The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 1 1The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province Ishak Hasan1*, Yasrizal2 1 Syiah Kuala University, Banda Aceh, Indonesia 2 Teuku Umar University, Meulaboh, Indonesia Abstract The competition of labor market in Asean Economic Society will be determined by the labor’s productivity. Small businesses of foods and beverages is the highest sub sector which recruit the labor in Aceh. In 2010 there were 929.910 small businesses which were able to recruit 2.152.981 labor or around 31,99%. There are three variables impact the absorbtion of labor, the wages, labor productivity and capital. This research uses multiple regression technique to analyse data. The technique analysis used to find the impact of wages, productivity and capital to the absorbtion of labor in small businesses and enterprises. Based on research finding, the competitive advantage of Indonesian labor is at the sixth rank of ten countries in ASEAN. The research also found that productivity has significant impact to the absorbtion of labor while capital and wages have no significant impact to the absorbtion of labor in Aceh Province. JEL Classification: J01, J24, L66 Keyword: AEC, Capital, Labor Competitiveness, Productivity, Wages 1. INTRODUCTION The labor competition is tighter since the ASEAN Economic Community (MEA) was applied. The Countries in the Southeast Asia will establish an integrated area, it would be affect to investment access, distribution of goods and services more easily, that competent labors have a great opportunity to enter another country. The labor are not ready to compete, they will lose in the ASEAN Economic Community competition. This is a new challenge for Indonesian economic development. Labor productivity is the main factor of economic competitiveness, but infrastructure, education quality, investment climate, transportation conditions, logistics, a pro-business banking system and other supporting factors need to be improved to increase the competitiveness of the Indonesian economy in the ASEAN market. According to Michael Porter, competitiveness in international trade will be achieved through excellence comparative, such as the importance of technological elements and the relationship between governments and the business community should be synergize to improve competitiveness in international trade. The mastery * Corresponding author. Email address: ishakhasan20@yahoo.com mailto:ishakhasan20@yahoo.com The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 2 of technology has been proven by Japanese corporations, they imitated goods which are already invented and made them better and cheaper. The high unemployment level has been the main problems of economic development and employment in Indonesia. The number of new labors is increasing faster than the employment growth which can be provided annually (Amir, 2004:2). In 2014, Indonesia has the unemployed 7.56 million persons (Central Statistics Body, 2015), while in the Aceh Province, there were 216.806 person are unemployed (Aceh Central Statistics Body, 2015). The process of economic development of a country is often associated with the process of industrialization. The development of industry is the one of the directions for the welfare of the society, namely improving the lives more advanced and qualified (Sukirno, 2005). The industrial sector became the leader of the other sectors to advanced economy system, it’s caused by industrial products have a high trading power (Term of Track), more profitable, and is able to create a greater added value compared with products from other sectors. In addition, the industrial have variation production and capable of providing high marginal benefits to consumers (Dumary, 2002). The Small business enterprises (IMK) has an important role in Indonesian economics. IMK is a major player in economic activity in several sectors, as the largest provider of jobs, as an important player in the development of local economic activities and society empowerment, as well as a creator of new markets and a source of innovation. IMK is a labor intensive, which requires labor is more big industries that focused on capital (capital intensive). Based on data from BPS (2015), the growth of small business enterprises in Indonesia increased by 5.65%, and based on data from BPS Aceh (2015) the number of small business enterprises in Aceh Province are 1,862 units or 2.09% of the total IMK in Indonesia. The food processing industry is as the biggest contributor in employment provider and equalizing the society’s income. In 2010, Indonesia has 929 910 units of food processing industry, in every year these industries can provide employment by 2,152,981 people or 31.99% of the total labor IMK in Indonesia (Small and Micro Industries, BPS 2010). Based on this background, the researcher is interested to analyze the factors affecting that influence recruitment of labors in food and beverages small business enterprises in Aceh Province. The factors become variable in this research are labor wages, labor productivity and capital. 