Jejak Vol 13 (2) (2020): 292-306 DOI: https://doi.org/10.15294/jejak.v13i2.23398
JEJAK Journal of Economics and Policy http://journal.unnes.ac.id/nju/index.php/jejak The Impact of GRDP and RWP on Regional Minimum Wage
Robert Tua Siregar1 , 2Hery pandapotan Silitonga, 3Khairunnisah Lubis, 4Acai Sudirman
1,2,4Management Department, Sekolah Tinggi Ilmu Ekonomi Sultan Agung, Pematangsiantar 3Governance Sience Department, Medan Area University, Medan
Permalink/DOI: https://doi.org/10.15294/jejak.v13i2.23398
Received: May 2020; Accepted: July 2020; Published: September 2020
Abstract The purpose of this research was to find out the effect of the percentage in development of Pematangsiantar city’s regional minimum wages, and the problem in this study how GRDP and RWP affect on the percentage of development of Regionl Minimum Wage at Pematangsiantar City. The method used was quantitative descriptive analysis. Data analysis used were Classic Assumption Test, Multiple Linear Regression, Correlation Coefficient, Determination, F-test and t-test object on RMW at Pematangsiantar city. Finding of research and results of the study can be summarized as follows: 1). The results of the multiple linear regression analysis test are that the GRDP and RWP had a positive effect on the RMW of Pematangsiantar City, 2). The results of the correlation coefficient indicate that the GRDP and RWP of Pematangsiantar City on its RMW were at a very strong level, while the coefficient of determination of 67.5% at high or low of the minimum wages can be explained by the GRDP and RWP, while the remaining of 32.5% was influenced by other factors which were not included in this study, 3). Hypothesis Test for F- test indicates that the GRDP and RWP influences significantly on Pematang city’s RMW, and for the t- test indicates that the GRDP and RWP had a positive and significant effect on the RMW in Pematangsiantar City from 2005 to 2018. This means that as the GRDP increases, the value of setting Pematangsiantar City's minimum wage in the following year will also increase, and vice versa. The increase of laborers/workers demands will affect the standard of regioanalwages that will be determined, this happens because wages will always adjust to the labor market demand. The stipulation of the minimum wage, it has an impact on GRDP in Pematangsiantar City, because the consumptive rate will be carried out in the place where it gets paid.
Key words : Gross Regional Domestic Product, Rate of Workforce Participation, Regional Minimum Wage
How to Cite: Siregar, R., Silitonga, H., Lubis, K., & Sudirman, A. (2020). The Impact of GRDP and RWP on Regional Minimum Wage. JEJAK: Jurnal Ekonomi dan Kebijakan, 13(2). doi:https://doi.org/10.15294/jejak.v13i2.23398
Corresponding author : Acai Sudirman p-ISSN 1979-715X Address: St.Surabaya, No. 19 Pematangsiantar E-mail: [email protected] e-ISSN 2460-5123
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a high minimum wage means that populations INTRODUCTION in that city or regency have a high standard of National development is a process in living and consumption (Hasbi & Dahri, 2019). improving the standard of living of the Per capita income is the size of the average Indonesian people by following the income of a population in a country. It is objectives stated in the Preamble to the obtained from the distribution of national Constitution of the Republic of Indonesia. income of a country and the country’s Principally, the purpose of development is to population. It also reflects GDP per capita. overcome or get out of the problems that Besides, it is often used as a measure of a have been faced by a nation, so that the country’s prosperity and development level; the standard of living of the nation increases. greater the income per capita, the more One way to improve the standard of living of prosperous the country (Hasbi & Dahri, 2019). the nation is to prosper the community. Income Distribution is the spread of Public welfare is a condition in which the earnings within the community. In the process material, spiritual, and social needs of the of production, the owners of the factors of country’s population are fulfilled to live production will receive a reward equal to the properly and be able to develop themselves, factor of production contributed to the so they can carry out social and economic production process. In this income distribution activities. In Indonesia, the public welfare process, there will occur a cycle (turnover) of can be illustrated by the poverty rate. consumers who have to pay the price of goods. Poverty is a condition where the community However, at other times, they will be a provider cannot meet the basic needs of life. Poverty of capital, labor, natural resources, or expertise occurs not because of the will of the poor, factors so that they will receive a share of but because of circumstances that cannot be income at a certain time, and they will pay the avoided by its power. Poverty is a disease in price of goods at other times (Kalalo, et al., the economy, so it must be overcome or at 2016). Income Distribution is a measure used to least reduced. The problem of poverty is see how much of the national income is indeed a complex and multidimensional received by the community. Based on this problem. Therefore, efforts to reduce poverty calculation, a portion of the national income must be carried out comprehensively, cover controlled by a percentage of the population various aspects of community life, and be can be seen. The purpose is to see how much implemented in