An Analysis on Factors Influencing Labor Demand of Industrial Sector in Indonesia In 2010-2015

Abstract

Indonesia is undergoing a change in economic sector of the economy that has been previously dominated by agricultural sector into the economy of industrial sector and services. The industrial sector is one of the sectors which plays an important role and has contributed significantly to the development in Indonesia. The industrial sector is absorbing a lot of labor and can reduce unemployment, but as time goes by existing data show that the amount of labor in the industrial sector is decreasing each year. The decline in labor demand may increase employment problems in Indonesia such as the increasing of unemployment, poverty and crime because the high living costs. Therefore, this study tried to analyze the existence of any factors that influence the demand for labor especially in the industrial sector in Indonesia. The data used in this research is secondary data from BPS and Central Bank 2010-2015, the data include of the gross domestic product in constant price, minimum wage, government spending, investment, and money supply. The analysis used in this study is panel data analysis with fixed effect model. The results of the analysis shows that the demand for labor in the industrial sector has been significantly influenced by GDRP, and government spending. Government spending give negative impact toward labor demand, while GDRP give positive impact toward labor demand in industrial sector. Investment, minimum wage and money supply not significantly affect the labor demand of industrial sector in Indonesia.