Examining the Long and Short Run Effect of Young Workers on Macroeconomic Variables: An Application of Panel Autoregressive Distributed Lag Approach
Abstract
The purpose of this research is to analyze the linkage between young workers and macroeconomic variables in Indonesia through a cointegration and causality approach. Multivariate causality between these variables. Using ARDL panel regression (Auto-Regressive Distributed Lag) with data from 2005 – 2019 covering 33 provinces in Indonesia. The results showed that the variable government expenditure on education had no effect on young workers in the short and long term, the variable economic growth only had a positive and significant effect on young workers in the long term. The increase in the minimum wage has a significant negative effect on young workers in the short term, and vice versa, it has a positive and significant effect on the long term. The last variable that has an effect is the investment variable which has a negative and significant effect in the short term on young workers. The results of multivariate causality testing between the variables above have the result that young workers have a two-way causal relationship with the minimum wage and have a one-way relationship with government spending on education.
Keywords
Full Text:
PDFReferences
Acquah, A. M., & Ibrahim, M. (2020). Foreign direct investment, economic growth and financial sector development in Africa. Journal of Sustainable Finance and Investment, 10(4), 315–334. https://doi.org/10.1080/20430795.2019.1683504
Ahmad, A., & Khan, F. (2018). Investigating the Determinants of Youth Unemployment in Pakistan. Pakistan Journal of Humanities and Social Sciences Research, 01(01). https://doi.org/10.37605/pjhssr.1.1.1
Anyanwu, J. C. (2013). Characteristics and Macroeconomic Determinants of Youth Employment in Africa. African Development Review. https://doi.org/10.1111/j.1467-8268.2013.12019.x
Azam, M., & Lukman, L. (2010). Determinants of Foreign Direct Investment in India , Indonesia and Pakistan. Journal of Managerial Sciences, 4(1), 31–44.
Belser, P., & Rani, U. (2015). Minimum wages and inequality. In Labour markets, institutions and inequality (pp. 123–146). Edward Elgar Publishing.
Bouznit, M., & Pablo-Romero, M. del P. (2016). CO2 emission and economic growth in Algeria. Energy Policy, 96, 93–104. https://doi.org/10.1016/j.enpol.2016.05.036
Caliendo, M., & Schmidl, R. (2016). Youth unemployment and active labor market policies in Europe. IZA Journal of Labor Policy, 5(1). https://doi.org/10.1186/s40173-016-0057-x
Caruso, R., & Gavrilova, E. (2012). Youth unemployment, terrorism and political violence, evidence from the Israeli/Palestinian conflict. Peace Economics, Peace Science and Public Policy, 18(2). https://doi.org/10.1515/1554-8597.1254
Chemingui, M. A. (2007). Harnessing Public Spending for Poverty Reduction in Yemen. In Public Policy and Poverty Reduction in Arabic Region (pp. 315–360).
Chen, J.-H., & Huang, Y.-F. (2013). The Study of the Relationship between Carbon Dioxide (CO 2 ) Emission and Economic Growth. Journal of International and Global Economic Studies, 6(2), 45–61. http://www2.southeastern.edu/orgs/econjournal/index_files/JIGES DEC 2013 CHEN HUANG 3-28-2014.pdf
Comola, M., & De Mello, L. (2011). How Does Decentralized Minimum Wage Setting Affect Employment And Informality? The Case Of Indonesia. Review of Income and Wealth, 57(SUPPL. 1). https://doi.org/10.1111/j.1475-4991.2011.00451.x
Corbanese, V., & Rosas, G. (2016). Rights @ work for youth: Decent work for young people. International Labour Organization.
