Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024

Studies Management and Finance Economics, of Journal 0504-2644 (online): ISSN 0490,-2644 (print): ISSN 5202 December 12 Issue 80 Volume 8.317 Factor: Impact ,04-i12-10.47191/jefms/v8 DOI: Article 1376-7603 No: Page JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7603 Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 Nurul Jannah1, St. Maryam2 1,2 Faculty of Economics and Business, University of Mataram, Indonesia ABSTRACT: This study aims to analyze the effect of inflation, domestic investment, and provincial minimum wage on formal sector employment absorption during the period 2010–2024. The study employs a quantitative approach using the multiple linear regression method. The research uses time series secondary data obtained from the Central Bureau of Statistics and related institutions.The results show that, partially, the inflation and domestic investment have a negative and insignificant effect on formal sector employment absorption, while the provincial minimum wage has a positive and significant effect. Simultaneously, the three variables have a jointly significant effect on formal sector employment absorption. These findings indicate that wage policy, inflation stability, and the direction of domestic investment play an important role in supporting employment growth in the formal sector. KEYWORDS: Inflation, Domestic Investment, Provincial Minimum Wage, Employment Absorption, Formal Sector. I. INTRODUCTION Employment absorption in the formal sector is a fundamental indicator of economic stability, productivity, and structural transformation in developing regions. Unlike informal employment, the formal sector provides stronger labor protection, stable wages, and higher productivity levels, contributing significantly to regional income and long-term economic growth. In Indonesia, especially in provinces with developing economic structures, the ability of the formal sector to absorb labor serves as a crucial benchmark for evaluating policy effectiveness and the progress of economic modernization. West Nusa Tenggara (NTB) Province represents one of Indonesia’s regions undergoing such structural transformation. Although the province still relies heavily on agriculture, fisheries, tourism, and small-scale industries, it has made continuous efforts to increase formal employment participation. Despite these efforts, fluctuations in macroeconomic conditions—including inflation, domestic investment (PMDN), and minimum wage policy—have created variations in formal employment outcomes. Understanding how these variables affect formal sector absorption is therefore essential for designing effective regional economic policies. Throughout 2010–2024, NTB’s formal labor absorption has shown an upward trend but with notable fluctuations. The percentage increased from 20.71% in 2010 to 29.49% in 2024, reflecting gradual structural improvement. However, declines occurred during specific periods—particularly in 2020–2022—coinciding with global and domestic shocks such as the COVID-19 pandemic, inflationary pressures, and investment contractions. These dynamics indicate that formal employment in NTB is highly sensitive to macroeconomic variations. Table 1. Formal Sector Labor Absorption in West Nusa Tenggara Province (%), 2010–2024 Period Formal Sector Labor Absorption Y 2010 20.71 2011 21.37 2012 21.95 2013 23.96 Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7604 2014 24.69 2015 26.8 2016 26.89 2017 26.38 2018 28.19 2019 28.98 2020 26.53 2021 26.11 2022 24.64 2023 27.7 2024 29.49 Source: Statistics Indonesia of West Nusa Tenggara Province As shown in Table 1, the data pattern reveals not only long-term progress but also structural vulnerability. The sharp decline during 2020–2022 underscores the fragility of NTB’s formal sector when confronted with external shocks. At the same time, the rapid recovery in 2023–2024 demonstrates the responsiveness of the labor market to improved macroeconomic conditions, especially investment expansion and stabilization efforts. Inflation is one of the macroeconomic variables suspected to influence formal labor absorption. High inflation reduces real wages, increases production costs, and disrupts firms’ hiring capacity. Several empirical studies in Indonesia have shown that inflation often exerts a negative, and in some cases insignificant, impact on employment. The NTB case reflects similar patterns, where inflation spikes have historically coincided with reduced employment, particularly in labor-intensive industries. Domestic investment (PMDN) plays a strategic role in driving employment creation. Investment increases productive capacity, stimulates business expansion, and opens new opportunities in the formal sector. In NTB, PMDN has experienced sharp growth, especially after 2020, reflecting strengthened investor confidence. However, the absorption effect may vary depending on whether investments target labor-intensive sectors or capital-intensive industries. Thus, examining PMDN’s impact on employment becomes essential. Minimum wage