Relationship Education with Poverty in Indonesia
Amir Machmud and Eeng Ahman
Universitas Pendidikan Indonesia, Setiabudhi 229 street, Bandung, Indonesia
{amir, edueengahman}@upi.edu
Keywords: Education, Proverty and Indonesia.
Abstract: This study aims to find out and analyse the relationship between education with poverty in Indonesia
Education is measured by the level of education of the poor, while poverty is measured by the percentage of
the population with poor status is they who live below the poverty line. This study uses an explanatory survey
method with secondary data in the form of time series data during the period 2004-2015 obtained from the
Central Bureau of Statistics to obtain poverty data. The results show that education has a strong and negative
relationship with poverty in Indonesia. This finding implies that education can reduce poverty because
education can improve the quality of human resources that ultimately increase productivity.
1 INTRODUCTION
Education and poverty are two very interesting
phenomena to be studied, because they have
influence with each other (Thirlwall, 2006).Income
poverty does not permit one to make adequate
investment in education, and a low level of
investment in education, finally, accentuates poverty.
It is widely recognized that investment on education
is one of the important keys to break the circular
relationship of poverty of education (ADB, 2003).
In the modern era, education is considered as a
component of basic need the lack of which
contributes a lot to generate income poverty (Thapa,
2010).The significance of education on reducing
poverty is that it generates a variety of benefits. These
benefits of education are classified as direct and
indirect benefits. Education provides direct benefits
in the form of higher income, more stable
employment and better working condition
(Psacharopoulos and Maureen, 1985) and in the form
of indirect benefits such as people’s empowerment
with knowledge, improvement of values and
institutions for better quality of life (ADB, 2003).
The nation will not develop without investment in
education and Poverty has a strong relationship with
education and economic growth. (Afzal, Ehsan,
Ishrat, Kafeel & Hina (2012)). Education is one of the
major components that shape human models has an
important role in economic growth (Abiodun and
Iyiola, 2011). Previous studies of the linkage between
education and poverty in different countries. It has
been done by several previous researchers, among
others Todaro (2001), Knight et al. (2007), undefined
Berg (2008), Cloud et al. (2011) undefined Afzal et
al. (2012), Faux and Ntembe (2013).The results from
their study show that between education, and poverty
has a significant relationship. However, the
relationship is inversely related.
This study aims to analyze the relationship
between education and poverty in Indonesia, re-test
the hypothesis of previous researchers. The findings
are expected to serve as input for policy makers
related to poverty and education.
2 METHODS
This study uses an explanatory survey method, with
an explanation rate of associative research or
relationships. The population of this study is the
number of population in Indonesia who received
education up to senior high school level and the
absolute level of poverty in Indonesia. The sample in
this study is the Indonesian population who obtained
education until senior high school level, the absolute
poverty level in Indonesia in 2004-2015. This study
uses secondary data with time series data types during
the period of 2004-2015. The data required in this
research is secondary data obtained from the Central
Bureau of Statistics and the National Team for
Acceleration of Poverty Reduction in the form of
education data and poverty data.
74
Machmud, A. and Ahman, E.
Relationship Education with Poverty in Indonesia.
In Proceedings of the 2nd International Conference on Economic Education and Entrepreneurship (ICEEE 2017), pages 74-77
ISBN: 978-989-758-308-7
Copyright © 2017 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
The variables in this study consist of dependent
variable and independent variable the dependent
variable in this research is poverty and independent
variable in this research is education in Indonesia.
The collected data is then analyzed by classical
assumption assays include normality,
heteroscedasticity, linearity, multicollinearity and
autocorrelation, and simple linear regression test. The
linear regression model has some basic assumptions
that must be met to produce a good estimate otherwise
known as BLUE (Best Linear Unbias Estimator).
These basic assumptions include homoscedastic, no-
multicollinierity, and no-autocorrelation.