an integrated manner control of the national income has so that it can (Yusnedi, et al., 2019). be known whether there is national income by Economic growth and income per only a few people or there is an even capita are the most important indicators to distribution among the population in the measure the success of the development of country. (Siradjuddin, 2012). an area/region. Each country will strive to Imbalance is still a crucial issue achieve optimal economic growth. In many concerning with employment condition in countries in the world, the main requirement Indonesia where the growth of labor/work force for the realization of poverty reduction is keeps increasing from year to year while at the economic growth. The minimum wage is an same time its demand is not in line with the indicator of income per capita. A low number of job availability. Moreover, the minimum wage means that populations in increasing of population growth is another the region have a low standard of living and factor that contributes this condition to happen consumption, while a city or regency that has causing many more people unemployment. On
JEJAK Journal of Economics and Policy Vol 13 (2) (2020): 292-306 294 the other hand, wage issues and welfare in keep the company running and to produce employmentship appear the major and very profit for them. dominating problems as the source of Indonesia is an agrarian country where conflict between labor/worker and employer the population employment is more dominated since long time ago. Wage is closely related by the agricultural sector, so that the economy to the aspect of individual economy or is more supported by this sector. However, in income and as far as the employment issues recent years, in some countries, particularly in arise within its various dimensions and developing countries such as Indonesia, variables it is always connected with wage. structural changes have occurred, in which Additionally, wage issue is not only a there is a transition from traditional agricultural fundamental problem in Indonesian but also societies to modern industrial economies. The in other countries as claimed by Reich, dominant sector in the economy was initially Allegretto & Goddy, (2017); Fairris & Bujanda the agricultural sector. But, with this structural (2008); Mayneris, Poncet, & Zhang (2014); change, the dominant sector in terms of Allegretto & Reich (2018); Otten et al. (2017); employment is the industrial sector because this Luce (2012); Dreier (2014); Waehning (2015); sector requires more workers in carrying out its Stephenson (2015). production activities. Labor problems will arise Since wages become a reference to if the number of workers offered is higher than improve the welfare of workers or the existing employment in each business labor/worker’s life; therefore, wages must be sector. In other words, the existing employment sufficient to fulfill and support the fair needs is unable to accommodate (employ) the existing of the workers’ life and their families. The workers, especially the untrained and fairness or appropriateness of wages can be uneducated workers. This problem will cause seen and measured by looking at the increasing unemployment rates and poverty adequacy of labors/ workers in fulfilling and rates, which will have an impact on the supporting their basic needs for decent living economic development process. The high (see Rao & Min, 2018; S. A. Allegretto & population growth rate absolutely results in the McMahon, 2006). In fact, workers (laborers), population to increase and gives impacts on the employers, the government and the number of workers to increase. Therefore, the community; however, have the same faster growth of the working-age population in interests concerning with policy of waging the labor market must be balanced with the system. In the perspective of companies, on expansion of employment (Muslihatinningsih & the first hand, wages are considered as one Karlina, 2019). component of production costs which might It is said that workers (laborers) are reduce the rate of company‘s profit. parties who give services to the company which Consequently, companies try making it they are working for and play an important role necessary to reduce wages to the minimum in a production process. As the compensation of level as possible so that the company's profit the service they are giving, the company can be increased. Sadly, very few employers rewards it by giving what it is called wage. see that their workers as partners in running Regardless, wage is so important that it is the company business. Despite the fact that considered as one of the indicators to determine they can generate profits for them. On the the adequacy of workers/labors decent living. It other hand, very few employers consider is the reason why the workers and union their labors/workers as business partners to workers always expect a higher wage to improve
