THE EFFECT OF MINIMUM WAGE INCREASING TO UNEMPLOYMENT RATE IN INDONESIA FOR PERIOD 1992–2010

Yuventus Effendi

Abstract


This research is trying to explain Indonesian empirical evidence about minimum wage increasing effect
towards unemployment. Minimum wage increasing should become a benefit for labour force. Unfortunately, macroeconomics
theory stated that the effect of minimum wage increasing has positif correlation with labour surplus.
Research method that will be used in this paper is simple regression by using panel data. The result of this research
is increasing minimum wage will be significantly affect unemployment for period 1992–2010, in Indonesia. For
every 10% minimum wage increasing will affect unemployment about 11,35% positively. This research also find
that for every province there will be a different unemployment increasing percentage possibly depends on cost of
production, labour surplus, and provincial GDP.

Keywords


unemployment, minimum wage, Indonesia

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DOI: http://dx.doi.org/10.14203/widyariset.15.1.2012.85–98

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