Migration of Foreign Workers to Indonesia: Pull Factors and Their Impact on Unemployment Rate (Study of 34 Provinces in Indonesia)

David Andriansyah; Ida Budiarty

doi:10.63922/ijebir.v5i04.5586

David Andriansyah Jurusan Ekonomi Pembangunan, Fakultas Ekonomi dan Bisnis, Universitas Lampung, Bandar Lampung, Indonesia
Ida Budiarty Jurusan Ekonomi Pembangunan, Fakultas Ekonomi dan Bisnis, Universitas Lampung, Bandar Lampung, Indonesia

DOI: https://doi.org/10.63922/ijebir.v5i04.5586

Keywords: Foreign Workers, Foreign Direct Investment, Inflation, Open Unemployment, Panel Data

Abstract

This study aims to analyze the effects of foreign workers, Foreign Direct Investment (FDI), inflation, unemployment persistence, and the interaction between foreign workers and FDI on the open unemployment rate across 34 provinces in Indonesia during the 2022–2024 period. This study employs panel data regression by selecting the most appropriate model among the Common Effect Model (CEM), Fixed Effect Model (FEM), and Random Effect Model (REM). The results indicate that the Common Effect Model is the best estimation model. Partially, unemployment persistence, foreign workers, and the interaction between foreign workers and FDI have a significant effect on the unemployment rate. FDI has a positive effect at the 10% significance level, while GRDP and inflation have no significant effect. These findings suggest that an increase in foreign workers may raise unemployment if it is not accompanied by improvements in the quality of the domestic workforce. However, foreign investment accompanied by technology transfer can mitigate this effect by enhancing local labor competence. Therefore, policies should promote foreign investment while strengthening the quality and competitiveness of Indonesia's human resources.

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