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their standard of life (Sinaga, 2008). In However, there are different research the regard to the importance of minimum findings concerning with minimum wage in the waging system, a number of studies have North Sumatra region. For example, research attempted to investigate its impact based on conducted by Sari (2007) who found that the a number of indicators such as its GRDP and RWP in Secondary Level of distribution impact distribution and the Education (ie.Junior and Senior High graduates) increase of minimum wage. For example have given a positive value to employment Dewi (2018) examined the effect of gross opportunities in 4 regions in North Sumatra. regional domestic product, population and The findings confirm that not all regions of capital expenditure on regional own-source Indonesia have the same impact as Latin revenue. Next, by Lbn Raja & Hasugian America. It is concluded that the variables that (2018), who investigated the policy of have positive and significant influence are minimum wage system and cash transfer secondary level of education. It is also program. Then, Guzman (2018) who reported concluded that GRDP is a variable that gives a the impact of local minimum wages on price positive value but is not significant enough. It is increases (in S. Allegretto & Reich, 2018b). in contrast to RWP in which its variable is Regional expansion could be a strength significant and gives a positive effect, althoughit to improve the performance of local occurred only into 2 regions but not for all governments and aims to make governments regions in North Sumatra, namely at regional level to be more focused on Pematangsiantar city and Binjai where its escalating potential sectors in their regions variables is not signifant and gives positive (Rahayu, Maria & Suryana, 2019). As for impact especially in Medan regency and Tebing Indonesia, each region has set different Tinggi. However, the difference between this system of minimum wages. This is study and previous ones are there in time series determined by the particular defining factors of research data. Previous studies used a period that are different in each region such as of 15 years from 1997-2005, while this study standard of living costs. Nevertheless, based analyzed 13 years of time period, namely from on the literature study on the policy of 2005-2018. In addition to differences of the time increasing minimum wages, Izzaty (2013) series of research, the cross-section data is argues that minimum wage system always different as well. If Sari (2007) measured it in 4 has a quite negative and insignificant impact regions of North Sumatra, namely Medan, on Gross Regional Dosmetic Products Pematang Siantar, Binjai and Tebing Tinggi; (GRDP) and Rate of Workforce Participation however, this study focuses on examining the (RWP). It causes, for example, the positive and significant effects of occurrence of competitiveness of the regionalminimum wages in Pematangsiantar workforce in looking for work. Like the City. situation when there was an increase in the In a different context, other previous minimum wage in Latin America which had findings also explained that there had a change a negative impact on job availability by in employment opportunities particularly after decreasing the volume of employment. In the the enactment of the minimum wage in Bogor regard of Izzati’s research findings (2013), Regency. Job opportunities in Indonesia when it is compared with other countries in generally have increased, but surprisingly this the world, Indonesia also experienced did not happen in Bogor district. Yuliarti (2006) thesame thing as in Latin America. came to conclusion that minimum wage might have not only positive impact but also negative
JEJAK Journal of Economics and Policy Vol 13 (2) (2020): 292-306 296 one as well. With the existence of the those who hadn’t had job yet to find job. enactment of Law No.22 of 1999 concerning Certainly, it had increased significantly because regional autonomy in which all central of the additional minimum wage. government authority is transferred to the The wage system is a framework in which regional government, this also creates a labor the wage payment framework is regulated and problem for local government whose determined to improve the welfare of workers. authority should be use particularly as an According to Sumarsono (2009), the wage effort to increase and widen employment system in Indonesia is generally based on three opportunities, as well as to improve the wage functions, including: a) giving a guarantee quality of Human Resources (HR) and of a decent living for workers and their families; increase the minimum wage in accordance b) reflecting the rewards for the workers’ work with the components of the workers’ Decent results; c) providing incentives to encourage Living Needs. The research conducted by increased workers’ productivity. Furthermore, Erni was carried out by processing the Sumarsono (2009) states that some economists minimum wage data and employment notice that setting minimum wages will inhibit opportunities data within a period of 5 years the establishment of employment. Another namely from 1992 to1997, while this study group of economists with empirical evidence also used the shift share method. The focus shows that applying minimum wages is not of Yuliarti's study (2006) was to analyze the always followed by a decrease in employment negative impact, namely the decrease of opportunities, but it will even be able to drive employment opportunities post the the process of economic recovery. minimum wage policy in Bogor Regency. Siantar Pematang becomes interesting to Obviously, this research has differences from be used as a cross section because in the period the previous research in the manner of of 15 years, namely from 1997 to 2005, its GRDP collecting the data of time series and cross had a significant effect on the minimum wage section. Besides, in the aspect of theories and the RWP had a positive effect. This is hard applied, this research is also different to find in other areas of North Sumatra. This eventhough both analyze the impact on the