JEE 12 (1) 2023 : 125-132

Journal of Economic Education

http://journal.unnes.ac.id/sju/index.php/jeec

Analysis of The Influence of The Unemployment Rate and HDI on

Poverty Levels in Province of Central Java

Liliana Handayani

Faculty of Economics and Business, Diponegoro University Semarang

Article Info Abstract
Article History : The high level of poverty in Central Java shows that the process of economic
Received March 2023 development has not been able to increase people's welfare evenly. Thus, an analysis is
Accepted Mei 2023
needed to determine the factors that influence poverty in the context of overcoming
Published June 2023
poverty. The aim of this research is to analyze the Unemployment Rate, Human
Keywords: Development Index (HDI) on poverty in 35 Regencies/Cities in Central Java Province
Poverty, Human from 2016 to 2020. This research uses secondary data with cross-section data consisting
Development Index (IPM), of 35 Regencies/Cities in the Province Central Java and time-series data, namely 2016-
Unemployment, Fixed Effect
2020. The analytical tool used to estimate the panel data regression model is the Fixed
Model
Effect Model (FEM) or also called Least Square Dummy Variable . The results showed that
the HDI variable had a negative and significant effect on the poverty level. Meanwhile,
the Open Unemployment Rate has a positive and significant effect on the Poverty Level.
Based on the research results, the government is advised to coordinate with related
agencies in formulating policies to improve the quality of education and optimize health
services.

© 2023 Universitas Negeri Semarang


Correspondence : p-ISSN 2301-7341
Postgraduate, Universitas Diponegoro
E-mail: [email protected] e-ISSN 2502-4485
 Liliana Handayani / Journal of Economic Education 12 (1) 2023 : 125-132