Durotoye, A. (2014). The crisis of youth unemployment in the MINT countries : causes , consequences and corrections. European Journal of Business and Management, 6(24), 123–136. www.iiste.org
Edeme, R. K., Nkalu, C. N., & Ifelunini, I. A. (2017). Distributional impact of public expenditure on human development in Nigeria. International Journal of Social Economics, 44(12), 1683–1693. https://doi.org/10.1108/IJSE-05-2016-0152
Ehinomen, C., & Afolabi, B. (2015). Rising Youth Unemployment and Its Social Economic Implications for the Growth and Development of the Nigerian Economy. SSRN Electronic Journal, 1–22. https://doi.org/10.2139/ssrn.2549284
Eichhorst, W., & Rinne, U. (2015). Promoting Youth Employment Through Activation Strategies. IZA Research Report, 65(40), 1–70. http://en.dial.ird.fr/content/view/full/203225
Eneji, M. A., Mai-Lafia, D., & Weiping, S. (2013). Socio-economic impact of graduate nunemployment on Nigeria and the vision n20:2020. International Journal of Development and Sustainability, 2(1), 148–176. http://isdsnet.com/ijds-v2n1-12.pdf
Fadlli, M. D., Khusaini, M., & Syafitri, W. (2019). The effect of government expenditure on health performance. International Journal of Scientific and Technology Research, 8(7), 23–31.
Fitrianti, R., Ismail, M., Maski, G., & Pratomo, D. S. (2015). Does Government Expenditure Crowds Outthe Private Domestic Investment? Empirical Evidence of Indonesia. Journal of Applied Economic Sciences, X(5 (35)), 685–692.
Fox, L., Senbet, L. W., & Simbanegavi, W. (2016). Youth employment in Sub-Saharan Africa: Challenges, constraints and opportunities. Journal of African Economies, 25, i3–i15. https://doi.org/10.1093/jae/ejv027
Galí, J. (2012). Notes for A New Guide to Keynes (I): Wages, Aggregate Demand, and Employment. Journal of the European Economic Association, 11(5), 973–1003.
Garrouste, C., Kozovska, K., & Perez, E. A. (2010). Education and Long-Term Unemployment. MPRA, 25073(25073), 1–30. https://doi.org/10.2788/28401
Gorry, A. (2013). Minimum wages and youth unemployment. European Economic Review, 64, 57–75. https://doi.org/10.1016/j.euroecorev.2013.08.004
Gough, K., Langevang, T., & Owusu, G. (2013). Youth employme nt in a globalising world. International Development Planning Review, 35(2), 91–102. https://doi.org/10.3828/idpr.2013.7
Grimaccia, E., & Lima, R. (2013). Public expenditure on education , education attainment and employment : a comparison among European countries. September, 1–18.
Helgesson, M., Johansson, B., Nordqvist, T., Lundberg, I., & Vingård, E. (2013). Unemployment at a young age and later sickness absence, disability pension and death in native Swedes and immigrants. European Journal of Public Health, 23(4), 606–610. https://doi.org/10.1093/eurpub/cks099
Hohberg, M., & Lay, J. (2015). The impact of minimum wages on informal and formal labor market outcomes: evidence from Indonesia. IZA Journal of Labor and Development, 4(1). https://doi.org/10.1186/s40175-015-0036-4
Horner, S., Zhang, A., & Furlong, M. (2018). The Impact of Higher Education on Unemployment. ECON, 3161, 1–19. https://smartech.gatech.edu/bitstream/handle/ 1853/60545/econ_3161_research_paper.pdf?sequence=1&isAllowed=y
Hussain, A., Mohammad, S. D., Akram, K., & Lal, I. (2009). Effectiveness of government expendeture crowding-in or crowding-out: An emperical evidance in case of Pakistan. European Journal of Economics, Finance and Administrative Sciences, 16(16), 141–147.
Ihensekhien, O. A., & Aisien, L. N. (2019). Turkish Economic Review. Turkish Economic Review, 6(1), 63–76.