3 RESULTS AND DISCUSSION
3.1 Result Study
Based on the research results obtained results as in
Table 1.
Table 1: Results of Education and Poverty Regression
in Indonesia in the Period 2004-2015
Method: Least Squares
Sample: 2004 2015
Included observations: 12
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
3.100447
3.554918
0.872157
0.4058
LNX1
-1.255775
0.627501
-2.001233
0.0764
R-squared
0.567544
1.654353
Adjusted R-
squared
0.471443
0.173690
S.E. of
regression
0.126276
-1.088379
Sum squared
resid
0.143510
-0.967153
Log likelihood
9.530276
-1.133262
F-statistic
5.905680
2.135695
Prob (F-statistic)
0.023001
Table 1 shows the correlation or relationship (R)
of 0.567 with the coefficient of determination (R2) of
0.4714 which implies that education has an influence
of 47.14 percent on poverty in Indonesia, the rest of
52.86 percent influenced by other factors. The
relationship between education and poverty in
Indonesia is included in a moderate relationship.
Significantly significant influence between education
and poverty (Fhitung & nbsp; & gt; & nbsp; F table
on nf 5 (N-1) means that the regression model can be
used to predict poverty education. Constant of
3.100447 means that if there is no education then
poverty is 3.1005. The coefficient of education
regression equal to -1,256 mean every education
have increase 1 percent hence poverty will decrease
equal to 1,256 percent. Result of significance test
with; t test show statistically Education has a
significant effect on poverty in Indonesia
3.2 Discussion
Education in this study focused on high school
education level taken from the highest education
level. Based on the results of research conducted
found that education has a significant effect on
poverty variables. This is evidenced by the t test
showing the significance value of 0.07 and the
regression coefficient of -1.255775. Thus it can be
stated that in this study education has a negative effect
on poverty and if education variables increase by 1%,
then poverty will experience a decline of 1.255775%.
Todaro (2006) states that the Education sector plays a
major role in shaping the ability of a developing
country to absorb modern technology and develop
production capacity to create sustainable growth and
development. High quality human resources will
increase national output and income. Improving the
quality of education provides many benefits in
accelerating economic growth of the company's
management that will be developed more efficiently,
mastery of science and technology development,
productivity improvement and improving people's
mind power. The results of this study are in
accordance with the research undertaken by Faux and
Ntembe (2013) who researched the impact of
educational attainment on poverty in Cameroon. This
research uses logistic regression model to know the
probability of poor person using gender, work
experience and education level as explanatory
variable. The approximate coefficient shows that as
one level of education increases, the probability of
declining population.
Afzal et al. (2012) examines the relationship
between education, poverty and economic growth in
Pakistan based on secondary data for the period
1971/72 and 2009/10. They found that education
affects real GDP positively and significantly only in
the long run and concludes that better education can
be an effective tool for reducing poverty and
promoting economic growth. Cloud et al. (2011)
evaluated the impact of education on poverty in
Pakistan based on secondary data for 1998/99 and
2001/02. They conclude that education and poverty
Relationship Education with Poverty in Indonesia
75
are inversely proportional. The higher the education
level of the lower population will be the number of
the poor. Berg (2008) analyzes the relationship
between education and poverty in developed and
developing countries. He explained that access to
education varies depending on the level of income
and provides concrete evidence that education can
reduce poverty in a number of ways. However,
poverty is just one of several factors that prevent
access to education. Knight et al. (2007) analyzed the
relationship between education and income in rural
China based on data from a national household survey
for 2002. They found evidence that community
participation was positively associated with
community incomes and suggested that education and
income increase reduce risk of being in poverty.
Education has always been the main agenda of a
country to form a country with competent human
resources quality, so as to increase its national
income. According Friawan (2008) implication of
development in education is human life will be more
qualified. In relation to the economy in general
(national) the higher the quality of life of a nation, the
higher the growth rate and welfare of the nation. The
higher quality of life / investment of human resources
will also have implications for the national economic
growth rate. Aboidin and Iyiola (2011) have also
shown that educational investments have a direct and
significant impact on economic growth. The theory
used in this research is also the theory of economic
growth Solow-Swan. Many empirical studies show
that the main source of economic growth is the level
of technology. In mastering the increasingly modern
technology required high quality human resources.