INTRODUCTION decisions that guarantee respect, protection and

fulfillment of basic rights. Third, capacity building,
Nurkse (2006) explains two circles of the is carried out to develop the basic abilities and
poverty trap in terms of supply and demand . The business capabilities of poor communities so they
supply side explains that the low income level of can take advantage of environmental
the community due to low productivity levels developments. Fourth, social protection, is carried
causes the ability of the community to save to be out to provide protection and a sense of security for
low. The low ability to save people causes a low vulnerable groups and poor people, both men and
level of capital formation (investment), resulting in women, caused by, among other things, natural
a shortage of capital and thus a low level of disasters, the negative impact of the economic crisis
productivity. And so on. Meanwhile, from a and social conflict.
demand perspective, in poor countries the stimulus According to Todaro (2013) population
to invest is very low due to the limited market area growth and labor force growth have traditionally
for various types of goods. This is due to the very been considered one of the positive factors that spur
low income of the people due to their low level of economic growth. A larger number of workers will
productivity, as a result of the limited level of increase the level of production. Furthermore, it is
capital formation in the past. This limited capital said that the positive or negative effects of
formation is due to a lack of stimulation to invest population growth depend on the ability of the
capital. regional economic system to absorb and
One of Indonesia's national development productively utilize the increase in the workforce.
goals based on the Preamble to the 1945 According to Sukirno (2012) a large
Constitution is to promote public welfare. General population in the development of an area is a
welfare is a condition of fulfilling the material, fundamental problem. Because uncontrolled
spiritual and social needs of the country's population growth can result in not achieving the
population so that they can live properly and be goals of economic development, namely people's
able to develop themselves, so that they can carry welfare and reducing poverty. Population growth
out their social and economic functions. General can be a driving and inhibiting factor for
welfare in Indonesia can be described based on the development.
level of poverty. There is a negative relationship Mariyanti and Mahfudz (2016) who
between general welfare and poverty levels in conducted research on the relationship between
Indonesia. The lower the poverty level, the higher economic growth and poverty, obtained results that
the welfare of the population. there was a causal relationship between economic
The problem of poverty is a complex and growth and poverty. On the other hand, Akoum
multidimensional problem, therefore, efforts to (2008) in his research stated that countries with
eradicate poverty must be carried out high economic growth have high poverty rates.
comprehensively, covering various aspects of Meanwhile, Prasad (1998) argued that no concrete
people's lives, and implemented in an integrated relationship was found between economic growth
manner (Nasir, 2008) . Efforts to overcome poverty and poverty.
in Java are being implemented through five pillars The quality of human resources can also be
called the " Grand Strategy ". First, expanding a factor causing poverty. The quality of human
employment opportunities, aimed at creating resources can be seen from the quality of life
economic, political and social conditions and index/human development index. Low HDI will
environments that enable poor people to have the result in low work productivity of the population.
opportunity to fulfill their basic rights and improve To produce quality people, efforts are needed to
their standard of living in a sustainable manner. improve the quality of human resources. Human
Second, community empowerment, carried out to quality can be measured through HDI. According
accelerate social, political, economic and cultural to Mulyadi (2003) , improving human quality can
institutions in society and expand the participation be achieved through various policies, namely
of poor communities in making public policy education development will also pay attention to
the direction of economic development in the
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future, health development must receive attention in Central Java in 2016-2020 in percentage units
by instilling a culture of healthy living and (%).
expanding the coverage and quality of health HDI (I) can explain how residents can access
services for the poor. Quality improvement is development in obtaining income, health and
carried out by providing practical skills. education (BPS, 2016) . HDI is also an important
According to Ginting (2008) human indicator for measuring the level of success in
development in Indonesia is synonymous with efforts to build the quality of human life. The
poverty reduction. Investments in education and variable used in this research is the HDI in each
health will be more meaningful for poor people district/city in Central Java in 2016-2020 in percent
than for non-poor people, because the main asset of units (%)./city in Central Java in 2016-2020 in
poor people is manual labor. The availability of percent units (%).
cheap education and health facilities will really The open unemployment rate (U) is a
help to increase people's productivity. number that shows the number of unemployed
In their research, Hong and Pandey (2007) (BPS, 2007) , for 100 residents in the labor force
obtained results that residents with a higher level of category, which can be calculated as follows:
education were less likely to become poor. Ele-Ojo
Ataguba et al (2013) in their research stated that
one of the determinants of reducing poverty levels Tingkat Pengangguran =
Jumlah Pencari Kerja
is education. Jumlah Angkatan Kerja
research (2010) regarding the effect of the X 100%
Human Development Index (IPM) on the poverty
rate in Indonesia explains that HDI has a negative What is used in this research is data on the
and significant effect. Saputra's research (2010) Open Unemployment Rate for each district/city in
regarding the analysis of the effect of population, Central Java for 2016-2020 in percent (%).
HDI, unemployment on poverty rates in Central This research uses panel data analysis (
Java districts/cities in 2011 explains that HDI has pooling data ) which is processed using the Eviews 9
a negative effect on poverty rates. program. Analysis using panel data is a
The purpose of this study is to analyze how combination of time series and cross section . In the
the effect of the unemployment rate and HDI on panel data model, the model equation using cross-
the poverty rate in Central Java Province (2016- section data can be written as follows:
2020). Yi = β0 + β1 Xi + μi ; i = 1, 2, ..., N
………..(1)
RESEARCH METHODS where N is the number of cross-section data .
While the model equation with time series is
This research uses three variables, consisting Yt = β0 + β1 Xt + μt ; t = 1, 2, ..., T
of one dependent variable and two independent ………..(2)
variables. The poverty level (P) of Central Java is where T is the number of time series data
the dependent variable, then the independent Considering that panel data is a combination
variables in this research include the of time series and cross-section , the model can be
unemployment rate (U), HDI (I) from each region written as:
of 34 districts/cities in Central Java Province. The Pit = α0 + α1 Iit + α2 Uit + μit ......(3)
existence of operational definitions serves to clarify Where Pit is the poverty level, α0 is the
and make it easier to understand the use of the intercept, is the regression coefficient of the
variables that will be analyzed in this research. independent variable, U is the open unemployment
The operational definition is as follows. rate of districts/cities in Central Java, I is the
The poverty level (P) is a population whose annual HDI of districts/cities in Central Java, and
average monthly per capita expenditure is below μ is the error/variable outside the model.
the poverty line (BPS, 2013) . The variable used is
the percentage of poor people in each district/city