Inekwe, J. N. (2013). FDI, Employment and Economic Growth in Nigeria. African Development Review, 25(4), 421–433. https://doi.org/10.1111/1467-8268.12039
International Labour Office (ILO). (1982). Resolution concerning statistics of the economically active population, employment, unemployment and underemployment. Adopted by The 13th International Conference of Labour Statisticians (ICLS). ILO: Geneva
International Labour Office (ILO). (2006). Global employment trends for youth, Geneva
International Labour Office (ILO). (2011). Global Employment Trends for Youth, Geneva
International Labour Office (ILO). (2019). ILO Glossary of Statistical Terms. https://www.ilo.org/ilostat-files/Documents/Statistical%20Glossary.pdf
Javorcik, B. (2013). Does FDI Bring Good Jobs to Host Countries? In The World Bank. http://siteresources.worldbank.org/EXTNWDR2013/Resources/8258024-1320950747192/8260293-1320956712276/8261091-1348683883703/WDR2013_bp_Does_FDI_Bring_Good_Jobs.pdf%0Ahttps://datahelpdesk.worldbank.org/knowledgebase/articles/114954-what-is-the-difference-be
Karikari-Apau, Ellen and Abeti, W. (2019). The Impact of Unemployment on Economic Growth in China. Munich Personal RePEc Archive, 96100, 1–72. https://mpra.ub.uni-muenchen.de/89834/
Kawar, M., & Tzannatos, Z. (2013). Youth employment in Lebanon : Skilled and jobless. LCPS Policy Paper, 39. http://www.lcps-lebanon.org/publications/1368538726-youth_enemployment.pdf
Korpela, K. (2017). Mismatch Between Education and Youth. LUND University.
Kuznets, S. (1973). Kuznets.Pdf. In The American Economic Review (Vol. 63, Issue 3, pp. 247–258).
Laporšek, S. (2013). Minimum wage effects on youth employment in the European Union. Applied Economics Letters, 20(14), 1288–1292. https://doi.org/10.1080/13504851.
799752
Levine, L. (1965). Implications of the Anti-Poverty Program for Education and Employment. Vocational Guidance Quarterly, 14(1), 8–15. https://doi.org/10.1002/j.2164-585x.1965.tb00763.x
Mandishekwa, R. (2014). Causality between Economic Growth and Investment in Zimbabwe. Journal of Economics and Sustainable Development Www.Iiste.Org ISSN, 5(20), 136–140. www.worldbank.org/data
Maqbool, M., Mahmood, T., Sattar, A., & Bhalli, M. (2013). Determinants of unemployment: Empirical evidences from Pakistan. Pakistan Economic and Social Review, 51(2), 191–208.
Marimpi, M., & Koning, P. (2018). Youth minimum wages and youth employment. IZA Journal of Labor Policy, 7(1). https://doi.org/10.1186/s40173-018-0098-4
Maryati, S. (2015). Dinamika Pengangguran Terdidik: Tantangan Menuju Bonus Demografi Di Indonesia. Economica, 3(2), 124–136. https://doi.org/10.22202/economica. 2015.v3.i2.249
Mitsis, P. (2015). Effects of Minimum Wages on Total Employment: Evidence from Cyprus. Journal of Labor Research, 36(3), 318–345. https://doi.org/10.1007/s12122-015-9205-0
Mkombe, D., Tufa, A. H., Alene, A. D., Manda, J., Feleke, S., Abdoulaye, T., & Manyong, V. (2020). The effects of foreign direct investment on youth unemployment in the Southern African Development Community. Development Southern Africa, 0(0), 1–16. https://doi.org/10.1080/0376835X.2020.1796598
Mora, J. J., & Muro, J. (2017). Dynamic Effects of the Minimum Wage on Informality in Colombia. Labour, 31(1), 59–72. https://doi.org/10.1111/labr.12087
Mosikari, T. J. (2013). The effect of unemployment rate on gross domestic product: Case of south africa. Mediterranean Journal of Social Sciences, 4(6), 429–434. https://doi.org/10.5901/mjss.2013.v4n6p429
Moubayed, L., & Purnagunawan, R. M. (2014). Youth employment in indonesia: compendium of best practices and recommendations for indonesia (No. 19b).
Mubarok, B., Hanita, M., & Rohman, S. (2019). Demographic and Youth Bonus; Creative Economic Development Based on Local Culture. 24–26(Oktober). https://doi.org/10.4108/eai.24-10-2018.2289656
Müller, W. (2005). Education and youth integration into European labour markets. International Journal of Comparative Sociology, 46(5–6), 461–485. https://doi.org/10.1177/0020715205060048
Munzir, A., Syechalad, M. N., & Silvia, V. (2018). The Effect of Government Expenditures, Private Investment and Labor on Economic Growth in Pidie District. Sriwijaya International Journal of Dynamic Economics and Business, 1(4), 357. https://doi.org/10.29259/sijdeb.v1i4.357-374
Muravyev, A., & Oshchepkov, A. (2013). Minimum Wages, Unemployment and Informality: Evidence from Panel Data on Russian Regions. IZA Discussion Paper, 7878.
