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Jurnal Bisnis STRATEGI ● Vol. 30 No. 2 Desember 2021, halaman 127 – 138P-ISSN : 1410-1246, E-ISSN : 2580-1171
INFLATION EFFECT ON UNEMPLOYMENT IN INDONESIA: A COMPARATIVE
STUDIES BETWEEN SHARIA AND CONVENTIONAL ECONOMIC
PERSPECTIVES
Sri Suharti1*, Muhammad Dzaki Naufal2, Farah Ladina Paiman3
1UniversitasIslam Nusantara
2Institut
Teknologi Bandung
3Royal Melbourne Institute of Technology
ABSTRACT
This study discusses the effect of inflation on unemployment by comparing the perspective of Islam
with capitalism. The purpose of this study is to identify the driving factors that cause inflation and
unemployment. This research is conducted using descriptive analysis through linear regression
analysis on Indonesia’s unemployment and inflation data from 2001 to 2019. This study found that
inflation was not the main contributor to unemployment and only accounted for 18.6% of
unemployment, whereas the remaining 80.4% was caused by other factors. This occurs because the
increase in prices are not due to aggregate demand, but due to natural and man-made factors. To
overcome inflation, the government should create policies to promoting a culture of saving,
investing and discouraging wasteful and excessive spending from early age and improve the morale
of officials and entrepreneurs. In addition to that, the government can also implement the law
firmly and consistently to all parties who commit unethical behaviour; second, increasing the role
of the community to observe and report corruption. To reduce the rate of unemployment, the
government can implement several policies. Those are implementing policies that make it easier
for startups to obtain capital, create investment security and facilitate licensing bureaucracy;
second, providing more free and accessible work training courses, especially in urban areas; third,
implement 12-year compulsory education consistently.
Keywords: Inflation, unemployment, natural factor, human factor, Islamic and Conventional
Perspective.
I. INTRODUCTION Samuelson W. D., 2001; Bach, 1975). High
Inflation and unemployment are two inflation can be another inducing factor of
major issues in the economy, when inflation higher income and wealth gap between the
increases, the prices of goods and wages do rich and the poor
not move at the same pace. This deviation A.W. Phillips in his theory of the Phillips
results in a redistribution of income and curve states that inflation and the high
wealth between different groups and a unemployment rate have a negative impact
deviation in outpu t and employment (Paul A toward the economy and stability of the
*Corresponding author: cicisuharti@gmail.com 127
, Jurnal Bisnis STRATEGI ● Vol. 30 No. 2 Desember 2021, halaman 127 – 138
P-ISSN : 1410-1246, E-ISSN : 2580-1171
country. He also stated that if the inflation is Furthermore, according to some Muslim
high, then unemployment will be low. This is scholars such as M Umer Chapra, inflation
based on the assumption that inflation is a increases the prices of goods, and in the long
reflection of an increase in aggregate demand, run it burdens the society and causes a
so the demand theory applies, namely when decrease in employment (Chapra, 2000). Al-
demand increases, prices will rise which Maghrizi stated that inflation was caused by
causing inflation. To meet the increased natural and human factors (Karim, 2010).
demand, producers increase production The rate of inflation and unemployment in
capacity by hiring more labor. Thus causing a Indonesia from 2001 to 2019 is depicted in the
decrease in the level of unemployment following graph on Figure 1.
(Gertler & Leahy, 2006).
18,00
16,00
14,00
12,00
10,00
Unemployment
8,00
6,00 Inflation
4,00
2,00
0,00
Figure 1. Inflation and Unemployment Rate of Indonesia 2001 - 2019
Source: Central Bank of Indonesia and Statistics Indonesia
Figure 1 shows that inflation in Indonesia it is likely that unemployment is influenced by
fluctuates throughout the year, but on other factors. Another study that has been
average, Indonesia experiencing low inflation, done by Edyson Susanto and his friends found
which was indicated by the inflation rate that that inflation has a direct and significant effect
were only in the single digit. The the highest on unemployment in the city of Samarinda
inflation rate was in 2005 at 17.11%. During (Edyson Susanto, 2017).
this period, unemployment rate was Despite there have been several related
decreased continuously, and in 2019 the studies, the underlying problems of inflation
unemployment rate was only 5, 28%. and unemployment have never been resolved.
Previous research on the effect of inflation This condition encourage the writer to
on unemployment has been carried out by conduct research on the effect of inflation
Nadia Ika Purnama (2015), who found that the toward the unemployment level in Indonesia.
inflation rate has a negative and insignificant In this study, the author will compare the
effect on unemployment in the city of Medan, concepts of inflation and unemployment
128
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