2. RESEARCH METHOD 2.1 Research Scope This research was conducted to analyze labor absorbtion in food and beverages small business enterprises in Aceh Province. The variables will be researched are labor wages, labor productivity and capital. 2.2 Data Types and Source These research using secondary primary data. Secondary data obtained by the Aceh Central Body of Statistics (BPS), The Department of Industry, Cooperation The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 3 Trade and Aceh small businesses and equipped with literal studies. The primary data is the raw data obtained from small business enterprise in Aceh Province, based on a small business enterprise survey in 2014 by the Aceh Central Body of Statistics (BPS Aceh), specifically in the food and beverage industry (code 10 for food and code 11 for beverage industries). The number of labor absorptions in food and beverage small business enterprises in Aceh Province, labor wages, capital and labor productivity as the primary data. 2.3 Analysis Method The analysis used in this research was multiple linear regressions with a least square method or Ordinary Least Square (OLS). The model used in this research based on production theory. The general form of the production function is able to be written as the following: Q = f (K, L) (1) Explanation: Q= Output, K= capital, L= labor The production function model in equation (1) above is transformed into a lagrangian equation form for obtaining the labor demand function which is the following: Q = f (K, L) (2) Minimum c (w, r, Q) = min w L + r K Subject to Q =f(K, L) The production function in equation (2) is transformed into another lagrangian function so the form of the equation becomes : i = w L + r K + λ [Q – f(K, L) ] (3) The first derivatives (first-order conditions) from equation (3) above to K, L and λ are as the following: w – λfl =0 (4) r – λfl =0 (5) Q-f(K, L) =0 (6) From equations (4) and (5) is obtained: 𝑤 𝑟 = 𝜆𝑓𝐿 𝜆𝑓𝐾 (7) K = 𝑤 𝑟 . L (8) Equation (8) substituted to equation (6) Q = f(K, L) Q = ( 𝑤 𝑟 L). L Q = 𝑤 𝑟 L2 The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 4 L2 = 𝑄 𝑤 𝑟⁄ L = √ 𝑟 𝑤 Q (9) Ld = F(r, w, Q) (10) Ld = F(r+, w-, Q+) (11) Where : C cost, r = price from capital (interest level), K = capital, w = price from labor (wage), L = number of labor, Q = production Ld = demand of labor, i = lagrange equation and λ = artificial variable. The equation (10) above is transformed into a linear regression form by using logarithm (Ln), the form of the equation becomes as the following: Ln LD = α + β1LnR + β2LnQ + β3LnW (12) The equation above os able to be written in a linear regression form as the following : Ln LD = β0 + β1LnR + β2LnQ – β3LnW + ε (13) Explanation: LD = The number of labor absorption in small business enterprises and the unit of measure in persons R = capital in small business enterprises and the unit of measure is in rupiah Q = The number of labor productivity in small business enterprises and the unit of measure is in rupiah W = Wage of labor in small business enterprises and the unit of measure is in rupiah A = constant B = coefficient 3. RESULTS AND DISCUSSION 3.1 AEC Competitiveness Publications by the International Labor Organization (ILO) mentions that the productivity of Brunei Darussalam has the highest labor productivity value with a value of $100,015 then followed by $ 98,072, Malaysia $35,751, Thailand $14,754 and Philippines $10,026. The productivity competitiveness of Indonesia is ranked sixth after the Philippines with a productivity value as large as $9,848 and it is still better compared with Vietnam and Cambodia. The counting is implemented based on constant values in 2005 and its development in 2013. The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 5 Table 1 ASEAN Labor Market Indicator 2014 Country Workforce (000s) (a) Education and skill development Average Monthly Wage ($) Labor Productivity (Constant Numbers 2005 ($) Literacy Rate 15 years and over (%) TVET (number of admissions) (%) Higher Education Admissions (%) Brunei Darussalam 186 95.4 11.4 24.3 ... 