Muravyev, A., & Oshchepkov, A. (2016). The effect of doubling the minimum wage on employment: evidence from Russia. IZA Journal of Labor and Development, 5(1). https://doi.org/10.1186/s40175-016-0051-0
Muthui, J., Kosimbei, G., Maingi, J., & Thuku, G. (2013). The Impact of Public Expenditure Components on Economic Growth in Kenya 1964-2011 John Njenga Muthui Kenyatta University Kenya George Kosimbei Kenya Institute for Public Policy research and Analysis ( KIPPRA ) Kenya James Maingi Kenya Gideon Kiguru Thuku. International Journal of Business and Social Sciences, 4(4), 233–253.
O’Higgins, N. (2012). This time it’s different youth labour markets during the great recession. Comparative Economic Studies, 54(2), 395–412. https://doi.org/10.1057/ces.2012.15
O’Reilly, J., Eichhorst, W., Gábos, A., Hadjivassiliou, K., Lain, D., Leschke, J., McGuinness, S., Kureková, L. M., Nazio, T., Ortlieb, R., Russell, H., & Villa, P. (2015). Five characteristics of youth unemployment in Europe: Flexibility, education, migration, family legacies, and EU policy. SAGE Open, 5(1). https://doi.org/10.1177/2158244015574962
Obi, Z. C., & Obi, C. O. (2014). Impact of government expenditure on education: The Nigerian experience. Ijbfmr, 2, 42–48.
Oktafianto, E. K., Achsani, N. A., & Irawan, T. (2019). The Determinant of Regional Unemployment in Indonesia: The Spatial Durbin Models. Signifikan: Jurnal Ilmu Ekonomi, 8(2), 179–194. https://doi.org/10.15408/sjie.v8i2.10124
Pitman, A., Krysinska, K., Osborn, D., & King, M. (2012). Suicide in young men. The Lancet, 379(9834), 2383–2392. https://doi.org/10.1016/S0140-6736(12)60731-4
Pratama, R. P., Muhammad, S., & Silvia, V. (2020). Do Minimum Wage and Economic Growth Matter for Labor Absorption in Sumatra Island , Indonesia ? 4464(1), 2013–2017. https://doi.org/10.36349/easjebm.2020.v03i01.007
Priyanka Jain, Vyas, V., & Roy, A. (2013). Journal of Advances in Management Research Article information : Journal of Advances in Management Research, 10(1), 122–138.
Richards, D. L., & Gelleny, R. (2007). Women’s status and economic globalization. International Studies Quarterly, 51(4), 855–876. https://doi.org/10.1111/j.1468-2478.2007.00480.x
Schneider, F., Krstić, G., Arsić, M., & Rancrossed D Signelović, S. (2015). What is the extent of the shadow economy in Serbia? In Contributions to Economics (Vol. 212). https://doi.org/10.1007/978-3-319-13437-6_5
Sitompul, T., & Simangunsong, Y. (2019). The Analysis of the Impact of GDP, FDI, Minimum Wage on Employment in Indonesia. International Journal of Management, Entrepreneurship, Social Science and Humanities, 2(2), 53–62. https://doi.org/10.31098/ijmesh.v2i2.17
Sonje, A., Deskar-Skrbic, A., & Milan Sonje, V. (2018). Efficiency of Public Expenditure on Education: Comparing Croatia With Other Nms. INTED2018 Proceedings, 1(85152), 2317–2326. https://doi.org/10.21125/inted.2018.0439
Stigler, G. J. (1946). The Economics of Minimum Wage Legislation Revisited. The American Economic Review, 36(3), 38–365.