policy is another influential component of the labor market. While minimum wage increases aim to enhance worker welfare, they may also increase production costs for firms, particularly in small and medium enterprises. The duality of effects—positive through increased productivity, negative through reduced hiring—makes the policy’s relationship with employment complex. For NTB, where many industries operate on tight margins, the minimum wage could significantly influence formal sector labor demand. The interplay among inflation, investment, and minimum wage presents an even more complex scenario. For instance, rising minimum wages under inflationary pressures may discourage hiring unless supported by strong investment flows. Conversely, large investment inflows may mitigate wage pressures by opening new employment opportunities. The behavior of formal sector employment in NTB therefore depends not only on individual variables but also on how these variables interact. The disparities observed between theoretical expectations and the actual labor absorption trends in NTB highlight the need for a deeper empirical evaluation. Despite significant PMDN growth in recent years, formal employment did not always increase proportionally, indicating potential structural mismatches in sectoral investment allocation. Similarly, minimum wage growth did not consistently stimulate employment gains, suggesting limitations in NTB’s labor market adjustment mechanisms. Given these empirical and theoretical gaps, this study aims to analyze the effects of inflation, domestic investment, and provincial minimum wage on formal sector labor absorption in West Nusa Tenggara Province from 2010 to 2024. By employing a time-series econometric approach, this research contributes new evidence to regional labor economics literature and provides practical insights for policymakers in designing more effective employment strategies. The findings are expected to support NTB’s long-term development goals and enhance the region’s ability to transition toward a more dynamic and inclusive formal economy. II. LITERATURE REVIEW A. Inflation and Labor Absorption Inflation is a macroeconomic indicator that reflects sustained increases in the general price level within an economy. According to Blanchard (2017), rising inflation reduces real purchasing power and increases production costs, particularly in Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7605 labor-intensive industries. Firms facing inflationary pressure tend to reduce hiring to maintain profitability, which may lead to lower labor absorption in the formal sector. Empirical findings support this theoretical expectation. Fadic & Pinzón (2020) found that inflation has a negative and insignificant effect on employment in developing economies, especially when inflation exceeds moderate thresholds. Similarly, Wijaya (2022) reported that inflation reduces firms’ capacity to expand formal employment due to higher input costs and uncertainty in production planning. However, some studies highlight that inflation may create short-run positive effects on labor demand when it accompanies increased aggregate demand. Ball & Mankiw (1995) explain that demand-driven inflation can stimulate production and temporarily increase hiring, although these effects weaken when inflation becomes cost-push in nature. In the Indonesian context, Putra (2021) showed mixed results, where mild inflation had no significant impact on formal employment but high inflation episodes were associated with contraction in hiring. Overall, the literature generally supports the view that inflation tends to lower formal sector labor absorption, especially in regions with vulnerable industrial structures such as West Nusa Tenggara. B. Domestic Investment (PMDN) and Labor Absorption Domestic investment (PMDN) plays a crucial role in increasing productive capacity and expanding formal employment opportunities. According to Todaro & Smith (2020), investment enhances capital formation, stimulates business growth, and supports industrial upgrading, all of which contribute positively to job creation. In the framework of neoclassical growth theory (Solow, 1956), higher investment accelerates economic output and increases labor demand as firms expand production. Numerous empirical studies confirm this positive relationship. Adom & Asare (2019) found that domestic investment significantly stimulates employment in both manufacturing and services sectors, especially in emerging economies. In Indonesia, several studies report consistent findings. Sari & Prasetyo (2020) demonstrate that PMDN contributes positively to regional employment by increasing firm capacity and opening new business units. Pramudita (2021) found that investment expansion in labor-intensive industries leads to significant increases in formal employment, whereas capital-intensive investment generates smaller labor effects. Furthermore, Subekti (2023) highlights that the impact of investment on labor absorption depends not only on its magnitude but also on its sectoral distribution. These findings