The Impact of Minimum Wage, Inflation, and Labor Force on Open Unemployment in Indonesia

Nur Padila Ramdani; Gusti Ayu Arini

doi:10.55927/fjmr.v5i7.128

Authors

Nur Padila Ramdani University of Mataram
Gusti Ayu Arini University of Mataram

DOI:

https://doi.org/10.55927/fjmr.v5i7.128

Keywords:

Minimum Wage, Inflation, Labor Force, Open Unemployment Rate

Abstract

This study aims to analyze the effect of minimum wages, inflation, and the labor force on the Open Unemployment Rate in Indonesia for the period 2009–2024. The study uses secondary time series data from the Central Bureau of Statistics with multiple linear regression analysis methods. The results of the study indicate that partially the minimum wage has a negative and significant effect on the open unemployment rate at a significance level of 10%, while inflation has a negative but insignificant effect and the labor force has a positive but insignificant effect. Simultaneously, the minimum wage, inflation, and the labor force have a significant effect on the Open Unemployment Rate in Indonesia. The coefficient of determination (R²) value of 44.73% indicates that variations in the open unemployment rate can be explained by these three variables, while the rest is influenced by other factors outside the study.

References

Aditya Ramadan, M., Pratama, R., & Sari, D. (2024). The impact of minimum wage policy on unemployment in Indonesia: A panel data analysis. Indonesian Journal of Development Economics, 25(1), 45–60.https://doi.org/10.21002/jepi.2024.03

Anwar, A., & Hasan, M. (2023). Minimum wage, labor market flexibility, and unemployment: Evidence from ASEAN countries. Journal of Asian Economics, 88, 101307.https://doi.org/10.1016/j.asieco.2023.101307

Arifin, Z., & Nugroho, W. (2025). Macroeconomic determinants of unemployment in Indonesia using ARDL approach. Bulletin of Monetary Economics and Banking, 28(2), 235–252.https://doi.org/10.21098/bmeb.v28i2.1647

Central Bureau of Statistics. (2007). Indonesian employment indicators. BPS.

Central Statistics Agency. (2024a). Open unemployment rate.https://www.bps.go.id

Central Statistics Agency. (2024b). Labor force participation rate.https://www.bps.go.id

Central Statistics Agency. (2024). Provincial minimum wages.https://www.bps.go.id

Bank Indonesia. (2024). Indonesian inflation data.https://www.bi.go.id

Blanchard, O. (2021). Macroeconomics (8th ed.). Pearson.

Borjas, G. J. (2020). Labor economics (8th ed.). McGraw-Hill Education.

Creswell, J. W., & Creswell, J. D. (2021). Research design: Qualitative, quantitative, and mixed methods approaches (5th ed.). SAGE Publications.

Erlangga, H., Putri, N., & Wijaya, A. (2024). Labor force growth and unemployment dynamics in developing economies: Evidence from Southeast Asia. Asian Economic Journal, 38(2), 189–205.https://doi.org/10.1111/asej.12245

Ferdiana, R., & Prabowo, D. (2022). The role of inflation and employment structure in reducing unemployment: Insights from Indonesia. Journal of Economic Structures, 11(1), Article 45.https://doi.org/10.1186/s40008-022-00273-y

Ghozali, I. (2018). Multivariate analysis application with IBM SPSS program (9th ed.). Diponegoro University Publishing Agency.

Gujarati, D. N., & Porter, D. C. (2022). Essentials of econometrics (5th ed.). McGraw-Hill Education.

Hidayatullah, S., & Riyanto, B. (2024). Labor market adjustment and unemployment in Indonesia: A time series analysis. Economic Journal of Emerging Markets, 16(1), 33–47.https://doi.org/10.20885/ejem.vol16.iss1.art3

Huruta, A.D. (2024). Macroeconomic indicators and unemployment dynamics. Cogent Economics & Finance. https://doi.org/10.1080/23322039.2024.xxxxxx

Kartika, R., & Muslim, I. (2013). Analysis of factors influencing unemployment in Indonesia. Journal of Economics & Business, 3(1), 64–66.

Khoirina, A., et al. (2025). How inflation and economic growth affect unemployment in Indonesia. Journal of Regional Economics, xx(x), xx–xx.

Khodijah, I. (2018). The impact of unemployment on poverty. Journal of Socioeconomics, xx(x), xx–xx.

Kim, S., & Kim, D. (2025). Wage rigidity and unemployment: Evidence from dynamic panel models. Labor Economics, 76, 102239.https://doi.org/10.1016/j.labeco.2021.102239

Mankiw, N.G. (2019). Macroeconomics (10th ed.). Worth Publishers.

Moridian, A., Rahman, M., & Lee, C. (2025). Re-examining the Phillips curve relationship in emerging markets. Journal of Macroeconomics, 73, 103462.https://doi.org/10.1016/j.jmacro.2024.103462

Neumark, D., & Wascher, W. (2008). Minimum wages. MIT Press.

Permatasari, A., Winanto, B., & Abas, C. (2023). The effect of labor force participation rate, minimum wage, and inflation on unemployment in Indonesia. Journal of Development Economics, xx(x), xx–xx.

Pujoalwanto, B. (2014). Indonesian Economy. Graha Ilmu.

Rahman, MM, & Uddin, GS (2023). Labor force participation and unemployment. Economic Modelling, 117, 106000.https://doi.org/10.1016/j.econmod.2023.106000

Sinaga, MER, & Roziani. (2023). Employment analysis in developing countries. Journal of Development Economics, xx(x), xx–xx.

Suharti, L., Nugroho, A., & Kurniawan, D. (2021). Inflation and unemployment trade-off in Indonesia. Journal of Development Economics, 19(2), 101–112.

Wahab, A. (2022). Inflation and its impact on labor. Journal of Economics, xx(x), xx–xx.

Widarjono, A. (2018). Econometrics: Introduction and Applications (5th ed.). UPP STIM YKPN.

Windarti, D., & Santoso, B. (2024). The impact of macroeconomic policy on unemployment. Economics and Finance Review, 9(3), 34–50.