Human capital is needed to create the desired
economic growth. It can be obtained through
education. Education is not just learning to do
something, education is also one of the instruments to
increase human capital.
Pradhan (2011) in his research also revealed that
there is a uni-directional uniformity between
education and economic growth in the Indian
economy. The analysis tool used is ECM (Error
Correction modeling). The results of the analysis
using ECM (Error Correction modeling) also
confirmed that there is a short-term dynamics
between education and economic growth in India that
bring long-term economic stability. It shows that
qualified human resources will sustain the progress of
a country, so that countries with qualified human
resources will have advantages in all fields, especially
in the economic field.
In Becker's theory of human capital explains that
a person increases his income through educational
improvement. Increased education will be able to
provide opportunities for higher economic growth in
the future. Education is the path to progress and the
achievement of social and economic well-being.
While the failure to build education will give birth to
various crucial problems: unemployment, crime, it is
concluded that the higher level of public education of
a country will have an impact on increasing the
productivity of human resources in the process of
economic growth. Increased physical capital
development becomes more efficient and labor is
more productive if followed by increased
development in the field of human capital, which will
further enhance economic growth. Therefore, it can
be said that high school education has a significant
influence on economic growth
Education serves as a driving force or the driving
force of community transformation to break the
poverty chain. Education helps reduce poverty
through its effects on labor productivity and through
social benefit channels, education is an important
development goal for the nation (World Bank 2005).
This means education is an important instrument for
poverty alleviation. People with a high level of
education will have the skills and skills to improve
the welfare of their lives, through increased
productivity that can increase the output of the
company so as to increase workers' wages. When the
welfare of society is guaranteed, the actual economic
growth will increase. This is consistent with the
endogenous growth theory pioneered by Lucas and
Romer (1996) in Arsyad (2010), education is one of
the driving factors for economic growth. Education
becomes a means to improve the quality of human
resources which will produce more productive
workforce. A high productivity workforce will
produce more output so that aggregate will increase
economist growth.
4 CONCLUSIONS
Based on findings previously implies that to reduce
poverty can be done by taking into account the quality
of education. Therefore, the government should pay
more attention to the quality of education to reduce
the poverty rate which in turn can encourage;
economic growth rate. Steps that can be done between
1) Improve the education system in Indonesia, this
can be done by re-designing the curriculum. 2)
Improve education infrastructure. During this time
the quality of education infrastructure in Indonesia is
very lame between urban and rural. Where in urban
areas the quality of education infrastructure is very
ICEEE 2017 - 2nd International Conference on Economic Education and Entrepreneurship
76
good, but in the countryside many school buildings
are almost collapsed or even already collapsed, the
educational facilities are also very limited. Therefore,
the government should pay more attention to
education in rural or remote areas by improving its
infrastructure. 3) Develop qualified learners. One of
the most important instruments in education is the
presence of high-quality learners. The quality and
competence of educators in Indonesia is very sad. To
obtain high-quality educational staff the government
needs to conduct special training and qualifications
about teachers and lecturers. A teacher must have
academic qualification that has completed the degree
program, competence in this matter can be seen from
pedagogic competence that is related to teacher
ability in teaching and learning process that is
preparation of teaching which includes designing and
executing learning scenario, choosing method, media,
Evaluation for students to achieve educational
objectives both in the cognitive, affective, and
psychomotor aspects of students
ACKNOWLEDGEMENTS
Thanks to the Directorate of Research and
Community Service, the Directorate General of
Higher Education, the Ministry of Research,
Technology and Higher Education as the grant
(Kemenristek Dikti) beneficiary grant.
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