DETERMINANTS OF LABOR ABSORPTION IN THE MANUFACTURING INDUSTRY IN CENTRAL JAVA PROVINCE

Structural transformation through industrialization offers numerous benefits to the economy of the Central Java Province, including contributing to the reduction of the Open Unemployment Rate (OUR). However, this structural transformation process remains suboptimal, as reflected in the contribution to regional Gross Regional Domestic Product (GRDP) and absorption capacity of the manufacturing sector. This study aims to analyze the influence of Domestic Investment (DI), the number of business units, Regional Original Revenue (ROR), Provincial Minimum Wage (PMW), and education level on labor absorption in the manufacturing industry in Central Java Province. The research employs multiple linear regression analysis using time series data derived from secondary sources covering the period from 1990 to 2022. The findings indicate that DI, number of business units, ROR, PMW, and education level simultaneously have a significant impact on labor absorption in the manufacturing sector in Central Java. Partially, DI has a significantly negative effect, while number of business units have a significantly positive effect. In contrast, ROR, PMW, and education level do not have a statistically significant effect. The implication of this study is that the government needs to reassess its industrialization strategies to be more employment-oriented by promoting labor-intensive investments and simplifying the licensing process for establishing new business units.