The Interrelation of Unemployment Rate, Labor Wages, and Poverty Rate with Economic Growth: Labor Absorption as an Intervening Variable

Abstract

This study aims to analyze the interrelation between the unemployment rate, labor wages, and poverty rate on economic growth in Banten Province, with employment absorption as an intervening variable. Using a quantitative approach and path analysis method, this research processes annual secondary data from the Central Bureau of Statistics covering the period 2014–2024 across eight regencies/cities in Banten Province (a total of 80 observations). Data processing was conducted using EViews 12 software, with the selected estimation model being the Random Effects Model (REM) based on Generalized Least Squares (GLS), as it meets the necessary statistical assumptions. The results show that the unemployment rate, labor wages, and poverty rate each have a negative relationship with economic growth. In contrast, employment absorption has a small but positive effect on economic growth. In terms of mediation, employment absorption only mediates the relationship between unemployment and economic growth, but does not mediate the relationships between wages or poverty and economic growth. These findings reflect Banten’s pattern of economic growth, which is not yet fully inclusive and tends to rely on capital- and technology-intensive sectors. The policy implications of these results highlight the importance of reorienting regional economic development strategies to focus more on sectors capable of creating productive jobs, such as manufacturing, tourism, and the creative economy. In addition, improving the quality of human resources is also a key element in driving sustainable and inclusive economic growth.