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Next, econometric and statistical tests were value is more than α = 0.05 then it can be
carried out on the results of the regression analysis concluded that the error term is normally
with this model. distributed.
Classic Assumption Detection Heteroscedasticity Detection
Ordinary Least Squares (OLS) method is a Heteroscedasticity is a condition where the
model that seeks to minimize deviations from homoscedasticity assumption is not fulfilled. In
calculation results (regression) against actual multiple linear regression, one of the assumptions
conditions. Compared to other methods, Ordinary that must be met so that the parameter estimates in
Least Squares is a simple method that can be used to the model are BLUE ( Best, Linear, Unbiased
perform linear regression of a model. As an Estimator ) is (μi) = ơ2 which has the same variation
estimator, Ordinary Least Squares is a regression (homoscedasticity). In other cases where 𝜇i is not
method with the advantage of being the best constant it is called heteroscedasticity. To detect
unbiased linear estimator or commonly known as the presence of heteroscedasticity, it can be done
BLUE ( Best Linear Unbiased Estimator ), so that the using the White Test.
results of Ordinary Least Squares calculations can be If the Chi-Square statistic is greater than the
used as a basis for policy making. However, to be a Chi-Square table, then it can be said that there is an
good and unbiased estimator, there are several indication of heteroscedasticity. The test was
classical assumption tests that must be met. carried out by comparing the White's Obs*R-squared
Gujarati (2010) says that the ten test value with the significance level value (α = 5%).
assumptions must be met. First, the equation H0: Homoscedasticity
model is linear. Second, the value of the H1 : Heteroscedasticity
independent variable remains the same even in If the calculated Obs*Squared value is greater
repeated sampling. Third, the average deviation than the significance level value (α = 5%), then the
value is zero. Fourth, homoscedasticity. Fifth, regression model is free from symptoms of
there is no autocorrelation between variables. heteroscedasticity.
Sixth, the covariance value is equal to zero. Seventh, Multicollinearity Detection
the number of observations must be greater than Multicollinearity means that there is a
the number of parameters estimated. Eighth, the perfect or definite linear relationship between some
value of the independent variables varies. Ninth, or all of the independent variables in the regression
the regression model must have a clear form. model. In the case of serious multicollinearity, the
Tenth, is the absence of multicollinearity between regression coefficients no longer show the pure
independent variables. Fulfillment of the ten influence of the independent variables in the
assumptions above makes the regression results model. The method used in the detection of
have a high degree of confidence. multicollinearity is the Klein method and the
Normality Detection Gujarati agreement on the correlation values
The normality assumption detection is between variables, namely by comparison between
performed to see whether the error term follows a the adjusted R2 ( adjusted R2) of the regression
normal distribution. If the assumptions are not met results between the independent variables. There is
then the test procedure using the test becomes a possibility of multi-collinearity if the Adjusted 𝑅 2
invalid. Detection is done by Jarque Bera test or by model detects the independent variable higher than
looking at the plot of the residue. The hypothesis in the Adjusted R2 of the main model. Another
the detection of normality, namely: indication that there are symptoms of
𝐻 0 ∶ The error term follows a normal multicollinearity is by using correlation matrices ,
distribution where if the correlation matrix is greater than 0.8, it
𝐻 1 ∶ The error term does not follow a normal means that there are symptoms of
distribution. multicollinearity, and vice versa.
Decisions are taken by comparing the Hausman test
probability value of Jarque Bera with a significant To determine precisely the specifications of
level of α = 0.05. If the Jarque Bera probability the model to be used, whether the model is a fixed