research is different from previous ones because implementation of a policy, for example it started from looking at how the impact after Yuliarti (2006) used labor theory in the the implementation of policy by using public aspect of theory. policy theory. Even though previous findings From the three previous research with the same context used the same theory, findings, it was found that there was a namely the labor demand and supply theory but growth in the level of employment this research is relatively new since it opportunities due to an increase in the formulated the impact of gross regional minimum wage in the sense there was also a domestic product (GRDP) and the rate of work decrease in the amount of labor demand. On force participation (RWP) on regional minimum the other hand, in the side of the workforce wages in Pematangsiantar City by using public which was measured in the rewards that had policy to see how impact of regional minimum to be generated due to the recompense of the wages policy after its implementation on GRDP energy and time that the labors/workers had and RWP. sacrificed, it turns out that it could also At a macro level, there are many factors increase the desire of the workforce to work that influence the gross regional domestic more effectively and increase the desire of product (GRDP) and the rate of labor/work
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force participation (RWP) towards regional General still gets a subsidy from the local minimum wage, particularly in the city of Government Center. One reason for the cause Pematang Siantar.For this regard, this study of such subsidies is due to Central Government focused on analyzing four factors including activities in areas that still have not been able to the GRDP, the Pematang Siantar City’s overcome by funds obtained government region regional minimum wage, the RWP and itself so the regional government budget have government expenditure based on policy. yet to describe the ability of local government Policy making is started from an initial as a whole (Siregar, 2016). After the survey was formulation process. Therefore, this research carried out, they were able to figure out the startedat first from identifying the policy Standard of Decent Living. Regulations problem through the stages of policy regarding decent living standards, are set up by formulation. This research used public policy the Minister of Manpower Decree No. 13 of 2012, theory in order to develop policy formulation in which decent living refers to the standard of itself and find the necessary impact that will needs that must be fulfilled by a single person come to emerge concerning with the policy to be able to live properly, both physically and of regional minimum wage itself. This non-physically within a period of one month. In research has conducted policy formulation addition, Article 89 of Law No. 13/2003 also based on observing and following the explains that necessities of living properly in development of policy formulation. The minimum wages will be achieved gradually. The process of policy formulation in public policy use of Decent Living Needs (DLN) in the goes through 4 stages, namely: Defining component to determine minimum wages since Problems, Policy Agenda, Selection of 2005 is a good signal in improving the welfare of alternative policies and Stage of policy workers (Ministerial Regulation Number 17 of determination, as explained by Winarno 2005). The Decent Living Needs (DLN) as the (2012). basis can be categorized as the main The minimum wage is a minimum consideration, so that it can be concluded that if standard used by entrepreneurs or industry there is an increase in the Decent Living Needs owners in providing wages to workers in (DLN), it will be followed by an increase in the their business environment. A proper City Minimum Wage. fulfillment of the needs in each different The needs of living properly are used as a region is called the City Minimum Wage. limitation on determining standard of wage and The process to determine reference value of the decent needs are obtained through a survey the minimum wage in Indonesia has been of the good prices. The standard components carried out for a long period of time. The first which are always considered in calculating the meeting was initiated by the Regional Wage needs of a decent living are included in food Council (DPD) at the district / city level and beverages, clothing, housing, education, which consisted of representatives of health, transportation, recreation and savings. bureaucrats (government), academics, Among the other seven components, it is also laborers and entrepreneurs. Then, the claimed that food, beverages, and meeting resulted in setting up a survey team transportation.are the main causes the value and schedule to go down to the field to and standard of the minimum wage to increase. gather information on the number of items The stipulation of recent regional minimum or basic needs of living concerning with the wage (RMW) refers to the added value current price of goods in the market. In produced by workers themselves while working, reality the Governments in the region in where employer as wage provider giving wages