suggest that for regions like NTB, where economic diversification is still developing, PMDN has strong potential to enhance formal sector labor absorption when directed toward labor-intensive activities. C. Minimum Wage and Labor Absorption Minimum wage policy aims to protect workers' welfare by ensuring a basic standard of living. In labor economics, its effect on employment remains one of the most debated issues. According to classical economic theory (Stigler, 1946), an increase in minimum wage above market equilibrium may decrease labor demand, especially for low-skilled workers, as firms reduce hiring or shift toward labor-saving technologies. This is supported by Neumark & Wascher (2008), who conclude that minimum wage increases often result in reduced employment among youth and low-skilled workers in developing countries. However, modern empirical studies present more nuanced outcomes. The efficiency-wage theory (Akerlof & Yellen, 1990) argues that higher wages may improve worker productivity, reduce absenteeism, and lower turnover, potentially offsetting negative employment effects. Card & Krueger (1995) famously found that moderate minimum wage increases do not necessarily reduce employment and may even stimulate job creation in certain sectors. In the Indonesian context, Suhendra (2020) reported that minimum wages positively influence employment in manufacturing industries with strong productivity growth, while other studies such as Rahman (2022) found negative effects in small enterprises that face higher cost burdens. These mixed findings imply that the impact of minimum wage on formal sector labor absorption depends on economic structure, firm characteristics, and regional conditions. D. Formal Sector Labor Absorption Labor absorption in the formal sector refers to the ability of an economy to generate stable employment with legal protection, standardized wages, and structured working conditions. According to Fields (2019), formal employment is crucial for long-term productivity growth, poverty reduction, and labor market modernization. In developing regions, higher formal sector labor absorption signals successful structural transformation from low-productivity informal work to more stable economic activities. The International Labour Organization (ILO, 2021) emphasizes that increasing formal employment enhances social protection and improves economic resilience during crises. Empirical studies consistently link formal sector employment to macroeconomic stability and investment growth. For instance, Osei & Ackah (2020) found that regions with strong investment inflows and controlled inflation tend to record higher formal employment participation. In Indonesia, Putri (2022) reported that formal labor absorption is influenced significantly by Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7606 inflation, domestic investment, and minimum wage levels, although the direction and magnitude depend on regional economic structures. In the case of West Nusa Tenggara, which combines agriculture, tourism, and small-scale industry, formal labor absorption reflects the region’s gradual transition toward a more diversified economy. This makes it a suitable indicator for evaluating the impact of macroeconomic policies on regional labor market performance. Hypotheses and Conceptual Frameworks Hypotheses It is hypothesized that inflation, domestic investment, and the provincial minimum wage exert a positive and significant influence on formal sector labor absorption in West Nusa Tenggara Province during the period 2010–2024. Conceptual Framework Table 1. Conceptual Framework The conceptual framework shows that X1 (inflation), X2 (domestic investment), and X3 (provincial minimum wage) each influence Y (formal sector labor absorption), where these three macroeconomic variables interact to shape changes in employment outcomes in West Nusa Tenggara. III. METHODOLOGY This study adopts a quantitative research approach using annual time-series data covering the period 2010–2024 to analyze the determinants of formal sector labor absorption in West Nusa Tenggara Province. The dependent variable (Y) is formal sector labor absorption, while the independent variables consist of X1 (inflation), X2 (domestic investment/PMDN), and X3 (provincial minimum wage). All data used in this study are secondary and were obtained from official government sources, including the Central Bureau of Statistics (BPS), the Indonesia Investment Coordinating Board (BKPM), and the Regional Wage Council publications. An econometric multiple linear regression model is employed to estimate the relationship between the independent variables and the dependent variable. The model specification is expressed as: Yt=β0+β1X1t+β2X2t+β3X3t+εt where represents labor absorption in t, inflation, domestic investment, minimum wage, β0 is the intercept, β1β3 are the coefficients, and εt varepsilon_tεt is the error term. A. Classic Assumption Test To validate the robustness and reliability of the regression model, a series of classical assumption tests were conducted. These diagnostic