Analysis Of The Effect Of Micro Small Enterprises On The Absorption Of Labor And The Welfare Of Micro Small Businesses In North Sumatra Province

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Analysis of the Effect of Micro Small Enterprises on the Absorption of Labor and the Welfare of Micro Small Businesses in North Sumatra Province

Introduction

Micro and Small Enterprises (UMK) play a vital role in employment in Indonesia, particularly in North Sumatra Province. As one of the pillars of the economy, UMK is able to absorb a significant amount of labor. This study aims to analyze the effect of demand for micro and small businesses based on the theory proposed by Pappas and Mark Hirshey, with the addition of supporting variables that are relevant to Pareto's welfare theory.

The Importance of Micro and Small Enterprises in North Sumatra Province

Micro and Small Enterprises (UMK) are an essential part of the economy in North Sumatra Province. They provide employment opportunities for a significant number of people and contribute to the province's economic growth. The existence of UMK in North Sumatra Province is a testament to the province's commitment to promoting entrepreneurship and supporting small businesses.

Theoretical Framework

This study is based on the theory proposed by Pappas and Mark Hirshey, which suggests that demand for micro and small businesses is influenced by various factors, including population, investment, and digitalization. The study also incorporates supporting variables that are relevant to Pareto's welfare theory, including costs incurred by UMK and entrepreneurial variables.

Methodology

The data used in this study is in the form of panel data taken from the Central Statistics Agency (BPS) during the 2017 to 2019 period. The analysis method used is simultaneous analysis, which makes it possible to evaluate the relationship between several variables simultaneously. The study included 30 districts/cities in North Sumatra Province.

Main Findings

The analysis results show that the minimum wage variable has a positive but not significant effect on employment in the UMK. This is not in line with the theory of wage efficiency and wage rigidity. Conversely, the population variable has a significant positive influence, supporting Marx and Ibn Khaldun's theory of the relationship between the population and the provision of labor.

In addition, investment at UMK also has a significant positive effect on employment. These findings support the theory of Pappas and Mark Hirshey who linked investment by increasing employment in the UMK sector. In this study, the UMK digitalization variable, although it showed a positive impact, did not have a significant influence on the welfare of UMK actors, which did not support Schumpeter's theory and Media Equation Theory.

Conversely, costs incurred by UMK have a significant positive effect on the welfare of UMK actors, supporting Carters & Milton's theory and Lipsey theory. However, the entrepreneurial variable in the UMK sector does not show a significant positive influence on the welfare of business actors, contrary to the theory of Bakker and Zimmerer & Scarborough.

Finally, the absorption of labor in UMK has a significant positive effect on the welfare of UMK actors, supporting the theory of Pareto and the welfare of the state. This finding shows that demand sourced from Pappas and Mark Hirshey needs to be modified by adding other supporting variables, namely Digitalization of MSEs, UMK Costs, and UMK Entrepreneurship.

Conclusion

This study concluded that demand theory originating from Pappas and Mark Hirshey was very relevant in the context of micro -small business in North Sumatra Province. The variable population and investment of UMK is proven to be able to increase employment, which in turn also has a positive impact on the welfare of business actors. With a deeper understanding of this dynamics, it is hoped that policy makers can formulate a more effective strategy to encourage the growth of MSEs and improve the welfare of the people in North Sumatra.

Recommendations

Based on the findings of this study, the following recommendations are made:

  1. Policy makers should focus on increasing investment in UMK: The study found that investment in UMK has a significant positive effect on employment and welfare of business actors. Therefore, policy makers should focus on increasing investment in UMK to promote economic growth and improve the welfare of the people in North Sumatra.
  2. Digitalization of MSEs should be promoted: The study found that digitalization of MSEs has a positive impact on employment and welfare of business actors. Therefore, policy makers should promote digitalization of MSEs to improve their competitiveness and contribute to the province's economic growth.
  3. Costs incurred by UMK should be minimized: The study found that costs incurred by UMK have a significant positive effect on the welfare of UMK actors. Therefore, policy makers should minimize costs incurred by UMK to improve their competitiveness and contribute to the province's economic growth.
  4. Entrepreneurial variables should be promoted: The study found that entrepreneurial variables do not have a significant positive influence on the welfare of business actors. Therefore, policy makers should promote entrepreneurial variables to improve the competitiveness of UMK and contribute to the province's economic growth.

Limitations of the Study

This study has several limitations, including:

  1. Data limitations: The study used panel data taken from the Central Statistics Agency (BPS) during the 2017 to 2019 period. The data may not be representative of the current situation in North Sumatra Province.
  2. Methodological limitations: The study used simultaneous analysis, which may not be able to capture the complex relationships between variables.
  3. Theoretical limitations: The study is based on the theory proposed by Pappas and Mark Hirshey, which may not be able to capture the complexities of the real-world situation.

