The Influence of Economic Growth, The Minimum Wage, The

Unemployment Rate Against Poverty Level in Regency/City in South

Sumatra Province in 2011-2016

Maya Tourina, Didik Susetyo, Azwardi

Faculty of Economics, Universitas Sriwijaya, Palembang, Indonesia

Keywords: Economic Growth, Minimum Wage, Unemployment Rate, Poverty Rate

Abstract: This research aims to find out how to influence economic growth, unemployment rate, minimum wage

against poverty level regency/city in South Sumatra Province in 2011-2016. The object of this research was

15 regencies / cities in South Sumatra Province, with a period of 6 years. The data used is a combination of

data time series and cross section data so using regression analysis panel. Data collection methods used in

this research is to study methods of library. The results of this research show that simultaneously variables

of economic growth are, the minimum wage, the unemployment rate effect on poverty levels. Partially, only

economic growth has a negative and significant effect on the poverty level, while the variable of minimum

wage and unemployment rate have negative and insignificant effect to poverty level of regency/city in South

Sumatera province year 2011-2016.

1 INTRODUCTION

Development is a process that aims to realize the

prosperity of society through the development of the

economy. Measures of development success can be

seen from the economic growth, economic structure

and the level of disparities between people, between

regions and between sectors. The main objectives of

the economic development effort besides creating

the highest growth, should also eliminate or reduce

the level of poverty, income gap, and unemployment

rate (Todaro, 2000). So it can be said that the

priority of development is eliminating poverty.

Efforts are being made to accelerate the

development of the area with this central

Government has granted autonomy in local

Government to dig the potentialities that are owned

by the Government of the area. Development in

South Sumatra Province which took place

extensively and continuously been improving the

economy society. The achievement of the outcomes

of the development community is perceived very

aggregate construction of 13 regencies and 4 cities

with 2,872 village, 385 wards and 231 subdistricts in

South Sumatra Province which is inseparable from

the efforts together between the Government and the

public. But on the other hand various obstacles in

maximizing the potential of our human resources

and sources of capital still faced by deciding policy

at the provincial level as well as at the regency/city.

Based on Table 1, be aware that during the

period of 2011-2016 the whole district/city in South

Sumatra Province is experiencing the instability of

economic growth on average each year. Economic

growth in 2011 at the Muara Enim Regency, higher

than other regencies in South Sumatra Province of

12.28 percent, in 2012 the economic growth at

Regency Prabumulih increased by 8.32 percent, the

year 2013 economic growth in OI higher than in

other regencies of the District of 7.26 percent,

economic growth in 2014 at Regency Prabumulih

11.51 percent increase by the year 2015 and the

economic growth in the Regency Muara Enim and

Ogan Komering Ulu Selatan higher is amounting to

7.62 percent, and 6.82 percent in 2016, however,

economic growth improved in the Regency of Ogan

Komering Ulu Timur and Prabumulih amounting to

6.15 percent and 6.8 percent. The increase is due to

198

Tourina, M., Susetyo, D. and Azwardi, .

The Inﬂuence of Economic Growth, The Minimum Wage, The Unemployment Rate Against Poverty Level in Regency/City In South Sumatra Province in 2011-2016.

DOI: 10.5220/0008438401980203

In Proceedings of the 4th Sriwijaya Economics, Accounting, and Business Conference (SEABC 2018), pages 198-203

ISBN: 978-989-758-387-2

the role of infrastructure development that is of great

benefit to the community. In addition, there is an

improvement in commodity prices leading to

increased purchasing power of the community.

Economic growth and poverty are closely linked,

Economic growth is often used as a benchmark of

economic performance of a region, but uncertain

high economic growth indicates the high level of

well-being of the people. It can not be denied that

economic growth is so important for poverty

alleviation and economic development.

Table 1: growth rate GDP based on Constant Price Basis in Regency/City of South Sumatra Province year of 2011-2016

(percent)

Regency/City

The Rate of Growth of GDP (%)

2011

2012

2013

2104

2015

2016

OKU

5.70

5.26

4.46

3.67

3.05

3.95

OKI

6.90

6.56

6.36

5.07

4.81

4.70

Muara Enim

12.28

8.27

6.76

3.13

7.02

5.24

Lahat

5.75

5.28

4.83

3.83

2.13

2.77

Musi Rawas

1.16

0.85

5.88

7.87

5.13

5.41

Musi Banyuasin

3.62

7.25

3.95

4.67

2.28

2.41

Banyuasin

5.42

6.15

6.18

5.14

5.56

5.88

OKUS

5.20

5.26

5.20

5.51

4.54

5.18

OKUT

6.37

7.20

6.96

5.19

6.82

6.15

Ogan Ilir

7.56

8.03

7.26

6.55

4.61

5.12

Empat Lawang

6.04

6.11

5.39

4.23

4.50

4.54

Palembang

6.39

7.75

5.85

5.24

5.44

5.76

Prabumulih

6.70

8.32

5.07

11.51

4.84

6.80

Pagar alam

5.43

6.27

5.70

4.57

4.33

4.32

Lubuk Linggau

6.21

6.35

3.37

6.30

6.00

6.33

Sumatera Selatan

6,36

6,83

5,31

4,79

4,42

5,04

Source: BPS South Sumatra (Processed)