JEJAK Journal of Economics and Policy Vol 13 (2) (2020): 292-306 298 to workers is seen from their working effect of the percentage to the development of productivity by calculating the amount of regional Minimum Wage.at Pematangsiantar output they produced. The ammount of the city. The significance of this research was in outputs is called the Gross Regional hope that the result of the study can be used as Domestic Product (GRDP). GRDP is one of a reference or consideration material of policy the factors that influence the standardization for government in determining standard of of RMW where the rate of output produced Minimum Wage in the future. by laborers or workers will affect the company profits. If the company profit increases, automatically the minimum wage METHOD shall be increased as well as. This means that The research approach employed in this the increase in the Gross Domestic Regional study was an associative approach. The research Product (GDRP) output that occurs is design used by the writer was library research. economic growth for a region. An increase in Data obtained through this research were from the GRDP will give income from the tax and secondary data in the aspects of theory, and retribution sectors to increase, which will other concepts. This research was conducted for directly increase the region’s Original Local approximately three months which begun from Government Revenue (OLGR). Thus, if there September 2019 to November 2019. The place of is an increase in GRDP, the minimum wage research was conducted in the City of should be increased. Pematangsiantar. The subject of this research In addition to the GRDP, Rate of was data which were collected from the Workforce Participation (RWP) plays an Pematangsiantar City’s Central Statistics Agency important role in standardizing dan (BSP) concerning with data of GRDP, RWP, and determining the value of the regional RMW. The type of data used in this study was minimum wage, namely by which the value quantitative data. The quantitative data in this of work force demand can be adjusted with study was colleted from the Central Statistics labor wages. The Labor Force Participation Agency (BPS) of Pematangsiantar City during Rate (LFPR) is an employment indicator that the period of 2005-2018 year. The technique of provides an overview of the economically data analysis applied in this study were as active population in daily activities referring follows; Quantitative Descriptive Analysis, to a time in the survey period conducted. Classical Assumption Test, Multiple Linear The decline in RWP is usually caused by a Regression Analysis, Hypothesis Test, limited number of job field. The basis for Correlation Coefficient and Determination. establishing Province Minimum Wage in Method Can Be the Present Review Introduces North Sumatra and Regional Minimum Methods of Analyzing the Relationship Between Wage in Pematangsiantar city refers to Two Quantitative Variables. The calculation Government Regulation Number 78 of 2015 and interpretation of the sample product concerning wages. moment correlation coefficient and the linear The formulation of the problem in this regression equation are discussed and study was how GRDP and RWP affect on the illustrated. common misuses of the techniques percentage of development of Regionl are considered. tests and confidence intervals Minimum Wage at Pematangsiantar City. for the population parameters are described, Based on the problem formulation above, the and failures of the underlying assumptions are purpose of this study was to find out the highlighted.
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RESULTS AND DISCUSSION with a positive relationship, meaning that if the Labor Force Participation Rate is increased by This regression analysis is often used to one unit, it will increase City Minimum Wage determine whether there is an effect of by 54,156,110. independent variables on the dependent variable. In this study, independent variable Table 2. Result of Correlation Coefficient and were the structure of assets and company Determination Coefficient size, while dependent variables were capital Model Summaryb structure. Thus, it is necessary to have Model R R Square Adjusted R multiple linear regression analysis. Square a Table 1. Results of Multiple Linear 1 ,822 ,675 ,616 Regression Analysis a. Predictors: (Constant), GRDP, RWP Coefficientsa b. Dependent Variable: RMW Unstandardized Coefficients Source: Results of data processing (2019) B Std. Error Based on table above, the results obtained 760232,865 1513626,427 from coefficient r was 0.822 which means that 264467,635 100872,894 there is a very strong correlation or relationship 54156,110 19563,838 between the minimum wage with the GRDP and a. Dependent Variable: RMW RWP. While the coefficient of determination (R Source: Results of data processing (2019) square) of 0.675, which means 67.5% of high and low minimum wages can be explained by the Based on the results of the multiple GRDP and RWP. Regarding the remaining 32.5%, linear regression analysis above, thus it was it was influenced by other factors which were not obtained the regression equation model as included in this study. follows: Simultaneous test (F test) is used to test Ŷ = 760,232,865 + 264,467,635X1 + whether the independent variable in the 54,156,110X2 (1) regression model is able to explain the change in This means that GRDP and RWP have a the value of the dependent variable or not. positive effect on the Regional Minimum Table 3. F test Result Wage of Pematangsiantar City from the year ANOVAa of 2005 to 2018. The interpretation of these Model F Sig results is described as follows: (1) A constant Regression 11,418 ,002b value of 760,232,865 with a positive 1 Residual relationship shows that if the GRDP variable Total and Labor Force Participation Rate are a. Dependent Variable: RMW considered constant, the City Minimum b. Predictors: (Constant), RWP, GRDP Wage has been formed of 760,232,865; (2) Source: Results of data processing (2019) The regression coefficient of the effect of GRDP on City Minimum Wage is 264,467,635 with a positive relationship, meaning that if the GRDP is increased by one unit, it will increase City Minimum Wage by Based on the table 3 above, it was 264,467,635; (3) The regression coefficient of obtained the value of F-calculated was 11.418 the effect of the Labor Force Participation and F-table with df = (14-2-1) = 11, then it was Rate on City Minimum Wage of 54,156,110 obtained F-table of = 3.98. This shows that F-