100 015 Cambodia 7 400 73.9 2.3 15.8 121 3 989 Indonesia 118 193 92.8 18.0 27.2 174 9 848 Lao PDR 3 080 72.7 0.8 16.7 119 5 396 Malaysia 13 785 93.1 6.8 36.0 609 35 751 Myanmar 30 121 92.7 … 13.8 ... 2 828 Philippines 41 022 95.4 … 28.2 206 10 026 Singapore 3 444 95.9 11.6 ... 3 547 98 072 Thailand 39 398 93.5 15.4 51.4 357 14 754 Viet Nam 53 246 93.4 … 24.6 181 5 440 Source: ILO, 2015 Towards the ASEAN Economic Community the competition of labor is determined by the productivity value of labor in each country, because the mentioned value reflects the ability of a nation’s labor in producing goods and service products. Observed from the results of this publication, the competitive position of Indonesia’s labor in facing the ASEAN Economic Community is in a position below the average of developed countries in the ASEAN region. 3.2 The Number of Small Business Enterprises in Aceh Province Small Business Enterprises in Aceh Province total at 1,862 business units that spread in 81 regencies/cities (Aceh Central Body of Statistics, 2015). Locations in regencies/cities influence the number of small business enterprises, this is able to be seen in Table 2. Table 2 Developing numbers of small business enterprises of Regencies/Cities in Aceh Province 2014 No. Regency/City The Number of Small Business Enterprises (unit) Percentage of the Province (%) 1 Simeulu 8 0.43 2 Aceh Singkil 20 1.07 3 Aceh Selatan 74 3.97 4 Aceh Tenggara 29 1.56 5 Aceh Timur 46 2.47 6 Aceh Tengah 17 0.91 7 Aceh Barat 39 2.09 8 Aceh Besar 40 2.15 9 Pidie 416 22.34 10 Bireuen 255 13.69 11 Aceh Utara 197 10.58 The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 6 No. Regency/City The Number of Small Business Enterprises (unit) Percentage of the Province (%) 12 Aceh Barat Daya 17 0.91 13 Gayo Lues 165 8.86 14 Aceh Taming 36 1.93 15 Nagan Raya 21 1.13 16 Aceh Jaya 14 0.75 17 Bener Meriah 3 0.16 18 Pidie Jaya 303 16.27 19 Banda Aceh 67 3.60 20 Sabang 30 1.61 21 Kota Langsa 35 1.88 22 Lhokseumawe 28 1.50 23 Subulussalam 2 0.11 Provincial Total 1862 100.00 Average Regency/City 81 Source: BPS Aceh, 2015 Based on table 2, the largest number of small business enterprises in Aceh Province is in Pidie as many as 416 small business enterprises, followed by Pidie Jaya as many as 303 units or as large as 16.27 percent and third place is achieved by Bireun regency which is as many as 255 units or 10.8 percent. The regency with the smallest number of small business enterprises is Simeulu Regency with a total of 8 units or 0.43 percent. The number of small business enterprises in a regency is influenced by private investment conditions, pushed by entrepreneurial spirit of the people and the role of the government that supports the people’s economic activities. The higher entrepreneurials spirit of the people, the higher the growth of micro and small businesses. This is seen in Pidie Regency and Pidie Jaya, generally people that are from Pidie (Pidie Regency and Pidie Jaya) are people that have a high entrepreneurial spirit. Strengthened by the opinion of Selo Sumardjan in the book (Ishak Hasan made business of grassroots 2013) “many of the Pidie people are capable in trading (making business), and only a few that enjoy working as farmers, they wander individually not as a group”. 3.3 Food and Beverage Small Business Enterprises in Regencies/Cities in Aceh Province If observed from the distribution of food and beverage industry types, the industry that has the most interest by businessmen is the cake industry, followed by melinjo chips, banana chips, where the number of industries is greater than 10 units. This is illustrated in illustration 3.1 below. The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 7 Figure 1 Distribution of Food and Beverage Industry Types in Aceh Province Based on Figure 1, it is able to be seen that the business that is most distributed is the cake type business with a total as large as 40% from the total businesses reaching 149 business units. This is a sign that the business opportunity of cakes is the largest opportunity compared to other businesses in Aceh Province today. 