Minimum Wages And Youth Neet: A Fixed-Effects Panel Data Analysis And Robustness Checks For 34 Provinces In Indonesia
Keywords:
Minimum Wages, Youth NEET, Regional Analysis, Human Resource DevelopmentAbstract
The continually increasing provincial minimum wage policy in Indonesia has not succeeded in reducing the high proportion of young people in the NEET (Not in Education, Employment or Training) category. This phenomenon indicates a dysfunction in the school-to-work transition that is influenced by inequalities in regional economic structures. This study aims to analyze the effects of provincial minimum wages and regional characteristics on the NEET rate among young people aged 15–24 within the broader framework of human resource development. This quantitative study used secondary data in the form of panel data from 34 provinces over the period 2015–2024 (340 observations). The data were analyzed using fixed-effects regression with Driscoll–Kraay standard errors to address cross-sectional dependence. The empirical results showed that the provincial minimum wage policy did not have a statistically significant effect on youth NEET. By contrast, population density had a positive and significant effect, while the other macroeconomic variables were not significant. These findings indicate that local geographic and economic characteristics are more decisive than nationally uniform wage-setting policy. The implication is that the government must reorient its youth unemployment strategies from uniform national policies towards territorially targeted labour-market interventions.
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