Syamsul Huda, Anik Yuliati | http://devotion.greenvest.co.id
2171
ANALYSIS OF THE INFLUENCE OF MINIMUM WAGE
AND HUMAN DEVELOPMENT INDEX ON
UNEMPLOYMENT RATE IN INDONESIA
Syamsul Huda, Anik Yuliati
Fakultas Ekonomi dan Bisnis UPN"Veteran" Jawa Timur, Indonesia
Email: syamsul.huda.ep@upnjatim.ac.id, anikyuliati.ak@upnjatim.ac.id
KEYWORDS
Minimum Wage, Human
Development Index,
Unemployment
ABSTRACT
One of the many development goals is to improve the performance of the
economy in order to be able to create jobs and organize a decent life for all
the people which in turn will realize the welfare of the population. The
purpose of this study is to determine the effect of the minimum wage on the
unemployment rate in Indonesia and to determine the effect of the human
development index on the unemployment rate in Indonesia. The method
used is quantitative method with multiple linear regression analysis and
statistical test using t-statistical test. The results showed that the wage level
had a positive and insignificant effect on unemployment. Meanwhile, the
human development index has a negative and insignificant effect on
unemployment
INTRODUCTION
Human resource development is one of the main goals for developing countries
including Indonesia. To improve the quality of human data sources, the government as
the implementing agency for national development certainly requires capital as the basis
for development. Governments make expenditures or investments indicated for human
development. Government spending is a reflection of the policies taken by the
government. In this case, government spending is used to finance the public sector which
is more important and becomes a priority in improving human data sources as reflected
in the Human Development Index (HDI).
Humans are the wealth of the nation, if the community has enjoyed a long life and
is healthy and knowledgeable, the region or state will be productive so that they can get
a decent standard of living. If a region or country has a high Human Development Index
(HDI), the success of human development is also high. The increasing population will
increase the number of workers and this addition allows increasing production (Arifin
and Fadilan 2021).
In addition to the rapid increase in the growth of human development and the
relatively slow growth in employment, the problem of unemployment in an area is getting
higher. A high unemployment rate is a measure of the lack of success in a country's
development (Mukhtar, Saptono, and Arifin 2019).
The next thing that affects the unemployment rate is the minimum wage. The
relationship between the minimum wage and the unemployment rate is that the higher the
wage set by the government, the lower the unemployment rate (Soldier 2018).
Based on the above background, the researcher is interested in conducting a
research entitled "Analysis of the Effect of Minimum Wage and Human Development
Index on Unemployment Rate in Indonesia".
Volume 3, Number 13, November 2022
e-ISSN: 2797-6068 and p-ISSN: 2777-0915
Vol. 3, No. 13, 2022
[ Analysis of The Influence of Minimum Wage and Human
Development Index On Unemployment Rate In Indonesia]
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a. Minimum wage
The minimum wage is regulated in Articles 88 to 92 of the Manpower Law and
Regulation of the Minister of Manpower and Transmigration No. 7 of 2013 concerning
Minimum Wages. The minimum wage according to Article 1 point 1 Permenakertrans
No. 7 of 2013 is the lowest wage consisting of basic wages including fixed allowances
by the Governor as a safety net. Provincial minimum wages are directed at achieving
decent living needs. The minimum wage is determined by the Governor by taking into
account the recommendations of the Provincial Wage Council and or the
Regent/Mayor. Employers are prohibited from paying wages lower than the minimum
wage (Amiliya 2019).
b. Human Development Index (HDI)
The Human Development Index (HDI) is one of the indicators to determine
economic development that measures the quality and non-physical level of the
population, namely health, education level and economic indicators. The United
Nations Development Program (UNDP) introduced the HDI or Human Development
Index (HDI) for the first time in 1990. The HDI is also used as a tool to measure
people's welfare and community welfare can be seen from the increase in the economy
and the even distribution of income (Yanthi and Marhaeni 2015).
The HDI value of a country or region shows how far the country or region has
achieved the specified targets, namely a life expectancy of 85 years, basic education
for all levels of society (without exception), and levels of expenditure and consumption
that have reached a decent standard of living. The closer a region's HDI value is to
100, the closer the road to achieving that goal is.
The composition of the HDI is based on three indicators, namely health,
education, and living standards (purchasing power) or income. An increase in a
person's education is often associated with an increase in income or wages earned. If
wages reflect productivity, the more people who have a higher level of education and
training experience, the higher the productivity and the result is that the national
economy will grow higher (Prasetyoningrum and Sukmawati 2018).
The human development index in Indonesia is still relatively low compared to
other countries in the world. According to data from the Central Statistics Agency
(2018), there is a slowdown in the growth of the Human Development Index (HDI) in
the 2016-2018 period compared to previous years, although nominally it continues to
grow positively (Ningrum, Khairunnisa, and Huda 2020).
c. Unemployment
The higher the quality of a person will affect the contribution to the company,
so the wages received are also getting bigger. The higher the wage set by the
government, the lower the number of people working in a country (Z, Istiyani, and
Hanim 2017).
According to Sadono in Kasnelly and Wardiah (2021) that the condition of an
individual who is of working age but has not yet received it is called unemployment.