3.4 Number of Labor Absorption in Small Business Enterprises in Aceh Province The number of labor absorption is the number of labor that has already worked in the food and beverage industry sector. The number of labor absorption is much varied in a business, where the number of labor starts from 1 person in labor up to 15 people in labor, this is seen in table 3 below: Table 3 The Number of Labor Absorptions in the Food and Beverage Industry in Aceh Province 2014 No Number of Labor Frequency Percent (%) 1 1 Person 13 8.72 2 2 Persons 44 29.53 3 3 Persons 35 23.49 4 4 Persons 37 24.83 5 5 Persons 5 3.36 6 6 Persons 3 2.01 7 7 Persons 1 0.67 8 8 Persons 3 2.01 9 9 Persons 2 1.34 10 10 Persons 1 0.67 11 11 Persons 1 0.67 12 12 Persons 2 1.34 13 15 Persons 2 1.34 Total 149 100 Based on table 3 above it is able to be seen that the largest absorption of labor, which is 15 persons, only happen in 2 business units, while the labor absorption at most used by businesses are 2 persons in labor with a number of businesses reaching 44 business units and the least which are 7 persons, 10 persons, and 11 persons each 1 business unit. If seen from the absorption of labor in the food and beverage industry, illustrated in Figure 2. 2% 3% 11% 1% 2% 1% 5% 3% 1% 1%7% 1%5% 40% 1% 1% 2% 1% 1% 3% 1% 1% 1% 2% 4% Air Isi Ulang Bulu Pancing Emping Melinjo Es Campur Es Cream Es Lilin Garam Jamu Keripik Ketan Keripik Peyek Keripik Pisang The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 8 Figure 2 The Absorption of Labor in Food and Beverage Industries in Aceh Province 2011 If the observed from the number of labor absorption distribution, the absorption of labor with a total of 1-4 persons that are absorbed most where the largest are 2 persons with a total number of businesses reaching 29.53% followed by the number of 4 persons as large as 24.83% and the last with a number of 4 persons at 23.49%. 3.5 The Number of Labor Wages of Labor in Food and Beverage Small Business Enterprises in Regencies/Cities in Aceh Province The amount of labor wages in a business is highly influenced by the number of labor used by a business. This is because if the labor that is used is in a large amount and the total production value produced is small, the mentioned business is unworthy of using labor in a large amount. This is able to be seen in the table. Table 4 The Number of Labor Wages of Labor in the Food and Beverage Industry in Regencies/Cities in Aceh Province 2011 No. Labor Wages Frequency Percent 1 < 631,249 37 24.83 2 631,250 – 712,499 58 38.93 3 712,500 – 793,749 24 16.11 4 793,750 – 874,999 22 14.77 5 875,000 – 1,037,499 2 1.34 6 1,037,500 – 1,118,749 2 1.34 7 > 1,118,750 4 2.68 Total 149 100 Based on table 4 above it is able to be seen the amount of wage that are issued by businessmen for paying labor wages where the highest wage number is Rp.1,200,000. There are only 4 businesses that give wages as large as Rp.1,118,749 per month while the most is Rp.712,499 per month with the number of businesses reaching 58 units. 8.72 % 29,53% 23,49% 24,83 3.36 % 2.01 % 0.67 % 2.01 %1.34 % 0.67 %0.67 % 1.34 % 1.34 % 1 Orang 2 Orang 3 Orang 4 Orang 5 Orang 6 Orang 7 Orang 8 Orang 9 Orang 10 Orang 11 Orang 12 Orang 15 Orang The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 9 If seen from the curve below, the largest portion which is as large as 38.93 percent is in the wage level of Rp.631,250 – 712,499 per month. A clearer explanation can be seen in Figure 3. Figure 3 Number of Labor Wages of Labor in the Food and Beverage Industry in Aceh Province 2011 Based on Figure 3, it shows that the spread of distribution in the accepted wages that starts from the wage of Rp.875,000 - > 1,118,750 only 6 business units, while a wage of less than Rp.875,000 per month reaches 143 business units. 3.6 Business Capital in Food and Beverage Small Business Enterprises in Regencies/Cities in Aceh Province Business capital is an important component in a business, where with a large capital businessmen are able to spend according to business needs, this is influenced by the type of business that will be built, because of that, the larger the business, the capital that is used is also larger. This is seen in table 5 about the condition of business capital usage. Table 5 Business Capital in the Food and Beverage Industry Aceh Province 2014 No Business Capital Frequency Percent (%) 1 < 26,418,749 136 91.28 2 26,418,750 – 51,787,499 4 2.68 3 51,787,500 – 77,156,249 3 2.01 4 77,156,250 – 127,893,749 1 0.67 5 127,893,750 – 153,262,499 2 1.34 6 153,262,500 – 178,631,249 1 0.67 7 > 178,631,250 2 1.34 Total 149 100 Based on Table 5 shows that the number of capital that is most used by businessmen for opening a food and beverage business which is < Rp.26,418, 749 as many as 136 business units, while the rest are Rp.26,418,750 – Rp.178,631,250 as many as 13 business units. For observing the distribution of the mentioned business capital, it is able to be seen in Figure 4. The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 10 Figure 4 Business Capital in the Food and Beverage Industry Aceh Province 2011 Based on Figure 4, it shows that the total distribution other than the 91% of business uses a business capital as large as < Rp.26,418,749, the rest which is as large as 9 percent Rp.26,418,750 – Rp.178,631,250. 