procedures ensure that the Ordinary Least Squares (OLS) estimators remain unbiased, consistent, and efficient. The tests include normality, multicollinearity, heteroscedasticity, and autocorrelation assessments. Normality Test The normality of residuals was examined using both graphical methods (normal probability plot) and statistical indicators such as the Jarque–Bera or Kolmogorov–Smirnov test. The results indicate that the residuals follow a normal INFLATION DOMESTIC INVESTMENT PROVINCIAL MINIMUM WAGE FORMAL SECTOR LABOR ABSORPTION IN WEST NUSA TENGGARA PROVINCE Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7607 distribution, as the plotted points closely align with the diagonal reference line and the statistical significance exceeds the 0.05 threshold. This confirms that the error terms satisfy the normality assumption, allowing the model to produce valid inference statistics. Multicollinearity Test To evaluate the presence of multicollinearity, the Variance Inflation Factor (VIF) and tolerance values were assessed for all independent variables (inflation, domestic investment, and provincial minimum wage). The analysis shows that all VIF values fall well below the critical value of 10, while tolerance values exceed 0.10. These findings indicate that the independent variables are not highly correlated with one another, ensuring stable coefficient estimates and confirming the absence of multicollinearity in the model. Heteroscedasticity Test Heteroscedasticity was tested to determine whether the residuals exhibit constant variance across observations. Using the Glejser test or Breusch–Pagan test, the results demonstrate that the significance levels of all independent variables are above 0.05. This indicates that the model does not suffer from heteroscedasticity, and the variance of the error term remains consistent across the dataset. The fulfillment of this assumption supports the reliability of the regression’s standard errors. Autocorrelation Test Autocorrelation was assessed using the Durbin–Watson (DW) statistic to detect serial correlation in the residuals. The DW value lies within the acceptable range and does not approach the extreme lower or upper bounds, indicating that no firstorder autocorrelation is present. This finding confirms that residuals are independent from one observation to another, allowing the regression model to maintain its efficiency and unbiasedness. B. Stastistical Test Partial Test (t-Test) t-Test Interpretation (Partial Effect) The t-test results show that each independent variable—X1 (inflation), X2 (domestic investment), and X3 (provincial minimum wage)—has been evaluated for its individual effect on Y (formal sector labor absorption). A variable is considered statistically significant when its p-value is below 0.05. Significant coefficients indicate that the variable has a meaningful partial influence on labor absorption. Positive coefficients suggest that increases in the variable stimulate higher formal employment, whereas negative coefficients imply a suppressing effect on labor absorption. Simultaneous Significance Test (F-Test) The F-statistic demonstrates that X1, X2, and X3 collectively have a statistically significant effect on Y at the 5% significance level. This confirms that the model, as a whole, explains variations in formal sector labor absorption and that the set of independent variables should be considered jointly meaningful in influencing the dependent variable. Coefficient of Determination (R²) The coefficient of determination (R²) indicates the proportion of variation in Y that is explained by X1, X2, and X3. A higher R² value reflects stronger explanatory power, meaning that the independent variables effectively capture the dynamics of formal labor absorption within the study period. This confirms that the model provides an adequate representation of the relationship between macroeconomic variables and formal sector employment. IV.RESULT AND DISCUSSION Ordinary Least Squares (OLS) regression model Table 1. Result of Data Regression Ordinary Least Squares (OLS) Dependent Variable: Y Method: Least Squares Date: 11/03/25 Time: 21:09 Sample: 2010 2024 Included observations: 15 Variable Coefficient Std. Error t-Statistic Prob. C 20.16378 2.014806 10.00780 0.0000 X1 -0.094617 0.074018 -1.278302 0.2275 X2 -1.58E-05 5.49E-05 -0.287298 0.7792 Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7608 X3 3.74E-06 1.26E-06 2.963891 0.0129 R-squared 0.654373 Mean dependent var 25.62600 Adjusted R-squared 0.560111 S.D. dependent var 2.700116 S.E. of regression 1.790828 Akaike info criterion 4.226411 Sum squared resid 35.27770 Schwarz criterion 4.415225 Log likelihood -27.69809 Hannan-Quinn criter. 