Does Human Capital And Wage Improvements Affect The Quality Of Human Development In Indonesia

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Abdul Rahman , Nursini , Abd. Rahman Razak , Anas Iswanto Anwar , Andi Sudirman , Nurbayani


The quality of human development in the territory of Indonesia is experiencing a slowdown, from the comparative position of each province there are not many shifts and the condition of human development is still uneven. If these conditions are observed, the government's role is urgently needed through human capital investment and wage policies. This research is directed to determine the influence of human capital (expenditure on education and health functions) and minimum wages on the quality of human development. The data used is panel data from 33 Provinces in Indonesia in the period 2010 – 2020. The analytical model used is the Structural Equation Model (SEM) with the help of Rstudio Software. The findings of this study indicate that human capital has different effects on the quality of human development, either directly or through labor absorption. Directly, education expenditure has a positive and significant effect, on the contrary, health expenditure has a negative and insignificant effect. Meanwhile indirectly, education expenditure has a negative and significant effect and health expenditure is not significant. The minimum wage has a positive and significant effect both directly and indirectly. Then it was found that there were differences in the quality of human development between the western and eastern regions of Indonesia, either directly or through employment, with the estimation of the western regions of Indonesia being larger.

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