View of The effect of education level and economic growth on poverty in East Java

(1)

A new decade

for social changes

ISSN 2668-7798

Vol. 16, 2021

(2)

The effect of education level and economic growth on poverty in East Java

Aris Dwi Septian¹, Ady Soejoto², Pujiono³

1 2 3Post Graduate Economic Education, Universitas Negeri Surabaya, Indonesia

aris.18009@mhs.unesa.ac.id¹, adysoejoto@unesa.ac.id², pujiono@unesa.ac.id³

Abstract. The effect of education level, economic growth on poverty in East Java. This study aims to know the effect of education level and economic growth partially and simultaneously on poverty in East Java 2014-2018 period. This study used a quantitative approach. The analysis method used is panel data analysis with fixed effect method approach. Data was collected using documentation techniques sourced from BPS and related goverment agencies. The study concluded that the level of education and economic growth negatively affect poverty levels partial and simultaneous.

Keywords. Education Level, Economic Growth, Poverty, Panel Data Regression

Introduction

Indonesia is a developing country, of course economic development in developing country aims to create the highest level of Gross National Product. Indonesian Goverment has a challenge to use long term policies to improve growth potential in order to achieve the level of living standards on par with rich countries. The causes of poverty also revolve around the phenomena of low income, low education level, unfulfilled nutrition, stagnant growth, and poor quality of human capital. According to Wibowo (2014) the level of education has a significant effect on poverty level. Higher level of people education, then level of people competence also high. So that the more people who have a higher level of education, then there are fewer poor people in an area. However, it’s different from research conducted by Maulidah (2015) which shows that there is no significant effect of the the level of education on the number of poor people in East Java. This means that increase in education level is not followed by decrease the number of poor people.

East Java Province is included in the scope of high poverty rates, as according to data from East Java BPS, Sumenep and Lamongan regions are still classified as high rates in poverty line. East Java consists of 28 districts/cities, but not all districts/cities have high poverty rates, some regions actually show successful development, can be seen from human development which is reflected in the value of the Human Development Index (HDI). Human Development Index (HDI) reflects the quality of human resources (HR). According to Rofi (2016), if the quality of human resources is high, it will have an impact on the high capacity in an effort to improve economic welfare, thereby preventing poverty and / or helping to reduce poverty levels.

Technium Social Sciences Journal Vol. 16, 229-233, February, 2021 ISSN: 2668-7798 www.techniumscience.com

(3)

It’s necessary to study the factors that cause poverty. According to (Hartono in Itang, 2017) the cause of poverty, namely: 1) Low education level, causing a person to lack certain skills needed in life. 2) Lazy to Work, being lazy (passive or relying on fate) causes a person to be indifferent and not enthusiastic about working. 3). Limited Natural Resources, people will be stricken by poverty if its natural resources no longer provide benefits for their lives. 4).

Limited Employment Opportunities. 5). Capital limitations, lack of capital to equip tools and materials in order to apply their skills with the aim of earning income. 6). Family Burden, A person who has many family members, if it is not balanced with efforts to increase income, will cause poverty.

This is closely related to economic development which is an effort to form a fair and prosperous country. With an increase economic growth of a country, problems related to poverty, unemployment and inequality income distribution can be resolved so as to form a fair and prosperous country from an economic perspective. Apart from economic growth as a prerequisite for poverty alleviation, education is a form of investment in human resources that must be prioritized in line with physical capital investment because education is a long-term investment. Education has an important role in the life of nation and state in an effort to create quality human resouces (Budiarti & Seosatyo, 2011). In the Republic of Indonesia Law Number 20 of 2003 about National Education System, it’s stated that Indonesian education is a conscious and planned effort to develop individual potential for the achievement of personal, people and state welfare. From that explanation, it can be seen that education in Indonesia is organized as an effort to achieve prosperity and reduce poverty.

Theoritical Review

Economic growth is one indicator of success of economic development, so the goal of development is to reduce poverty. Economic growth is a comparison of the increase between input and output which is greater and the existence of economic development (Sholeh &

Rahayu, 2015). Economic growth is one indicator of success of economic development. So the goal of development is to reduce poverty which can be achieved through economic growth (Purnomo & Istiqomah, 2019). The progress of an economy is determined by the amount of growth shown by changes in national output. The existence of a change in output in the economy is a short-term economic analysis. According to Todaro, economic growth as a process of increasing output from time to time is an important indicator for measuring the success of a country’s development (Ma’ruf & Wihastuti, 2008). Development process requires high national income and fast economic growth. In various regions, the main requirement for poverty reduction is economic growth. Increased economic growth is not sufficient to alleviate poverty, but is something that is needed. This fact means that high economic growth is meaningless for the decline of the poor if it’s not accomanied by an even income distribution (Romi & Umiyati, 2018).