Table 2: Poverty Level According To Regencies/Cities in South Sumatra Province year of 2011-2016 (percent)

Regency/City

Poverty Level (%)

2011

2012

2013

2014

2015

2016

OKU

11.58

11.19

12.31

11.96

13.22

13.29

OKI

15.06

14.52

15.82

15.30

17.08

16.03

Muaraenim

13.71

13.21

14.26

13.76

14.54

13.56

Lahat

17.92

17.45

18.61

18.02

17.11

Musi Rawas

18.25

17.67

17.85

17.28

15.13

14.30

Muba

18.99

18.29

18.02

17.38

18.35

17.27

Banyuasin

11.66

11.27

12.28

11.88

12.45

11.72

OKUS

10.84

10.49

11.57

11.21

11.58

10.95

OKUT

9.23

8.98

10.28

10.13

11.24

11.29

13.18

12.79

13.86

13.38

14.43

13.80

Empat Lawang

13.82

13.37

13.10

13.89

13.33

12.54

Palembang

14.30

13.59

13.36

12.93

12.85

12.04

Prabumulih

12.93

12.19

11.71

11.23

12.12

11.44

Pagaralam

9.24

9.00

8.90

9.64

9.19

Lubuk Linggau

14.43

13.89

14.37

13.90

15.16

13.99

Source: BPS South Sumatra (Processed)

The Inﬂuence of Economic Growth, The Minimum Wage, The Unemployment Rate Against Poverty Level in Regency/City In South

Sumatra Province in 2011-2016

199

Table 2 shows the instability of poverty levels in

regency/ city in South Sumatra Province from year

to year. From 2011-2016, Musi Banyuasin regency

was ranked first because of the high poverty level of

17.27 percent compared to other regencies, then

Lahat regency occupied the second position with the

poverty level of 17.11 percent. Pagar Alam Regency

has a lower poverty rate of 9.19 percent.

Formulation of Research Problems

Based on the above description of the

background that became the formulation of the

problem in the study as follows:

What is the effect of Economic Growth,

Minimum Wage, Unemployment Rate on Poverty

Rate of Regency / City in South Sumatra Province in

2011-2016?

2 LITERATURE STUDIES

2.1 Poverty

Poverty is a situation where there is a lack of

things that are common to possess such as food,

clothing, shelter and drinking water, these things are

closely related to quality of life.

2.2 Economic Growth

According to Nugraheni, the measurement of

the progress of an economy requires a precise

measuring instrument, some economic growth

measuring tools, among others, are: (Aditya, 2010):

1. Gross Domestic Product (GDP)

Gross domestic product (GDP), or at the regional

level is called the gross Regional domestic product

(GRDP), is the number of final goods and services

produced by an economy in one year and is

expressed in market prices. Either GDP or GRDP is

a global measure of its nature, and is not a precise

measure of economic growth, because it has not

been able to reflect the real well-being of the

population, whereas in fact prosperity must be

enjoyed by every resident in the country or region

concerned.

2. Gross Domestic Product Per Capita/Per Capita

Income

Gross domestic product per capita or gross

regional domestic product per capita at the regional

scale can be used as a better gauge of economic

growth because it more accurately reflects the

welfare of a country's population than the value of

GDP or GRDP only. Gross domestic product per

capita at both national and regional levels is the

amount of national GDP or GRDP of a region

divided by the number of people in the country as

well as in the region concerned, or it may be referred

to as the average GDP or GRDP.

3. The Minimum Wage

Minimum wage is a minimum standard used by

employers or industry players to provide wages to

workers in a business or work environment.

4. Unemployment

Unemployment is a person who has been

categorized into a labor force who is actively

looking for work at a certain wage level but can not

get the desired job (Sukirno,2003).

Figure 1. Theoretical Thinking Framework

3 RESEARCH HYPOTHESES

The hypothesis proposed in this research is as

follows:

Economic Growth Variables, Minimum Wage,

Unemployment Rate affect Poverty Rate in Regency

/ City of South Sumatera Province in 2011-2016.