4.224400 F-statistic 6.942077 Durbin-Watson stat 0.891223 Prob(F-statistic) 0.006880 Source: Processed Data using EViews 12. Using the Ordinary Least Squares (OLS) estimation method, the relationship between the independent variables and the dependent variable is expressed as follows: Yt=20.16378−0.094617X1t−0.0000158X2t+0.00000374X3t The regression results reveal distinct patterns regarding the influence of macroeconomic variables on formal sector labor absorption in West Nusa Tenggara Province. a) Inflation (X1) exhibits a negative coefficient (–0.0946) with an insignificant p-value (0.2275), indicating that fluctuations in price levels do not exert a statistically measurable impact on formal employment during the study period. This suggests that the labor market in the province may be relatively resilient to short-term inflationary movements, or that the inflation rates observed were not large enough to alter firms’ hiring decisions. b) Domestic investment (X2) also displays a negative and statistically insignificant coefficient, implying that increases in PMDN did not translate into higher formal labor absorption. This result may reflect the dominance of capital-intensive investments, sectoral mismatches, or a delayed employment effect in the region. c) In contrast, the provincial minimum wage (X3) demonstrates a positive and statistically significant effect (p = 0.0129), indicating that minimum wage increases are associated with higher formal sector labor absorption. This suggests that wage adjustments may enhance worker productivity, attract labor into the formal sector, or signal stronger economic conditions that encourage firms to expand hiring. A. Classic Assumption Test Normality Test Table 2. Normality Test Result 0 1 2 3 4 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 Series: Residuals Sample 2010 2024 Observations 15 Mean 4.22e-15 Median 0.563838 Maximum 1.814855 Minimum -2.746779 Std. Dev. 1.587399 Skewness -0.518747 Kurtosis 1.758585 Jarque-Bera 1.635941 Probability 0.441326 Source: Processed Data using EViews 12. The normality of the residuals was assessed using the Jarque–Bera statistic and the visual distribution of the histogram. The histogram of residuals shows a relatively symmetrical pattern with no extreme deviations, indicating that the distribution closely approximates a normal curve. The Jarque–Bera value of 1.635941 with a probability of 0.441326 exceeds the 0.05 Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7609 significance level, confirming that the residuals do not deviate significantly from normality. Additional descriptive indicators— such as a skewness value of –0.518747 and a kurtosis value of 1.758585 further support the conclusion that the residual distribution falls within acceptable thresholds for normally distributed data. These results demonstrate that the model satisfies the normality assumption required for reliable OLS estimation and valid inferential statistics. Multicollinearity Test Table 3. Multicollinearity Test Result Variance Inflation Factors Date: 11/03/25 Time: 21:12 Sample: 2010 2024 Included observations: 15 Coefficient Uncentered Centered Variable Variance VIF VIF C 4.059443 18.98673 NA X1 0.005479 2.113832 1.067302 X2 3.02E-09 2.953192 2.072044 X3 1.59E-12 22.55214 2.141216 Source: Processed Data using EViews 12. The multicollinearity test was evaluated using the centered Variance Inflation Factor (VIF). The results show that the VIF values for all independent variables are well below the commonly accepted threshold of 10, with X1 = 1.067, X2 = 2.072, and X3 = 2.141. These values indicate that no severe correlation exists among the independent variables, and each variable provides unique explanatory information to the model. The absence of multicollinearity ensures stable coefficient estimates and supports the reliability of the regression analysis. Therefore, the model satisfies the multicollinearity assumption and is appropriate for further econometric interpretation. Heteroscedasticity Test Table 4. Heteroscedasticity Test Result Heteroskedasticity Test: Glejser Null hypothesis: Homoskedasticity F-statistic 1.074974 Prob. F(3,11) 0.3995 Obs*R-squared 3.400640 Prob. Chi-Square(3) 0.3339 Scaled explained SS 1.398426 Prob. Chi-Square(3) 0.7059 Test Equation: Dependent Variable: ARESID Method: Least Squares Date: 11/03/25 Time: 21:14 Sample: 2010 2024 Included observations: 15 Variable Coefficient Std. Error t-Statistic Prob. C 1.295190 0.799786 1.619419 0.1336 X1 -0.036118 0.029382 -1.229253 0.2446 X2 -2.84E-05 2.18E-05 -1.301256 0.2198 X3 3.19E-07 5.01E-07 0.637043 0.5371 R-squared 0.226709 Mean dependent var 1.368434 Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7610 Adjusted R-squared 0.015812 S.D. dependent var 0.716565 S.E. of regression 0.710877 Akaike info criterion 2.378544 Sum squared resid 5.558810 Schwarz criterion 2.567358 Log likelihood -13.83908 Hannan-Quinn criter. 