Future Research Directions

This study provides several future research directions, including:

  1. Investigating the impact of digitalization on UMK: The study found that digitalization of MSEs has a positive impact on employment and welfare of business actors. Therefore, future research should investigate the impact of digitalization on UMK in more detail.
  2. Investigating the impact of costs incurred by UMK on their welfare: The study found that costs incurred by UMK have a significant positive effect on the welfare of UMK actors. Therefore, future research should investigate the impact of costs incurred by UMK on their welfare in more detail.
  3. Investigating the impact of entrepreneurial variables on the welfare of business actors: The study found that entrepreneurial variables do not have a significant positive influence on the welfare of business actors. Therefore, future research should investigate the impact of entrepreneurial variables on the welfare of business actors in more detail.
    Q&A: Analysis of the Effect of Micro Small Enterprises on the Absorption of Labor and the Welfare of Micro Small Businesses in North Sumatra Province

Q: What is the main objective of this study?

A: The main objective of this study is to analyze the effect of demand for micro and small businesses based on the theory proposed by Pappas and Mark Hirshey, with the addition of supporting variables that are relevant to Pareto's welfare theory.

Q: What is the significance of micro and small enterprises in North Sumatra Province?

A: Micro and small enterprises (UMK) play a vital role in employment in North Sumatra Province. They provide employment opportunities for a significant number of people and contribute to the province's economic growth.

Q: What are the main findings of this study?

A: The main findings of this study are:

  • The minimum wage variable has a positive but not significant effect on employment in the UMK.
  • The population variable has a significant positive influence on employment, supporting Marx and Ibn Khaldun's theory of the relationship between the population and the provision of labor.
  • Investment at UMK has a significant positive effect on employment, supporting the theory of Pappas and Mark Hirshey.
  • Digitalization of MSEs has a positive impact on employment and welfare of business actors, but it is not significant.
  • Costs incurred by UMK have a significant positive effect on the welfare of UMK actors, supporting Carters & Milton's theory and Lipsey theory.
  • Entrepreneurial variables do not have a significant positive influence on the welfare of business actors, contrary to the theory of Bakker and Zimmerer & Scarborough.
  • The absorption of labor in UMK has a significant positive effect on the welfare of UMK actors, supporting the theory of Pareto and the welfare of the state.

Q: What are the implications of this study?

A: The implications of this study are:

  • Policy makers should focus on increasing investment in UMK to promote economic growth and improve the welfare of the people in North Sumatra.
  • Digitalization of MSEs should be promoted to improve their competitiveness and contribute to the province's economic growth.
  • Costs incurred by UMK should be minimized to improve their competitiveness and contribute to the province's economic growth.
  • Entrepreneurial variables should be promoted to improve the competitiveness of UMK and contribute to the province's economic growth.

Q: What are the limitations of this study?

A: The limitations of this study are:

  • Data limitations: The study used panel data taken from the Central Statistics Agency (BPS) during the 2017 to 2019 period. The data may not be representative of the current situation in North Sumatra Province.
  • Methodological limitations: The study used simultaneous analysis, which may not be able to capture the complex relationships between variables.
  • Theoretical limitations: The study is based on the theory proposed by Pappas and Mark Hirshey, which may not be able to capture the complexities of the real-world situation.

Q: What are the future research directions?

A: The future research directions are:

  • Investigating the impact of digitalization on UMK.
  • Investigating the impact of costs incurred by UMK on their welfare.
  • Investigating the impact of entrepreneurial variables on the welfare of business actors.

Q: What are the recommendations for policy makers?

A: The recommendations for policy makers are:

  • Increase investment in UMK to promote economic growth and improve the welfare of the people in North Sumatra.
  • Promote digitalization of MSEs to improve their competitiveness and contribute to the province's economic growth.
  • Minimize costs incurred by UMK to improve their competitiveness and contribute to the province's economic growth.
  • Promote entrepreneurial variables to improve the competitiveness of UMK and contribute to the province's economic growth.

Q: What are the implications for business actors?

A: The implications for business actors are:

  • They should focus on increasing investment in UMK to promote economic growth and improve their welfare.
  • They should promote digitalization of MSEs to improve their competitiveness and contribute to the province's economic growth.
  • They should minimize costs incurred by UMK to improve their competitiveness and contribute to the province's economic growth.
  • They should promote entrepreneurial variables to improve the competitiveness of UMK and contribute to the province's economic growth.