3.7 The Production Value in the Food and Beverage Small Business Enterprises in Aceh Province The production values that were produced from food and beverage enterprises were the results of product sales in a 1 year period. As for this production value shows that products produced by the food and beverage industry are responded well by consumers so it will influence the amount of production value in an industry. If seen from the production levels in the food and beverage industry, it is able to be grouped to 6 levels of production values as seen in Table 6 below. Table 6 Production Value Levels in the Food and Beverage Industry Aceh Province 2014 No Production Values Frequency Percent 1 < 14,693,624 133 89.26 2 14,693,625 – 28,137,249 5 3.36 3 28,137,250 – 41,580,874 2 1.34 4 41,580,875 – 55,024,499 6 4.03 5 55,024,500 – 68,468,124 2 1.34 6 > 68,468,125 1 0.67 Total 149 100 Based on Table 6 shows that the most frequent business production value level is < Rp.14,693,624 per year as many as 133 business units and the rest Rp.14,693,625 – Rp.68,468,125 which is as many as 16 business units. Meanwhile if seen in a business production is value level distribution point, such as seen in Figure 5. 91% 3% 2% 1% 1% 1%1% < 26.418.749 26.418.750 - 51.787.499 51.787.500 - 77.156.249 77.156.250 - 127.893.749 127.893.750 - 153.262.499 153.262.500 - 178.631.249 > 178.631.250 The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 11 Figure 5 Production Values in the Food and Beverage Industry in Aceh Province Year 2014 Based on Figure 5, it shows that the largest distribution of production values which is < Rp.14,693,624 per year as large as 89% and the rest as large as 11% which starts from Rp.14,693,625–Rp.68,468,125 per year. 3.8 Data Analysis Results a. Normality Test Figure 6 Scatter Plot Normality Test Based on the result of the Normality test analysis, it is seen that data distribution approaches the diagonal line, so it is able to be declared that this research’s data shows normality. b. Multicollinearity Test Table 7 Results of Multicollinearity Test Analysis Independent Variable Tolerance VIF Remarks Wage Level 0.837 1.194 Non Multicollinearity Production Value 0.782 1.279 Non Multicollinearity Business Capital 0.867 1.154 Non Multicollinearity Source : Processed data (archives) 89% 4%1% 4% 1% 1% < 14.693.624 14.693.625 - 28.137.249 28.137.250 - 41.580.874 41.580.875 - 55.024.499 55.024.500 - 68.468.124 > 68.468.125 The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 12 From the count above we are able to know that the VIF value and tolerance are as the following: 1. The Level of Labor Wage Variable has a VIF value as large as 1.194 and tolerance as large as 0.837. 2. The Production Value Variable has the values VIF 1.279 and tolerance as large as 0.782. 3. The Business Capital Variable has a VIF value as large as 1.154 and tolerance as large as 0.867. From the present determinations which if VIP < 10 and tolerance > 0.10, a multicollinearity symptom does not happen and values obtained from the count are in accordance with determined VIP values and tolerance, so it is able to be summarized that the mentioned regression mode does not show the presence of multicollinearity symptoms, c. Heterocedastity Test Table 8 Results of Multiconiarity Data Test Model Unstandardized Coefficients T Sig. B Std. Error Partial 1 (Constant) -.774 1.791 -.432 .666 2 Labor Wage Level .105 .143 .733 .465 3 Production Value -.015 .026 -.563 .574 4 Business Capital -.005 .020 -.250 .803 From the output above is is able to be known that the variables labor wage level, labor production value and business capital do not have heterocedastity symptoms because Sig, > 0.05 d. T Test Table 9 Regression Coefficient Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) -4.758 2.925 -1.626 .106 Labor Wages .150 .233 .051 .643 .521 Labor Productivity .224 .043 .431 5.217 .000 Capital .021 .033 .052 .659 .511 Dependent Variable: The Number of Labor For observing how far the influences of wage level, production value and business capital to the absorption of