The Impact of Minimum Wage Province to Economic Growth (Study in Sumedang Regency, West Java Province Indonesia)

Setia, Rahman and Rusdiana, A. and Mulyawan, Setia (2020) The Impact of Minimum Wage Province to Economic Growth (Study in Sumedang Regency, West Java Province Indonesia). ARCTIC Journal, 73 (3). pp. 70-78. ISSN 0004-0843

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Abstract

This article studies the expansion of employment opportunities, the use of productive labor force, and the provision of decent wages, which are instrumental in determining long-term economic growth. A decent wage will increase labor income, the increase in income will increase the purchasing power of workers, and the increase in purchasing power will in turn increase effective demand. General issues that apply in relation to minimum wage increases are trends that have a positive impact on income, prices and employment opportunities, and economic growth. The problems in this study were analyzed using Input-Output analysis with the Supply Side approach. Analysis results show that wage increases will positively impact employment opportunities. To achieve optimal allocation, the government should not issue unemployment compensation or subsidies for recruitment costs. In addition, because companies and households experience catastrophic consequences related to minimum wages, the government does not intervene in the labor market to influence wage levels and does not set minimum wages. What the government can do is to make the right expenditure for the right success.

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