In statistical indicators, residents or individuals who have not worked are trying to find
work or are not looking for work because they are considered to be working but have
not started working, it is called unemployment.
Year by year unemployment has a tendency to increase. This is a big challenge
for the Indonesian government because one of the indicators of successful
development is being able to reduce unemployment (Suripto and SUbayi 2020).
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Todaro in deep Utami and Masjkuri (2018) stated that the underdevelopment of
the population of developing countries is mainly due to the high rate of population
growth and low absorption of labor, causing low productivity so that income is low,
this results in a standard of quality of life or a low standard of living.
According to Utami and Masjkuri (2018) also the way to reduce the open
unemployment rate is as follows.
a. Provide education and job training.
b. Expansion of job opportunities at home and abroad.
Acceleration of industrialization in the economic sector and in rural areas, in
order to absorb a lot of workers.
METHOD RESEARCH
The quantitative method is the research method chosen in this study to answer
research questions. Quantitative problems more generally have a large area, complex
levels of variation but are located on the surface (Mulyadi 2011). The data used are
primary data and secondary data. Primary data obtained from the website of the Central
Statistics Agency (BPS). While secondary data obtained by library research method.
Library Research is a study that is used to collect information and data with the help of
various kinds of assistance such as books, journals, articles and others (Mirzaqon and
Purwoko 2018). Library Research also means data collection techniques by reviewing
books, literature, notes, and reports related to the problem under study (Cahyono 2020).
The data sources used as materials are books, journals, articles, and similar things that are
obtained through Google Scholar.
RESULTS AND DISCUSSION
1. Multiple Linear Regression Analysis
Based on the selected model, the Fixed Effect (Cros Section Weight) model is
selected, so that it is obtained:
Table 1
Multiple Regression Results with Fixed Effect Cross Section Weight Model
Variable
Coefficient
Probability
Constant
0.373730
0.8557
Minimum wage
0.215211
0.0064
Human Development Index
-0.577833
0.5121
Based on the table above, it is explained as follows:
1) Constant
A constant of 0.37 means that the independent variable (minimum wage and
human development index) = 0, then unemployment in Indonesia increases by
0.373730 percent. However, the relationship between these variables is not
significant.
2) Minimum wage
If the minimum wage increases by 1 million rupiah, the unemployment rate
in Indonesia will significantly increase by 0.215211.
3) Human Development Index
If the human development index has a high value, then the unemployment
rate will decrease by 0.577833 percent.
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2. t-Statistics Test
T-statistical test needs to be done to determine the effect of each independent
variable on the dependent variable with a confidence level of 95% (α = 0.05). The
following are the results of the t-statistical test of the minimum wage and the human
development index in Indonesia.
Table 2
T-Statistics Test Results
Variable
t-Stats
Prob
Significant
Level
Relationship
Direction
Information
Minimum
wage
2.753452
0.0064
0.05
Positive
Not significant
HDI
-0.649845
0.5121
0.05
Negative
Not significant
Discussion
1. Effect of Minimum Wage on Unemployment Rate
The minimum wage coefficient is 0.215211 shows that the minimum wage
has a positive and not significant effect. It is indicated by the probability value of the
t test which is smaller than the significant level used, namely 0.0064 < 0.05 and the t
value of the minimum wage statistic is 2.753452, thus the hypothesis that states the
significant effect of the minimum wage on unemployment is ACCEPTED. This means
that the higher the minimum wage, the higher the unemployment rate in Indonesia.
This is in line with research conducted by which states that the effect of the
minimum wage shows a significant and positive impact on unemployment (Pratomo
2019). Supported by research conducted by (Sa'adah and Ardyan 2016) shows that the
minimum wage has a significant effect on the unemployment rate.
2. The Effect of the Human Development Index on the Unemployment Rate
The coefficient of the Human Development Index is-0.577833 indicates
thatHuman Development Indexnegative and insignificant effect. It is indicated by the
probability value of the t test which is greater than the significant level used, namely
0.5121 > 0.05 and the t value of the minimum wage statistic is -0.649845, thus the
hypothesis that states a significant effect betweenHuman Development Indexagainst
unemployment REJECTED. It means higher The Human Development Index will
reduce the unemployment rate in Indonesia.
Based on research conducted by Garnella, Wahid, and Yulindawati (2020) that
the human development index is measured by a comparison of life expectancy,
education, and standard of living has a negative and significant effect on the
unemployment rate, which means that any increase in the human development index
can cause a decrease in the open unemployment rate.
In line with research conducted by that the Human Development Index (HDI)
has a negative and significant effect on the unemployment rate, which shows that the
greater the value of the Human Development Index (HDI), the lower the
unemployment rate (Mahroji and Nurkhasanah 2019).
CONCLUSION
Based on the results of the study, it can be concluded as follows: a) the minimum
wage has a positive and insignificant effect on the unemployment rate in Indonesia. This
means that the higher the minimum wage for Indonesian people, the higher the
unemployment rate in Indonesia. b) the human development index has a negative and
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insignificant effect on unemployment in Indonesia. The higher the human development
index, the lower the unemployment rate in Indonesia.
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