Sunal, O., & Sezgin Alp, O. (2016). Effect of different price indices on linkage between real GDP growth and real minimum wage growth in Turkey. Journal of Economic & Financial Studies, 4(1), 01. https://doi.org/10.18533/jefs.v4i1.213
Surajo, A. Z., & Karim, A. H. . Z. (2016). Youth Unemployment and Poverty in Nigeria: A Threat to Sustainable Growth and Development. International Journal of Scientific Research and Management, 4(12), 4919–4928. https://doi.org/10.18535/ijsrm/v4i12.02
Tan, E. (2014). Human Capital Theory: A Holistic Criticism. Review of Educational Research, 84(3), 411–445. https://doi.org/10.3102/0034654314532696
Thioune, T., & Kane, C. S. (2018). Youth Employment and Economic Growth in WAEMU Countries. Journal of Economics and Development Studies, 6(4), 162–173. https://doi.org/10.15640/jeds.v6n4a14
Badan Pusat Staristik. (2019). Tingkat Pengangguran Terbuka (TPT) Menurut Provinsi, 1986-2018. Diambil dari https://www.bps.go.id/statictable/2014/09/15/981/tingkat-pengangguran-terbuka-tpt-menurut-provinsi-1986---2018.html
Kemenkeu. (2016). Bonus Demografi, Peluang Indonesia Percepat Pembangunan Ekonomi. Diambil dari https://www.kemenkeu.go.id/publikasi/berita/bonus-demografi-peluang-indonesia-percepat-pembangunan-ekonomi/
Kuznets, S. (1973). Kuznets.Pdf. In The American Economic Review (Vol. 63, Issue 3, pp. 247–258).
Okun, Arthur M. 1962. Potential GNP: Its measurement and significance. In Proceedings of the Business and Economics Section. Edited by the American Statistical Association. Washington: American Statistical Association, pp. 98–104
Schultz, T. W. (1961). Invest in Human Capital. In The Amercian Economic Review (Vol. 51, Issue 1, pp. 1–17).
Setkab. (2018). APBN 2018: Total Anggaran Pendidikan Rp444,131 Triliun, Terbanyak di Kemenag Rp52,681 Triliun dari https://setkab.go.id/apbn-2018-total-anggaran-pendidikan-rp444131-triliun-terbanyak-di-kemenag-rp52681-triliun/
Undang-Undang No. 1 Tahun 1967 tentang Penanaman Modal Asing (PMA)
Undang-Undang No. 12 Tahun 1970 tentang Penanaman Modal Dalam Negeri (PMDN)
UUD Pasal 31 ayat (4) Undang-Undang Dasar Negara Republik Indonesia 1945
UU Ketenagakerjaan No 13 Tahun 2003 Tentang Ketenagakerjaan
United Nation. (1992). Statistical charts and indicators on the situation of youth, 1970-1990 (New York).
United Nations. (2015). Transforming our world: The 2030 agenda for sustainable development. General Assembley 70 session.
Wang, B. (2005). Effects of government expenditure on private investment: Canadian empirical evidence. Empirical Economics, 30(2), 493–504. https://doi.org/10.1007/s00181-005-0245-9
Yakubu, M. M., & Akanegbu, B. N. (2015). Education Expenditure and Economic Growth in Nigeria: Granger Causality analysis. Journal of Business Management and Economics, 3(4), 1–6. https://doi.org/10.15520/jbme.2015.vol3.iss4.52.pp
World Bank. (2019a). Unemployment, youth total (% of total labor force ages 15-24, modeled ILO estimate). Diambil dari https://data.worldbank.org/indicator/SL.UEM.1524.ZS
World Bank. (2019b). Unemployment, total (% of total labor force, modeled ILO estimate). Diambil dari https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS
World Bank. (2019c). The World Bank in Indonesia, Overview. Diambil dari https://www.worldbank. org/en/country/indonesia/overview
DOI: https://doi.org/10.46336/ijqrm.v2i4.180
Refbacks
- There are currently no refbacks.
Copyright (c) 2021 Rizky Wardhana, Vivi Silvia, M. Shabri Abd. Majid
This work is licensed under a Creative Commons Attribution 4.0 International License.
Published By:
IJQRM: Jalan Riung Ampuh No. 3, Riung Bandung, Kota Bandung 40295, Jawa Barat, Indonesia
IJQRM Indexed By:
Creation is distributed below Lisensi Creative Commons Atribusi 4.0 Internasional.