According to research conducted by Priyo, it shows that economic growth has a negative and significant effect on the number of poor people. Based on the results of research on poverty alleviation strategies using SWOT analysis, then poverty alleviation strategy through the S-O (Strength-Opportunity) strategy is to improve the performance of local goverment poverty alleviation that focuses on fulfilling the basic rights of the people and improving the quality of human resources by increasing access to services and education (Priyo, 2014).

At the same time, education has a very important role to increasing regional economic growth. It’s widely recognized that education is needed by public to improve patterns of understanding and thinking more critically. Education has an important role in the life of nation Technium Social Sciences Journal

Vol. 16, 229-233, February, 2021 ISSN: 2668-7798 www.techniumscience.com

(4)

and state in an effort to create quality human resources (Budiarti & Seosatyo, 2011) therefore education has a very important role to increasing regional economic growth. According to research conducted by Wibowo (2014) education level has a negative effect on poverty levels.

Higher level of people education, then level of people competence also high. So that the more people who have a higher level of education, then there are fewer poor people in an area.

Education is a form of human capital that shows the quality of Human Resources (HR).

According to Blaug (1972), it shows that the relationship between education and economic lies in it’s effect on knowledge of economic development. Education contributes to economic growth by increasing the literacy rate of the workforce and by assisting in acquiring relevant skills and expertise (Kizito, 2013). The human capital approach focuses on the indirect ability to increase utility by increasing income. Investment in human capital will have a higher benefit if we compare the total cost of education spent during education to the income that will be earned when they are ready to work (Armina, 2019). Connection between the two matters regarding economic growth and the level of education will greatly affect the existence of poverty that occurs, in the phenomenon of poverty is a topical subject and therefore must be the main focus of social and development programs in the future. This is closely related to individual income and is systematically related to cognitive skills. The distribution of skills in public appears to be closely related to the distribution of income and perhaps most importantly, economic growth is strongly influenced by the skills of workers in the educational process (Hanushek & Wößmann, 2007).

According to East Java BPS, poverty is seen as an economic inability to meet basic food and non-food needs as measured in terms of expenditure. So the poor are people who have an average monthly expenditure per capita below the poverty line.

Methods

This type of research is quantitative study using correlation method, which aims to make predictions for the dependent variable. Namely looking for the effect of the independent variable on the dependent variable. The data used is secondary data in the form of education level data, economic growth and the percentage of poverty, this data includes 38 districts / cities in East Java, education data and economic growth data as well as the total percentage of poverty in 38 districts / cities in East Java from 2014 to 2018.

The analysis of this research uses a quantitative approach to panel data. This study use panel data analysis (pooled data) which combines time series data with cross section data. Panel data equation which is a combination of cross section and time series equations can be written as follows:

Yit = α + β1X1it + β2X2it + eit

Where Y is the dependent variable, X is independent variabel, t is the amount of time, and i is the amount of panel data. Where X1 is education level, X2 is economic growth while Y is poverty rate. There are two methods of panel data analysis (Gujarati, et al, 2009), namely fixed effect method (FEM) and random effect method (REM).

Result and Discussion

The results of analysis as shown in the Table 1 that the t statistical value of the education level variabel or X1 is -0.723302 with a probability of 0,4706. The probability value of t statistic which is higger than 0,05 indicates that Ha is not accepted and not significant, This value shows that value of the education doesn’t have a significant effect on the poverty rate in East Java for the period 2014-2018.

(5)

Table 1. Summary of Panel Data Testing Results

Variable Coefficient Std. Error t-Statistic Prob.

C 8.067426 0.380190 21.21947 0.0000

X1 -0.044020 0.060860 -0.723302 0.4706

X2 -0.780615 0.091741 -8.508868 0.0000

Effects Specification Cross-section fixed (dummy variables)

R-squared 0.998937 Mean dependent var 4.455211

Adjusted R-squared 0.998660 S.D. dependent var 1.034112 S.E. of regression 0.037849 Akaike info criterion -3.525771 Sum squared resid 0.214880 Schwarz criterion -2.842187 Log likelihood 374.9482 Hannan-Quinn criter. -3.248861

F-statistic 3613.813 Durbin-Watson stat 1.543737

Prob(F-statistic) 0.000000

From the calculation of panel data analysis, the t statistical value of economic growth variable or X2 is -8.508868 with a probability of 0,000. This value shows that economic growth have a significant effect on the poverty rate in East Java for the period 2014-2018.

F test used to see the effect of the independent variable on the dependent variable simultaneously. The panel data analysis that has been done shows the probability F of 0,000.

This value indicates that the independent variable affects the dependent variable simultaneously. This study can be explained that the results are in line with research conducted by Wibowo (2014) that education level has a significant negative effect on poverty levels.

Higher level of people education, then level of people competence also high. Likewise, it’s in line with research conducted by Hodija (2018) that simultaneous effect of economic growth, investment, and job opportunities does not have a significant effect.

