ANALISIS KAUSALITAS UPAH MINIMUM DAN TINGKAT INFLASI DI PROVINSI JAWA TENGAH TAHUN 2000 – 2020

Abstract

This study aims to determine the pattern of causality relationship between minimum wage and inflation rate in Central Java province in 2000-2020. The data used in this study were obtained through BPS (Central Bureau of Statistics) of Central Java province. The research method used is the Granger causality test. The results showed that the inflation variable (INF) was stationary at the level level while the provincial minimum wage variable (UMP) was stationary at the 2nd difference level. The results of the Granger causality test lag 1 to 5, all of which have empirical significance of F statistics > 0.10, indicate that there is no causal relationship between the provincial minimum wage and the inflation rate in Central Java province during 2000-2020. This reveals that the macroeconomic conditions of Central Java are still underemployment, so that when there is an increase in the minimum wage, the effect of an increase in aggregate demand does not cause an increase in production costs that can trigger cost push inflation. Inflation does not appear to be considered in determining the provincial minimum wage policy.