Human Capital and Labor Force Participation Rate: Exploring the Role and Relationship to Poverty in Indonesia

Abstract

The relationship between human capital, labor force participation rate, and poverty rate in Indonesia is interconnected. This research aims to analyze and explore the influence between human capital, labor force participation rate, and poverty rate in Indonesia. The research was conducted from 2001 to 2021 using the VAR analysis approach. The research findings explain that education and health have a negative impact on poverty, supporting the hypothesis that the improvement of human capital affects the reduction of poverty in Indonesia. In addition, the labor force participation also has a negative impact on poverty. Interestingly, the health improvement is apparently related to the decrease in Indonesia's labor force participation rate. Therefore, policymakers need to pay attention to strategies for enhancing human capital through education and health and factors related to labor force participation to reduce poverty levels in Indonesia.