Capital-Driven Labor Demand: Evidence of Non-Significant Wage Effects in Small Enterprises


Authors

(1) * Wardatul Firdauziyah   (Universitas Islam Malang, Indonesia)  
        Indonesia
(2)  Sifak Maulana   (Universitas Islam Malang, Indonesia)  
        Indonesia
(*) Corresponding Author

Abstract


Small-scale service enterprises play an important role in employment creation, yet the determinants of their labor demand remain debated. This study aims to examine the effect of wages and capital on employment absorption in small laundry enterprises and to identify the dominant factor influencing labor demand. A quantitative approach is applied using secondary panel data from micro and small laundry businesses, analyzed through multiple linear regression with classical assumption tests. Results show that wages have an insignificant effect on employment (p=0.9410), while capital has a positive and significant effect (p=0.0049); simultaneously, both variables are significant based on the F-test (p=0.0141). The study contributes by highlighting capital-driven labor demand in micro enterprises, challenging wage-centered labor demand assumptions in the SME context. Policy implications suggest that improving access to business capital is more effective than wage interventions in expanding employment opportunities and supporting the sustainability of micro enterprises.



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