JEJAK Journal of Economics and Policy Vol 13 (2) (2020): 292-306 300 calculated> F-table (11.418 > 3.98) or revenue and expenditure each year. Fiscal significant 0.021 < 0.05, then H0 is rejected, policy has the aim of spurring economic it means that GRDP and RWP have a growth, increasing output and employment positive and significant effect on the opportunities as well. Fiscal policy also has an minimum wage of Pematangsiantar City in impact in stabilizing prices and labor/worker 2005-2018. supply. The ultimate goal of government The t- test is used to determine expenditure is to encourage aggregate demand whether the independent variables partially which can be achieved through increasing have a significant or not significant effect on output generated from the economic sector. the dependent variable. The results of t-test Besides, it also can be achieved by increasing in this study can be seen in table 4 the level of community income, because government expenditure is a source of Table 4. t- Test Result community income. Producers will increase Coefficientsa their production output if there is an increase in Model T Sig. aggregate demand. If this happens then the (Constant) ,502 ,625 producer will need additional production inputs 1 GRDP 2,622 ,024 where one of the addition is labor/ worker demand. With an increase in government RWP 2,768 ,018 expenditure, certainly there will be an increase a. Dependent Variable: RMW in labor demand and supply in which these Source: Results of data processing (2019) stages are in accordance with the stages of Based on the table 4 above, it can be public policy formulation. seen the effect of each independent variable The impact of determining minimum on the dependent variable as follows: wages is that low-wage workers are protected GRDP has a t-count of 2.622
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leave the company to earn a better wage in RWP significantly influence the minimum wage another company. In its implementation, of Pematangsiantar City, and the GRDP and when the minimum wage ignores the Labor Force Participation Rate have a positive interests and abilities of the company and and significant effect on the Pematangsiantar merely considers the interests of the City’s minimum wage in 2005-2018. workers, it is possible that many companies The increase of a GRDP indicates that the that are unable to carry out the minimum amount of output value or the number of sales wage will end up with bankruptcy of the in all economic units of a region has also company (lockout). When the minimum increased as well. The greater the output or wage set is increased, it will be followed by sales made by the company, the bigger the the increase in the company’s production chance of the company to increase the demand costs, which in turn will increase the cost per for workforce. This is done in order to unit of goods produced. Rising prices of maximize production for current increasing goods will make consumers respond directly sales. As the result, this condition increases the to reduce consumption or not buy the goods supply or the demand of workforce at the same produced. As a result of these conditions, a time. Based on the multiple linear regression lot of the production of unsold goods makes test, it was found that GRDP has a positive the producers reduce the amount of effect on the minimum wage. Particularly, in production (Rahayu, 2019). this study, based on t- test results, it indicates Steven (1994) also said that along with that GRDP has a positive and significant effect government expenditure, the increase of on regional minimum wage of Pematangsiantar economic growth (GDP) would run at a City from the year of 2005 to 2018. To be able to slower pace. Government expenditure also absorb more labor at a decent wage level, plays a role in encouraging economic economic growth is expected to continue to movements by absorbing labor and capital increase to create new jobs in the city of goods in the field of social infrastructure Pematangsiantar so that people's welfare will be development (health, education, and public / realized. For this reason, the development of public facilities) that are budgeted in the minimum wage level in Pematangsiantar development expenditure or direct City seems to increase every year, so the expenditure. In total, the government's final correlation test will improve welfare. consumption expenditure in the city of GRDP at current prices indicates the Pematang Siantar showed an increase, both added value of goods and services calculated on the basis of current prices and on the using the prevailing price every year, whereas basis of constant prices in 2010. The GRDP at constant prices indicates the added contribution of this component is quite value of the goods and services that are stable in the range of 11-12 percent. In 2014, calculated using current prices, at a certain the total government final consumption time, as a base year. The GRDP based on expenditure based on current prices was current prices can be used to see shifts in 1,105,437.72 million rupiahs, then in economic structure, while the calculation on subsequent years, it was 1,221,318.28 million the basis of constant prices is used to determine rupiahs (2015); 1,305,346.34 million rupiah real economic growth over years, in which the (2016); 1,402,809.72 million rupiah (2017), factor of price changes has been issued. The and 1,493,096.55 million rupiah (2018). From positive value of GRDP shows the suitability of the fiscal policy derived from government 7 output produced that increases, so that the expenditure, it was found that the GRDP and number of people employed also rises. This can
