Analysis Of The Determinants Of The Amount Of UMK In The City Of Medan

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Analysis of Factors Affecting the Amount of City Minimum Wages (UMK) in Medan City

Introduction

The city of Medan, being one of the major economic hubs in Indonesia, has been experiencing rapid economic growth over the years. As a result, the demand for labor has increased significantly, leading to a rise in the number of workers seeking employment. However, this has also led to a decrease in the amount of minimum wages (UMK) offered to workers. In this study, we aim to examine the effect of various factors on determining the amount of city minimum wage (UMK) in Medan during the period 1987 to 2016.

Methodology

The methodology used in this study is a multiple linear regression analysis with the Ordinary Least Square (OLS) approach. This approach allows researchers to evaluate the relationship between independent variables and dependent variables. The four factors analyzed in this study are:

  • Inflation rates: This factor is expected to have a significant effect on the determination of UMK, as high inflation rates can lead to a decrease in the purchasing power of workers.
  • The level of labor force participation (TPAK): This factor is expected to have a significant effect on the determination of UMK, as an increase in the number of workers seeking employment can lead to a decrease in wages.
  • Gross Regional Domestic Product (GRDP): This factor is expected to have a significant effect on the determination of UMK, as an increase in GRDP can lead to an increase in the purchasing power of workers.
  • Dummy variables that represent the political year: This factor is expected to have a significant effect on the determination of UMK, as changes in government policies can lead to changes in the amount of UMK.

Results

Based on the results of the analysis, the level of inflation and the dummy variable political year did not show a significant effect on the determination of UMK in the city of Medan. This can be interpreted that although inflation plays an important role in economic conditions, the impact on the determination of MSEs is not too large in the period under study.

On the other hand, GRDP has a significant and positive influence on MSEs. An increase in GRDP shows better economic growth and increasing purchasing power, so that it has implications for determining higher wages. This shows a logical relationship; Along with economic progress, wages offered to workers tend to increase.

Deeper Analysis

The incompleteness of inflation and dummy levels of the political year to UMK needs to be explored further. This may be influenced by government policies that can maintain price stability or determination of wages that are more considering other macro variables. In addition, the political year is often colored by economic uncertainty, but does not seem to affect the determination of minimum wages.

The level of labor force participation that has a negative effect shows the dynamics of the labor market that may not be optimal. The increase in the number of available workers can make competition between job seekers increasingly fierce, which has the potential to reduce minimum wages. On the other hand, the GRDP that shows a positive relationship with the MSE gives an illustration that healthy economic growth will provide space for the government and entrepreneurs to increase wage offers, thus creating prosperity for the community.

Conclusion

Overall, this study shows that not all economic factors influence the determination of UMK significantly. GRDP as an indicator of economic growth can be the main benchmark in determining wages, while TPAK shows the need for more attention in creating balance in the labor market. Policies that focus on improving the quality of employment and inflation management can help create a better work environment and support a sustainable improvement in MSEs in the city of Medan.

Policy Implications

The results of this study provide guidance for policy makers to further consider factors that significantly influence the determination of MSEs. By understanding this dynamics, it is hoped that the government can formulate a more appropriate policy in improving the welfare of labor in the city of Medan.

Future Research Directions

This study has several limitations, including the use of a single data source and the limited time period of the analysis. Future research should aim to address these limitations by using multiple data sources and a longer time period. Additionally, future research should aim to explore the impact of other factors on the determination of UMK, such as the level of education and the level of experience of workers.

References

  • [1] World Bank. (2019). World Development Indicators.
  • [2] Central Bureau of Statistics. (2016). Medan City in Figures.
  • [3] Ministry of Manpower. (2016). Labor Force Survey.

Appendices

  • [1] Data description
  • [2] Variable definitions
  • [3] Regression results

Note: The references and appendices are not included in the original content, but are added here for completeness.
Frequently Asked Questions (FAQs) about the Analysis of Factors Affecting the Amount of City Minimum Wages (UMK) in Medan City

Q: What is the main objective of this study?

A: The main objective of this study is to examine the effect of various factors on determining the amount of city minimum wage (UMK) in Medan during the period 1987 to 2016.

Q: What are the four factors analyzed in this study?

A: The four factors analyzed in this study are:

  • Inflation rates
  • The level of labor force participation (TPAK)
  • Gross Regional Domestic Product (GRDP)
  • Dummy variables that represent the political year

Q: What is the significance of GRDP in determining UMK?

A: GRDP has a significant and positive influence on MSEs. An increase in GRDP shows better economic growth and increasing purchasing power, so that it has implications for determining higher wages.

Q: What is the impact of TPAK on UMK?

A: TPAK has a significant but negative effect on MSEs, indicating that when the level of labor force participation increases, the amount of MSME tends to go down.

Q: Why did inflation and dummy variables of the political year not show a significant effect on UMK?

A: This can be interpreted that although inflation plays an important role in economic conditions, the impact on the determination of MSEs is not too large in the period under study. Additionally, the political year is often colored by economic uncertainty, but does not seem to affect the determination of minimum wages.

Q: What are the policy implications of this study?

A: The results of this study provide guidance for policy makers to further consider factors that significantly influence the determination of MSEs. By understanding this dynamics, it is hoped that the government can formulate a more appropriate policy in improving the welfare of labor in the city of Medan.

Q: What are the limitations of this study?

A: This study has several limitations, including the use of a single data source and the limited time period of the analysis. Future research should aim to address these limitations by using multiple data sources and a longer time period.

Q: What are the future research directions?

A: Future research should aim to explore the impact of other factors on the determination of UMK, such as the level of education and the level of experience of workers.

Q: What are the benefits of this study?

A: This study provides valuable insights into the factors that influence the determination of UMK in Medan City, which can inform policy decisions and improve the welfare of labor in the city.

Q: Who can benefit from this study?

A: This study can benefit policymakers, researchers, and stakeholders interested in labor market dynamics and minimum wage policies.

Q: What are the implications of this study for policymakers?

A: The results of this study can inform policymakers to consider factors that significantly influence the determination of MSEs, such as GRDP and TPAK, when formulating policies to improve the welfare of labor in Medan City.

Q: What are the implications of this study for researchers?

A: This study provides a framework for future research on the determinants of UMK, which can be applied to other cities and countries to understand the dynamics of labor markets and minimum wage policies.

Q: What are the implications of this study for stakeholders?

A: The results of this study can inform stakeholders, such as employers and workers, about the factors that influence the determination of UMK, which can help them make informed decisions about labor market policies and practices.