SOCIOECONOMIC DRIVERS OF LABOR FORCE PARTICIPATION IN INDONESIA: EVIDENCE FROM MULTI-PROVINCE ANALYSIS

Abstract

This study aims to evaluate the macroeconomic determinants influencing the Labor Force Participation Rate (LFPR) across 34 provinces in Indonesia during the post-COVID-19 pandemic recovery period. Utilizing secondary data sourced from Statistics Indonesia (BPS) spanning 2018–2023, this research applies a panel data regression method to measure the partial and simultaneous significance of Gross Regional Domestic Product (GRDP), Mean Years of Schooling (MYS), and Provincial Minimum Wage (PMW). Following a rigorous model selection process, the Fixed Effect Model (FEM) was identified as the most robust specification. The estimation results indicate that the combination of GRDP, MYS, and PMW simultaneously explains 91.95% of regional LFPR fluctuations. However, only the MYS and PMW instruments demonstrate a positive, statistically significant impact on the increase in LFPR. Empirically, GRDP does not yield a significant direct effect, indicating the strong presence of a 'jobless growth' phenomenon within regional economic structures. These findings imply that unemployment alleviation policies cannot rely solely on GDP aggregates. Instead, they demand a dual synergy: enacting competitive minimum-wage regulations and revitalizing educational-sector spending (human capital investment) to mitigate skills-mismatch issues in the modern digital labor market.