Employment Absorption in Large and Medium Manufacturing Industries: Key Determinants

This study aims to analyze the effects of the number of industries, output value, and input costs on employment absorption in large and medium manufacturing industries in the long and short run. The study employs a quantitative approach using annual secondary time-series data for the period 1992–2023 obtained from the Central Bureau of Statistics. The analysis uses the Error Correction Model (ECM) after conducting stationarity, cointegration, and classical assumption tests. The results show that all variables are stationary at the first-difference level and have a cointegration relationship. In the long run, the number of industries has a positive and significant effect on employment absorption, while output value has a positive but insignificant effect, and input costs have a negative but insignificant effect. In the short run, all three variables have positive but insignificant effects. The ECT coefficient of -0.835358 is statistically significant, indicating that short-run disequilibrium adjusts toward long-run equilibrium by 83.54 percent within one period. These findings indicate that the number of industries is the main factor in increasing employment absorption.