JEJAK Journal of Economics and Policy Vol 13 (2) (2020): 292-306 302 be associated with the concept of a as amended by Decree of the Minister of production function, which states that an Manpower and Transmigration of the Republic increase in output can only be achieved if the of Indonesia No. KEP-226 / MEN / 2000 of 2000 input (workers) is increased in use. Demand is one of the government's efforts to protect for goods and services in an economy will workers so that they get a fair wage and live affect the level of output that must be well, and to be a reference for employers in produced so that it also affects the use of fulfilling their obligations to pay wages for inputs (workers). It is thus in line with the workers or workers. Thus, with the stipulation theory of production which states that the of the minimum wage, it has an impact on input drives the demand from output GRDP in Pematangsiantar City, because the demand, which means that demand for new consumptive rate will be carried out in the input occurs when there is demand for place where it gets paid. output. The demand for workers and services This means that if GRDP increases, the is the background of companies or industries value of regional minimum wage in to make production. It is because every Pematangsiantar city will also increase in the company will try to earn profit by looking at following year, and vice versa. This is in line opportunities to enter a market (Rahayu, with the opinion of Bersales (2014), that the 2019). GRDP is a consideration of the government and The results of the analysis of the the Board of remuneration in setting minimum Minimum Wage variable on the t test results wages. The results of this study are also in line that the GRDP had a positive and significant with those who conducted by Pratomo and effect on the minimum wage in Saputra (2011), Erna Agustina (2007), Musriha Pematangsiantar City in 2005-2018. This (2010), Ilham and Kristianto (2013). They means that as the GRDP increases, the value concluded that if there is an increase of of setting Pematangsiantar City's minimum laborers/workers’s productivity by which can be wage in the following year will also increase, measured by GRDP, then the minimum wage and vice versa. This shows that the City should be increased as well. Minimum Wage variable (RMW) is one of The Labor Force Participation Rate the factors affecting the declining (LFPR) is an employment indicator that unemployment rate in Pematangsiantar City. provides an overview of the economically active This result is in accordance with the population in daily activities referring to a time Efficiency Wage theory described by Mankiw in the survey period conducted. The Rate of which states that the average quality of a Workforce Participation (RWP) is a percentage company's workforce depends on the wages for calculating labor/workforce participation. paid to its employees. However, workers who The results of multiple linear regression test choose to take jobs elsewhere will not shows that RWP has a positive effect on immediately move away but will have to regional minimum wage of Pematangsiantar compete with other job applicants. So that City from 2005 to 2018 year. In addition to this the period of time the worker waits to find test, the t- test results also indicates that RWP work in the new place will increase the has a positive and significant effect on the unemployment rate. Pematangsiantar City minimum wage from The Decree of the Minister of Energy of 2005 to 2018. This means that if RWP increases, the Republic of Indonesia No. PER-01 / MEN the standard in determining the regional / 1999 of 1999 concerning Minimum Wages minimum wage in Pematangsiantar City will
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also increase in the following year, and vice mechanism comprehensively. The presence of versa. This result findings are also in line the government is expected to fix market with the view of Bersales (2014), according to failures so that they become more efficient and him, RWP can be used to find out equitable. Regional development as an integral laborers/workers demands, reversely they part of national development is carried out on can be used to adjust to a standard of the basis of the principle of regional autonomy reasonable wage level for workers or and the regulation of national resources that laborers. If laborers/workers demand provides an opportunity for democratic increases, it can reduce the rate of minimum improvement and regional performance to wages. The increase of laborers/ workers improve the welfare of the community towards demands will affect the standard of a corruption-free, collusion and nepotism civil regioanalwages that will be determined, this society (Siregar et