ANALYSIS OF MEANS YEARS SCHOOLING AND REGIONAL MINIMUM WAGE TO OPEN UNEMPLOYMENT RATE IN THE REGENCY/CITY OF THE RIAU ISLANDS PROVINCE

Abstract

Background - The Riau Islands province has a relatively high open unemployment rate compared to other provinces in Indonesia. In fact, the open unemployment rate in the Riau Islands Province is higher than the open unemployment rate at the national level

Purpose – This research aims at investigating the effect of the average educational background and the minimum wage in regencies/cities on the open unemployment rate in the regencies/cities of the Riau Islands Province

Research methodology – The data used in this study were obtained from seven regencies/cities in the Riau Islands Province, with the total sample of 70 data from 2011 to 2017 provided by the Central Statistics Agency. The sampling method used in this research was a non-probability sampling, with saturated sampling technique. Furthermore, the data analysis used a panel data analysis method with Random Effect Model (REM).

Findings – The research results revealed that the average educational background had a significant effect on the open unemployment rate due to low levels of education, which is not in accordance with the company's demand. In addition, unwillingness of employees with high levels of education to be paid with low salaries and the minimum wage in regencies/cities did not have a significant effect on the open unemployment rate because they believed that machines would eventually replace people due to the rapid development of the latest technology.

Research limitations– This research is still limited to predicting the factors that affect the open unemployment rate. Meanwhile, there are variables outside of this research affecting the open unemployment rate.

Originality/value – Novelty of the research is regional minimum wage has no effect on the open Unemployement rate, which means that no matter how large the MSE is, it will not have an impact on the Unemployement rate. This is due to the rapid increase in technology, the existence of machines/robots that can shift human labor as labor, the results of this research are contrary to the results of previous research (Santoso & Kristiyanto, 2021) and Prayitno & Kusumawardani (2022)

Keywords:  mean years schooling, open unemployment rate, regional minimum wage