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effect or a random effect , a Hausman test is carried 10.88%, while Semarang City has the lowest
out to test the best model to be used in the percentage of poor people at 4.85%.
estimation. The Hausman test will provide an Open Unemployment Rate for 29 Regencies
assessment using Chi-Square Statistics so that model and 6 Cities in Central Java Province from 2016 to
selection decisions can be determined correctly. 2020. The district with the lowest average Open
Rejection of the Hausman statistic means rejection Unemployment Rate is Temanggung Regency at
of the fixed effect model or dummy variable model , so 3.24%, while the highest is Brebes Regency at
that the greater the Hausman statistical value the 8.99%. In other words, 8.83% of the working age
more it leads to the acceptance of the alleged error population of Brebes Regency is not yet working.
component model . The city with the lowest average open
Model Parameter Testing unemployment rate is Pekalongan City at 5.93%,
Model parameter testing aims to determine while the highest is Tegal City at 8.88%. This
the feasibility of the model and whether the means that 8.88% of Tegal City's working age
estimated coefficients are in accordance with the population is not yet employed.
theory or hypothesis. This test includes the The Human Development Index in each
coefficient of determination (R2), partial regression Regency/City in Central Java Province,
coefficient test (t test) and overall regression specifically in 29 Regencies and 6 Cities, tends to
coefficient test (F- test or F test). For models that increase from 2016-2020. In 2016, the district with
have passed the significance test and the detection the lowest Human Development Index was Brebes
of new classical assumptions can be used for District at 63.98, while the district with the highest
hypothesis testing. development index was Sukoharjo District at
75.06%. The city with the highest Human
RESULTS AND DISCUSSION Development Index is Semarang City at 81.19%,
while Pekalongan City has the lowest Human
Central Java Province includes 29 regencies Development Index at 73.32%.
and 6 cities, namely Cilacap Regency, Cilacap Normality Detection
Regency, Banyumas, Purbalingga, Banjarnegara, The normality test is carried out with the aim
Kebumen, Perworejo, Wonosobo, Magelang, of seeing whether the error term is normally
Boyolali, Klaten, Sukoharjo, Wonogiri, distributed. The Normality Test is carried out by
Karanganyar, Sragen, Gobogan, Blora, Rembang looking at the Jarque-Bera probability. If the
Pati, Kudus, Jepara, Demak, Semarang, Jarque-Bera probability is greater than α = 5%, then
Temanggung, Kendal, Batang, Pekalongan, it can be said that the error term is normally
Pemalang, Tegal and Brebes as well as the cities of distributed. Based on the normality test results, by
Magelang, Surakarta, Salatiga, Semarang, looking at the Jarque-Bera probability value of
Pekalongan and Tegal. The area of Central Java is 15.73 at α = 5%, it can be said that the error term is
3,254,412 ha or 25.4% of the area of the island of normally distributed because the Jarque-Bera
Java and the equivalent of 1.7% of the area of probability is greater than α = 5%.
Indonesia. Based on the results of the National
Economic Census, the population of Java Province
from 2016 to 2020 has increased. Heteroscedasticity Detection
The percentage of poor people in each Heteroscedasticity testing aims to test
district/city tends to decrease from year to year. whether in the regression model there is inequality
Until 2020, the percentage of poor people in of variance from the residuals of one observation to
Central Java Province was 13.27%. The district another observation. If the variance from the
with the highest percentage of poor people in 2016 residual of one observation to another observation
was Wonosobo district at 20.53%, while the district remains, then it is called homoscedasticity and if it
with the lowest percentage of poor people was is different it is called heteroscedasticity. A good
Kudus district at 7.65%. The city with the highest regression model is one that has homoscedasticity
percentage of poor people is Surakarta City at or does not have heteroscedasticity (Ghozali, 2016)