3.1 The Scope of Research

This research was conducted in 17 districts in

South Sumatera Province with the focus of research

on analysis of economic growth, minimum wage,

unemployment rate and poverty level in regency/city

of South Sumatera Province. The regencies/cities are

13 regencies and 4 cities in southern sumatera

province, while the 2 new districts resulting from

Regency Expansion namely Pali and Muratara

regency are not subjected to research because they

Economic growth

Minimum Wage

Regency/City

The Unemployment

Rate

Poverty Level

SEABC 2018 - 4th Sriwijaya Economics, Accounting, and Business Conference

200

do not have complete data during the period of the

research year.

3.2 Types of Data

The type of data used in this research is panel

data and time series data for 6 years starting from

2011 until 2016.

3.3 Research Model

The research model in this research is using

econometric model of panel data regression equation

with Ordinary Least Square (OLS) approach. Where:

Y = β0 + β1 G

+β2 W

+ β3 UN

+ µ

................(1)

Where:

Y : Poverty Level

: Economic Growth (%)

: Minimum Wage (in million Rupiah)

: Unemployment Level (%)

i : Regency/City Area

t : Time

βo : Constants

β1 : Coefficient Of Economic Growth

β2 : Minimum Wage Coefficient

β3 : The Unemployment Coefficients

: Interference Factor

4 RESULTS AND DISCUSSION

Table 3: The Results of Study

Variable

Coefficie

t-Statistic

Prob.

51.00119

0.807501

0.4220

PE?

-0.121544

-2.103073

0.0390

UM?

-2.595138

-0.584130

0.5610

TP?

-0.003185

-0.049363

0.9608

The results of the estimation of quantitative

analysis based on panel data regression statistical

tests using eviews program can be known to each of

the independent variables are just variables that

influence economic growth significantly to growth

economic value is the probability of 0.0390 smaller

than α 0.05. While other variables are the Minimum

wage and the unemployment rate has no effect

against a significant poverty level because the

probability value greater than 0.05 α. As for the

results of the estimation of the regression equation in

the above panel data, in the following equation:

Y = 51,00119 – 0,121544PE

– 2,595138UM

0,003185TP

Explanations of the equation are as follows:

1. Constants

Constants of 51.00119 this means that if the

economic growth, the minimum wage, the

unemployment rate of 0, then the value of Y is

constant 51.00119. When adjusted to the economic

growth data, the minimum wage, the unemployment

rate is, every increment of 0, and then the value of

the level of poverty will be a constant of 51.11

percent in subsequent years.

2. Economic Growth Regression Coefficient (X1)

Coefficient of economic growth against the

poverty level had a negative influence by a

coefficient of 0.121544. This means that if the

economic growth experienced an increase of 1 unit,

then it will result in the level of poverty of the

district/city in South Sumatra Province declined by

1.2 percent.

3. Minimum Wage Coefficient (X2)

The minimum wage against poverty levels had a

negative influence by a coefficient of 2.595138. This

means that when the minimum wage has increased

by 1 unit, it will result in the level of poverty of the

district/city in South Sumatra Province declined by

2.5 percent.

4. Unemployment Rate Coefficient (X3)

The unemployment rate against the poverty level

had a negative influence by a coefficient of 0.03185.

This means that when the minimum wage has

increased by 1 percent, it will result in the level of

poverty of the district/city in South Sumatra

Province declined by 3 percent

5 CONCLUSION AND

SUGGESTION

5.1 Conclusion

This research aims to analyze Poverty Rate of

Regency / City in South Sumatera Province. From

the data analysis can be concluded as follows:

1. Of the three independent variables (free)

discussed are economic growth, minimum wage,

and unemployment rate to poverty level that is

92 percent while the remaining 8 percent is

The Inﬂuence of Economic Growth, The Minimum Wage, The Unemployment Rate Against Poverty Level in Regency/City In South

Sumatra Province in 2011-2016

201

influenced by other factors outside this research

model.

2. Simultaneously independent variables, namely

economic growth, minimum wage, and

unemployment rate have a significant effect on

poverty level in Regency/City of South Sumatera

Province.

3. Partially, economic growth variable has positive

and significant effect to poverty level. While the

minimum wage and unemployment variables do

not affect the level of poverty in the District /

City of South Sumatra Province.

4. For the more dominant variable affecting the

level of poverty is the variable of economic

growth. Because if seen from probability value

that is equal to 0, 0390 < 0, 05. So we can

conclude that economic growth has a significant

and more dominant effect on poverty levels.

5.2 Suggestion

From the results of the study concluded that

some suggestions are expected to be used as a study:

1. It is expected that the government will pay more

attention to economic growth and development

because if economic growth is increasing

especially in South Sumatera Province then it is

expected to improve people's welfare.

2. For future research is expected to conduct better

research again, by adding two new regencies in

the province of South Sumatra that is PALI and

Musi Utara regency and can add a number of

years much longer.

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Sumatra Province in 2011-2016

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