TESTING OKUN'S LAW ON YOUTH AND ADULT UNEMPLOYMENT

Abstract

Characteristics of unemployment vary, so this study analyzes whether the effect of growth on unemployment differs between youth and adults. This study uses secondary data covering the growth, unemployment, and wages of several age groups. The research period lasts from 1991 to 2021. This study uses regression analysis based on Okun's Law. The regression model is realized in the equation with an unemployment rate as the dependent variable, growth as the independent variable, and wages as a covariate. The results show that growth has no impact on youth unemployment. However, growth has a negative effect on adult unemployment. Higher growth leads to lower adult unemployment. That is, for adult unemployed, the result is in line with Okun's law. However, the results do not support Okun's law for youth unemployment. Furthermore, the wage rate negatively affects youth unemployment, but the wage rate does not affect adult unemployment. Furthermore, the change in government from the New Order to the Reform Order impacts youth and adult unemployment.

Keywords

• growth
• unemployment
• youth
• adult