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. Based on the results in the White Test table, the in the model simultaneously (simultaneously) on
statistical Chi-Square value of 0.141 is greater than α the dependent variable. Statistical F value can be
= 5%. The statistical Obs*R-squared value of 9.703 calculated by looking at the value of the F table. In
is smaller than the Obs*R-squared calculated by the this study, the results of estimating HDI and
table, namely 124.342 or the probability value is Unemployment on Poverty Levels for 2016-2020
more than 0.05. In other words, the regression with a confidence level of 95%, degree of freedom for
model in this study does not experience numerator = 4 (k-1) and degree of freedom for
heteroscedasticity. denominator = 5, obtained an F table value of 4.40.
Multicollinearity Detection Based on the regression results, the statistical F
A regression model that is classified as good value was 119.2212. In other words, the HDI and
is that there is no strong correlation between the Unemployment variables simultaneously influence
independent variables in the model. A regression the Central Java Poverty Level variable.
model experiences multicollinearity when two or Partial Significance Test (t Test)
more independent variables in the model have a The t statistical test shows how much
strong correlation. One way to detect influence each independent variable individually
multicollinearity is to use correlation matrices , where has in explaining the dependent variable. In this
if the correlation matrix is greater than 0.8, it means research, the value of degree of freedom = 175 (nk =
there are symptoms of multicollinearity. Based on 180-5), then the t table value obtained with α = 5%
the results of Correlation Matrices , the coefficient of is 1.980. Based on the results of the partial
the poverty variable with HDI is -0.466, with the significance test, the t statistical value of the HDI
unemployment variable being -0.038. The variable is -12,198 and the t statistical value of the
magnitude of the correlation coefficient between Unemployment variable is 4.620. So it can be
independent variables in the regression model is concluded that the HDI and Unemployment
smaller than 0.8. In other words, the regression variables have a partially significant effect on the
model in the research does not experience Poverty Level in Central Java.
multicollinearity. Based on computer processed results using
Coefficient of Determination Test Eviews 9.0 software. The test results obtained are
The coefficient of determination (R2) is used shown in Table 1.
to measure how far the model's ability to explain Based on the results of data processing in
variations in the dependent variable. The Table 1, the following equation is obtained:
coefficient of determination value is zero to one. A Pit = 321.1121 + 0.129398 Unemployment –
small value (R2) means that the ability of the 4.29180 HDI
independent variables to explain variations in the The regression model in this research meets
dependent variable is very limited. Meanwhile, a the classic assumptions, namely BLUE ( Best Linear
value (R2) that is close to one means that the Unbiased Estimate ). The independent variables in
independent variables provide almost all the the model, namely Education, Health, and
information needed to predict variations in the Unemployment significantly influence the Poverty
dependent variable, or in other words, the Level (α = 5%). The coefficient of determination
independent variables in the model are able to test results show a figure of 0.9878. So it can be said
explain variations in the dependent variable very that as much as 96.48% of the variation in poverty
well. The R-Squared value of 0.96 in the table levels can be explained by variations in education,
means that 98.1% of the Poverty Level variable can health and unemployment, while 3.52% is
be explained by the HDI and Unemployment explained by other variables outside the model.
variables. Meanwhile, the remaining 0.4% of HDI has a negative and significant influence
poverty can be explained by other variables not on the poverty level of Central Java Province.
included in the analysis model of this research. Based on the regression results, the HDI coefficient
Simultaneous Significance Test (F Test) value is -5.027. This means that every 1 year
The F test is used to show the influence increase in the HDI will have an impact on
(significance) of the independent variables included reducing the poverty rate by 5.027%. The results of

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this research are in line with research by Bakhtiari Open Unemployment Rate will have the impact of
and Meisami (2009) which states that an increase increasing the Poverty Rate by 0.229. The results of
in education will reduce the poverty rate. In line this research are in accordance with research by
with Bakhtiari and Meisami, research conducted Hong and Pandey (2007) which states that
by Ataguba et al (2013) also obtained results stating unemployment has a positive effect on poverty.
that one of the determining factors in reducing The same results were also obtained by Ukpere and
poverty levels is education. Slabbert (2009 ) , namely that unemployment in the
Unemployment as represented by the Open era of globalization has a positive and significant
Unemployment Rate (TPT) has a positive and effect on poverty. This result can be interpreted that
significant influence on the Poverty Level of when the unemployment rate rises, the poverty rate
Central Java Province. Based on the regression will also increase.
results, the Unemployment coefficient value is
0.229. This means that every 1% increase in the

Table 1. Research Data Processing Results

Variables Coefficient Std. Error t-Statistics Prob. Information
C 321.1121 22.78542 11.52751 0 Significant
UNEMPLOYMENT 0.129398 0.0881 4.620656 0 Significant
IPM -4.29180 0.321877 -12.19873 0 Significant
F-statistics 119.2212
Prob(F-statistic) 0
R-Squared 0.853712

with related agencies in formulating policies that

CONCLUSION improve the quality of education in Central Java.
This quality is not only related to facilities such as
Based on the research results, the schools or teachers, but also the ease with which
unemployment variable represented by the Open people can access education which can later be
Unemployment Rate (TPT) has a positive and used as capital to improve welfare. The Central
significant effect on the Poverty Rate in 35 Java Provincial Government is expected to be able
Regencies/Cities in Central Java Province. This to coordinate with related agencies in optimizing
result is in accordance with Todaro's opinion health services so that people can access them
which states that the problem of unemployment is easily, especially for less fortunate people.
closely related to the prosperity of society.
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