Determinants of Unemployment in the Large and Medium Industrial Sector in Indonesia

Abstract

As a country with the second-highest unemployment rate, Indonesian policymakers should worry about this condition. Based on the macroeconomic perspective, unemployment is affected by the firms' labour demand. It highlights that the firm's profit or loss highly determines the labour force demand. Using the Fixed Effect Model, this study results show that the labour force significantly affects industrial output, and the changes of industrial output highly increase the labour demand in the market. However, foreign and domestic capital neither significantly reduce unemployment rate in Indonesia nor stimulate the large and medium industries to absorb labour in the market. The Government should utilize foreign and domestic capital efficiently as possible to reduce unemployment rate.

How Population, Economic, Inequality and Unemployment Contribute Affect Indonesian’s Poverty

“…Regardless of its ability, the workforce's role positively impacts the quality of life of disadvantaged communities (Callander et al, 2011). Abdurachman et al (2021) stated that unemployment is an indicator of a country's progress; the lower the unemployment rate, the government is considered successful in managing the lives of its people; conversely, the higher the unemployment rate, the government is considered to have failed in fulfilling people's rights. Furthermore, unemployment directly challenges the country's social and economic stability, hindering its social and economic development.…”