Conclusion

The level of education does not influence significantly the poverty in East Java during the five years observation period (2014-2018). It means that education at the level of senior high school still cannot decrease the poverty level. The first finding discovered that the average of each education level in East Java has fluctuated each year either decreasing or increasing. It can be seen in 2017 that the number of graduate students reached the highest point. There are some districts whose education level is lower compare to the other districts in East Java. The result is relevant to Wibowo's (2014) study that the level of education has a negative influence on the poverty level.

Economic development affects poverty in East Java during five years observation period (2014-2018). It means that the economic growth does not influence any decrease in on poverty level for five years. The first finding discovered is that there is a rising number of economic growth because of the companies’ development. As more companies are founded, the amount of salary among society also increases which is followed by the reduction of the poverty level.

The result is in line with a study that defines economic growth as one of the successful indicators in economic development. Therefore, the purpose of development is to reduce poverty which can be achieved through economic growth (Purnomo & Istiqomah, 2019). Economic growth is determined by the number of escalation which is aimed at the changes of the output nationwide.

(6)

Simultaneously, education cost variables, level of education, and economic growth influence the level of poverty.

References

[1] Armina, N. (2019). Analisis Pengaruh Pertumbuhan Ekonomi, Tingkat Pendidikan, Pengangguran, dan Jumlah Penduduk Terhadap Kemiskinan di Kariidenan Pati Tahun 2011-2017. Universitas Muhammadiyah Surakarta.

[2] Budiarti, D., & Seosatyo, Y. (2011). 7189-9791-1-Pb. Pengaruh Tingkat Pendidikan Terhadap Pertumbuhan Ekonomi Di Kabupaten Mojokerto Tahun 2000-2011, 1–19.

[3] Hanushek, E. A., & Wößmann, L. (2007). The Role of Education Quality in Economic Growth The Role of School Improvement in Economic Development (World Bank Policy Research Working Paper 4112). Humanities, 76.

[4] Hodijah, S. (2018). Pengaruh Pertumbuhan Ekonomi, Investasi, Pad Terhadap Kemiskinan Melalui Kesempatan Kerja Di Provinsi Jambi. Jurnal Ekonomi Dan Kebijakan Publik Indonesia, 4(2), 156–173.

[5] Itang, I. (2017). Faktor Faktor Penyebab Kemiskinan. Economics, 16(01), 12.

[6] Kizito, U. (2013). Education , Economic Growth & Poverty Rate in Nigeria : Any Nexus ? 4(12), 544–553.

[7] Ma’ruf, A., & Wihastuti, L. (2008). Pertumbuhan Ekonomi Indonesia: Determinan dan Prospeknya. Economics, 9(1), 44–55. https://doi.org/10.18196/jesp.9.1.1526

[8] Maulidah, F. (2015). Pengaruh Tingkat Pendidikan, Pendapatan Dan Konsumsi Terhadap Jumlah Penduduk Miskin Di Propinsi Jawa Timur. Jurnal Economia, 3(9), 12. https://doi.org/10.1017/CBO9781107415324.004

[9] Priyo, S. (2014). Analisis Faktor-Faktor Yang Mempengaruhi Tingkat Kemiskinan Dan Strategi Pengentasan Kemiskinan Di Kab. Brebes Tahun 2009-2011. Economics Development Analysis Journal, 3(4), 159. https://doi.org/10.15294/edaj.v3i4.3221 [10] Purnomo, S. D., & Istiqomah, I. (2019). Economic Growth and Poverty: The

Mediating Effect of Employment. Jejak, 12(1), 238–252.

https://doi.org/10.15294/jejak.v12i1.18591

[11] Rofi, A. (2016). Perubahan Angka kemiskinan di Provinsi Jawa Timur. Economics, 53(9), 3. https://doi.org/10.1017/CBO9781107415324.004

[12] Romi, S., & Umiyati, E. (2018). Pengaruh Pertumbuhan Ekonomi dan Upah Minimum terhadap Kemiskinan di Kota Jambi. E-Jurnal Perspektif Ekonomi Dan Pembangunan Daerah, 7(1), 1–7.

[13] Rudiningtyas, D. A. (2008). Pengaruh Pendapatan dan Belanaja Terhadap Pertumbuhan Ekonomi, Kemiskinan dan Pengangguran. Economics, 1997, 1–19.

http://ejournal.uin-malang.ac.id/index.php/ekonomi/article/view/1746/pdf

[14] Sholeh, A., & Rahayu, Y. (2015). Analisis Pengaruh Tingkat Pendidikan dan Kesehatan Terhadap Kemiskinan di Propinsi Jambi. Economics, 60–70. http://e- journal.upp.ac.id/index.php/sungkai/article/view/1525

[15] Wibowo, D. A. (2014). Pengaruh Pembiayaan Pendidikan, Tingkat Pendidikan, Pertumbuhan Ekonomi Dan Kemiskinan Di Jawa Tengah. Jurnal Economia, 10(2), 133–140. https://doi.org/10.21831/economia.v10i2.7539