Effects of the Number of Industrial Enterprises, Values of Input and Output, and Regional Minimum Wage on Labor Demand in Indonesia : Empirical Study on Micro Industrial Enterprises

This study aims to (1) identify the effects of the number of industrial enterprises, values of input and output, and Regional Minimum Wage (RMW) on the labor demand in Indonesia, particularly in micro industrial enterprises; and (2) detect the elasticities of these variables toward the labor demand in micro enterprises. The regression of panel data is used to estimate the data. Results of this research show that the number of micro industrial enterprises positively and significantly affects the labor demand of these enterprises. Input negatively but insignificantly affects the labor demand of micro industrial enterprises, whereas output positively but insignificantly affects the labor demand of these enterprises. Meanwhile, RMW negatively and significantly affects the labor demand of micro industrial enterprises. All variables are inelastic on labor demand. Accordingly, the government should stimulate the increase in the number of micro industrial enterprises to absorb many workers. Moreover, micro industrial enterprises should build relationships with other companies to mutually benefit, strengthen, and support one another