al., 2020). happens because wages will always adjust to The results of the study showed that the the labor market demand. GRDP and RWP had a positive effect on the size RMW is determined by the 264,467,635 and 54,156,110 Pematangsiantar city, Pematangsiantar City government every year so that an increase in welfare increased, and by taking into account the components of this would provide an opportunity to be free of the cost of living in different regions. So it corruption, collusion and nepotism. In this case becomes natural if the RMW is different in the Pematangsiantar City government must each region too. From the analysis results make a binding regulation related to the obtained based on the results of the multiple minimum wage of labor. The minimum wage linear regression analysis above, the policy is carried out by the government by regression equation model is as follows: Ŷ = setting a lower floor (price floor) of wages above 760,232,865 + 264,467,635 X1 + 54,156,110 X2 the supposed balance point, so that workers are This means that GRDP and RWP have a more prosperous. The decrease in positive effect on RMW Pematangsiantar laborers/workers force demand, it will create an City in 2005-2018. Other factors can also be excessive supply of laborers/workers, seen from the increased level of consequently wages will fall down. The result of consumption that encourages the emergence the study is also in line with research findings of new types of businesses that have the conducted by Musriha (2010), Nurtiyas (2016). potential to add new jobs. The reality in the implementation of labor wages is determined by the balance CONCLUSION point (equilibrium) between the amount of From the results of the study that have labor market supply and the demand for been described, it can be concluded that the labor in the factor (producer) market. In GRDP and RWP have a positive effect on the microeconomics, in reality, concrete things regional minimum wage of Pematangsiantar sometimes happen to market failure (Market City from 2005 to 2018 year. From the results of Failure), where the equilibrium value the correlation coefficient and determination, it respects labor costs under its socio-economy, was obtained correlation coefficient (r) which so this makes labor experienced a hardship indicates that there is a very significant in the course of its welfare. In principle, the correlation between minimum wages with economy explains that sometimes it takes the presence of the Pematangsiantar City GRDP and RWP. While the coefficient of government to improve the market determination (R square) of 0.675, which means
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67.5% of high and low minimum wages can Based Restaurant Menus. ILR Review. be explained by the GRDP and RWP, while https://doi.org/10.1177/0019793917713735 the remaining 32.5% is influenced by other Allegretto, S., & Reich, M. (2018b). Are Local factors. From the F- test results, it shows that Minimum Wages Absorbed by Price the GRDP and RWP have a positive and Increases? Estimates from Internet- significant effect on the regional minimum Based Restaurant Menus. ILR Review, wage in Pematangsiantar City in 2005-2018. 71(1), 35–63. Similarly, from the t test result, it shows that https://doi.org/10.1177/0019793917713735 the GRDP and RWP have a positive and Bersales, Lisa, & Grace. (2014). Determinant of Regional Minimum Wage in the significant effect on RWP in Pematangsiantar Philippines. Statistics Journal. City in 2005-2018. The GRDP growth which is Dewi, S. G. (2018). The Effects of Minimum an increase in economic growth means that Wage Throughout the Wage the income per capita will also increase, so Distribution in Indonesia. Signifikan: the increase in the minimum wage in Jurnal Ilmu Ekonomi, 7(2), 221–232. Pematangsiantar City will continue. To https://doi.org/10.15408/sjie.v7i2.6125. further increase the level of Labor Force Dreier, P. (2014). The Battle over the Minimum Participation Rate, the effort that can be Wage, City by City. New Labor Forum. carried out is by increasing the level of https://doi.org/10.1177/1095796014542615 education, both in terms of quality and Fairris, D., & Bujanda, L. F. (2008). The quantity so that workers can compete in the dissipation of minimum wage gains for work circumstances. By increasing the workers through labor-labor quality and quantity of qualified workers in substitution: Evidence from the Los Pematangsiantar City, it is expected that Angeles living wage ordinance. Southern economic growth can continue to drive the Economic Journal. availability of jobs for job seekers. The Guzman, W. (2018). Social Policies in Ecuador : researcher suggests Pematangsiantar City The Effects of Minimum Wages and Government to make policies in alleviating Cash Transfers. The London School of poverty in Pematangsiantar City Economics and Political Science. Government. The researcher suggests Hasbi, A. R., & Dahri, A. AP. (2019). The Effect Pematangsiantar City Government to be of Economic Growth and Minimum careful in setting the City Minimum Wage Wages on Perapita Income in East Luwu (UMK) so that the number of poor people Regency [Pengaruh Pertumbuhan Ekonomi dan Upah Minimun Terhadap does not increase. The researcher suggests Pendapatan Perkapita di Kabupaten Pematangsiantar City Government to carry Luwu Timur]. Jurnal Equilibrium, 8(1), out income distribution to alleviate poverty 45-63. in Pematangsiantar City Government. Izzaty, R. (2013). Minimum Wage Setting Policy
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