DETERMINANTS OF OPEN UNEMPLOYMENT RATE IN CENTRAL JAVA: ECONOMIC GROWTH, MINIMUM WAGE, LABOR FORCE PARTICIPATION, AND DOMESTIC INVESTMENT

Abstract

This study aims to analyze the effect of economic growth, district/city minimum wages, labor force participation rate, and domestic investment on the open unemployment rate across 35 regencies/cities in the Central Java province during the period 2018 – 2024. The background of this study is based on the fluctuating condition of the open unemployment rate and the existence of disparities in labor absorption across regions. This study employs a quantitative descriptive approach using panel data regression analysis processed with EViews 13 software. Model selection was conducted through the Chow test and Hausman test, which identified the Fixed Effect Model (FEM) as the most appropriate estimation technique. The data used are secondary data obtained from the Central Bureau of Statistics (BPS). The results show that economic growth has a negative and significant effect on the open unemployment rate. In contrast, the minimum wage has a positive and significant effect on the open unemployment rate. The labor force participation rate does not have a significant effect on the open unemployment rate. Meanwhile, domestic investment has a negative and significant effect on the open unemployment rate. Therefore, policies are needed to promote inclusive economic growth, establish appropriate minimum wage levels, and optimize investment and labor force participation to reduce the open unemployment rate.