labor with the final estimator count as the following: LnLD= -4.758 + 0.150 (Ln W) + 0.224 (LnQ) + 0.021 (Ln R) From the model above there is one variable that significantly influences dependent variables partially. The mentioned variable is Production Value. While the two other independent variables that are not significant influences dependent variables partially which are, X1 (wage levels) and X2 (business capital). LnLD = Dependent variable which the value will be predicted by independent variables. In this research that will become the dependent variable is Labor Absorption The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 13 C = (Constant) valued at -4.758 which means when LnW, LnQ, and LnR = 0 the Unemployment Level increases as large as 4.758 percent that is caused by workforce growth. B2 = The Ln Q variable which the probability is as large as 0.000 < 0.05 which means the Production Value variable partially and significantly influences labor absorption. The value of the Ln Q coefficient as large as 0.224 means that when there is an addition of production values as large as 1 percent , this will increase the income of fishermen as large as 0.224 percent. e. F Test Tabel 10 ANNOVA Model Sum of Squares df Mean Square F Sig. 1 Regression 7.428 3 2.476 14.046 .000a Residual 25.560 145 .176 Total 32.988 148 a. Predictors: (Constant), Capital, Labor wages, Labor Productivity b. Dependent Variable: The Number of Labor Based on the results of the F test (simultaneously) an Fcount of 14.046 is obtained while the Ftable in a significance level of ȣ = 5% is as large as 2.67. This shoes that Fcount> Ftablewith a significance level of 0.0001. So it is able to be declared that wage (X1), production values (X2) and labor capital (X3) simultaneously influence absorption to labor absorption (Y) in small business enterprises for the food and beverages sector in Aceh Province. f. R2 Test Table 11 Correlation Coefficient Model R R Square Adjusted R Square Std. Error of the Estimate 1 .475a .225 .209 .41985 Predictors: (Constant), Capital, Labor wages, Labor Productivity Dependent Variable: The Number of Labor Based on analysis, results a coefficient determination (R2) as large as 0.225 is obtained. This means that changes as large as 22.5% in dependent variables (labor absorption) is able to be explained by changes in the wage level, production value, and business capital factors. While the rest which is as large as 77.5% is able to be explained by other factors outside of the research variables such as the above explanation. Discussion The Influence of Production Values to Labor Absorption The amount of the regression coefficient of the Production Value is 0.224 has a meaning that if this variable increases 1%, labor absorption will increase as much as 0.224% with the assumption that other variables are constant. So the relation of production value with labor absorption is positive and influences significantly to small business enterprises for the food and beverage sector in Aceh Province. This significant influence contains a further understanding that production values in small business enterprises in this food and beverage subsector influences The Labor Absorbtion in Food and Beverages of Small Business Enterprises in Aceh Province 14 the small businessmen party to determine the number of labor that are used in production. While the positive relation in this regression result shows that if production values raise, the number of labor, neither labor that have skill nor less skilled labor that are used in the production process will also increase, because an increase in production values reflect an increase in total production with the assumption that the price of products are still fixed. In accordance with the theory that for increasing output an increase in the input that is used is needed, in this context, it is labor. So the higher the labor productivity, the higher the total of goods produced with the assumption that other production factors are fixed, the production value will also increase. In accordance with the research of Adrianto (2013) that implemented a research about factors that influence labor absorption in small business enterprises in Mojokerto Regency shows that production value is a factor that influences labor absorption in small businesses. The Influence of Labor Wage Levels to Labor Absorption Results of research to the labor wage variable (X1) a tcount value as large as 0.643 is obtained, while the ttable value is as large as 1.976. This result shows that tcount