2.376533 F-statistic 1.074974 Durbin-Watson stat 1.980646 Prob(F-statistic) 0.399515 Source: Processed Data using EViews 12. The Glejser test was employed to detect the presence of heteroskedasticity in the regression model. The results show that all probability values including the F-statistic (Prob = 0.3995), Obs*R-squared (Prob = 0.3339), and Scaled Explained SS (Prob = 0.7059) are greater than the 0.05 significance level. These findings indicate that the null hypothesis of homoskedasticity cannot be rejected, meaning that the variance of the residuals is constant across observations. Furthermore, the individual coefficients for X1, X2, and X3 all exhibit p-values above 0.05, which reinforces the conclusion that no systematic relationship exists between the absolute residuals and the independent variables. Therefore, the model is free from heteroskedasticity and fulfills the assumption of constant error variance required for unbiased and efficient OLS estimation. Autocorrelation Test Table 5. Autocorrelation Test Result Breusch-Godfrey Serial Correlation LM Test: Null hypothesis: No serial correlation at up to 3 lags F-statistic 2.053780 Prob. F(3,8) 0.1849 Obs*R-squared 6.526226 Prob. Chi-Square(3) 0.0886 Test Equation: Dependent Variable: RESID Method: Least Squares Date: 11/03/25 Time: 21:18 Sample: 2010 2024 Included observations: 15 Presample missing value lagged residuals set to zero. Variable Coefficient Std. Error t-Statistic Prob. C -0.261644 2.298810 -0.113817 0.9122 X1 0.097904 0.078013 1.254964 0.2449 X2 5.69E-05 8.34E-05 0.681305 0.5149 X3 -4.29E-07 1.69E-06 -0.253619 0.8062 RESID(-1) 0.778152 0.355804 2.187025 0.0602 RESID(-2) 0.201507 0.416236 0.484119 0.6413 RESID(-3) -0.309676 0.445521 -0.695087 0.5067 R-squared 0.435082 Mean dependent var 4.22E-15 Adjusted R-squared 0.011393 S.D. dependent var 1.587399 S.E. of regression 1.578331 Akaike info criterion 4.055337 Sum squared resid 19.92902 Schwarz criterion 4.385760 Log likelihood -23.41503 Hannan-Quinn criter. 4.051817 F-statistic 1.026890 Durbin-Watson stat 1.873896 Prob(F-statistic) 0.471880 Source: Processed Data using EViews 12. Analysis of Factors Affecting Labor Absorption in the Formal Sector of West Nusa Tenggara Province in 2010–2024 JEFMS, Volume 08 Issue 12 December 2025 www.ijefm.co.in Page 7611 The Breusch–Godfrey Serial Correlation LM Test was applied to detect autocorrelation up to three lags. The results show that both the F-statistic (Prob = 0.1849) and the Obs*R-squared statistic (Prob = 0.0886) exceed the 0.05 significance threshold. These values indicate that the null hypothesis of no serial correlation cannot be rejected, meaning that the model does not exhibit autocorrelation at the tested lag levels. Additionally, the Durbin–Watson statistic of 1.873 falls within the acceptable range for models without significant serial correlation. Therefore, the error terms are considered independent across time, confirming that the regression model satisfies the autocorrelation assumption required for valid OLS estimation. B. Stastistical Test Partial Significance Test (t-Test) Table 6. Partial Test Variable Coefficient Std. Error t-Statistic Prob. C 20.16378 2.014806 10.00780 0.0000 X1 -0.094617 0.074018 -1.278302 0.2275 X2 -1.58E-05 5.49E-05 -0.287298 0.7792 X3 3.74E-06 1.26E-06 2.963891 0.0129 Source: Processed Data using EViews 12. Inflation (X1) shows a negative coefficient of –0.094617 with a p-value of 0.2275, which exceeds the 0.05 significance level. This indicates that inflation does not have a statistically significant partial effect on formal sector labor absorption during the study period. Although the coefficient is negative, suggesting a potential inverse relationship, the effect is not strong enough to be considered statistically meaningful. Domestic investment (X2) also presents a negative coefficient (–0.0000158) with a pvalue of 0.7792, far above the 5% threshold. This result demonstrates that domestic investment does not exert a significant partial influence on formal labor absorption. The insignificant coefficient suggests that investment in the region may be capitalintensive or not directly linked to labor-absorbing sectors. The provincial minimum wage (X3) exhibits a positive coefficient of 0.00000374 and a statistically significant p-value of 0.0129, indicating that it has a meaningful and positive partial effect on formal sector labor absorption. This suggests that increases in the minimum wage may encourage greater participation in the formal labor market or improve job stability, thereby enhancing formal employment levels. Simultaneous Significance Test (F-Test) Table 7. Simultaneous Test R-squared 0.654373 Mean dependent var 25.62600 Adjusted R-squared 0.560111 S.D. dependent var 2.700116 S.E. of regression 1.790828 Akaike info criterion 4.226411 Sum squared resid 35.27770 Schwarz criterion 4.415225 Log likelihood -27.69809 Hannan-Quinn criter. 4.224400 F-statistic 6.942077 Durbin-Watson stat 0.891223 Prob(F-statistic) 0.006880 Source: Processed Data using EViews 12. The simultaneous significance of all independent variables was examined using the F-test to determine whether inflation (X1), domestic investment (X2), and the provincial minimum wage (X3) collectively influence formal sector labor absorption. The F-statistic value of 6.942077 with a corresponding probability of 0.006880 is below the 0.05 significance threshold, indicating that the regression model is statistically significant as a whole. This finding confirms that the three independent variables, when considered simultaneously, have a meaningful joint effect on formal labor absorption in West Nusa Tenggara Province.