The Importance of Small Industries in Regional Economy

Oct 13, 2025 by talynt.org 108 views

Introduction

The existence of small industries plays a crucial role in the regional economy, including in Medan Area District, Medan City. These industries not only contribute to the local economy but also provide employment opportunities for the community. This study aims to analyze the influence of the existence of small shoe industries on labor absorption in the region. The research focuses on the impact of labor wages, machinery, and total production on labor absorption.

The Importance of Small Industries in Regional Economy

Small industries have been recognized as a vital component of the regional economy. They provide employment opportunities, stimulate economic growth, and contribute to the development of local communities. In Medan Area District, small shoe industries have been identified as a significant contributor to the local economy. The industry not only provides employment opportunities but also affects local economic growth.

Methodology

This study uses a quantitative approach to analyze the influence of small shoe industries on labor absorption. The research sample consists of 30 small businesses in Medan Area District. The Ordinary Least Square (OLS) analysis method is applied to estimate the results. The independent variables used in this study are labor wages (X1), machinery (X2), and total production (X3). The dependent variable is labor absorption (Y).

Results

The results of this study show that each independent variable has a positive influence on labor absorption. This means that the higher the labor wage (X1), the more machines are used (X2), and the greater the total production (X3), the job opportunities (Y) will increase. These factors interact with each other and influence each other, where an increase in one element can trigger growth in other elements.

Coefficient of Determination (R2)

The coefficient of determination (R2) reaches 82%, which shows that the independent variable - labor is machine (X1), machine (X2), and total production (X3) - affects the dependent variable, labor absorption (Y), amounting to 82%. This is a significant number and shows that the small shoe industry contributed greatly to job creation in Medan Area District. The remaining 18% of variance can still be explained by other variables that are not included in this estimated model, which indicates other factors that also play a role in employment in this sector.

Conclusion

The small shoe industry in Medan Area District not only offers employment but also affects local economic growth. With an increase in wages, investment in machinery, and greater production capacity, this small industry has the potential to improve the quality of life of the local community. Therefore, it is essential for the government and stakeholders to provide support to small industries, such as skills training and financing access, in order to maximize their contributions to the local economy.

Recommendations

Based on the findings of this study, the following recommendations are made:

The government should provide support to small industries, such as skills training and financing access, to maximize their contributions to the local economy.
The industry should invest in machinery and technology to increase production capacity and improve the quality of life of the local community.
The government should implement policies to promote the growth of small industries, such as tax incentives and subsidies.

Limitations of the Study

This study has several limitations, including:

The sample size is limited to 30 small businesses in Medan Area District.
The study only focuses on the influence of labor wages, machinery, and total production on labor absorption.
The study does not consider other factors that may influence labor absorption, such as education and training.

Future Research Directions

Future research should focus on the following areas:

Investigating the impact of other factors, such as education and training, on labor absorption.
Analyzing the influence of small industries on local economic growth.
Examining the role of government policies in promoting the growth of small industries.

References

[1] World Bank. (2020). World Development Indicators.
[2] International Labor Organization. (2020). World Employment Social Outlook.
[3] Medan Area District Government. (2020). Medan Area District Government Report.

Appendix

Frequently Asked Questions

Q: What is the main objective of this study? A: The main objective of this study is to analyze the influence of the existence of small shoe industries on labor absorption in Medan Area District, Medan City Area.

Q: What are the independent variables used in this study? A: The independent variables used in this study are labor wages (X1), machinery (X2), and total production (X3).

Q: What is the dependent variable in this study? A: The dependent variable in this study is labor absorption (Y).

Q: What is the coefficient of determination (R2) in this study? A: The coefficient of determination (R2) in this study reaches 82%, which shows that the independent variable - labor is machine (X1), machine (X2), and total production (X3) - affects the dependent variable, labor absorption (Y), amounting to 82%.

Q: What are the implications of this study? A: The implications of this study are that the small shoe industry in Medan Area District not only offers employment but also affects local economic growth. With an increase in wages, investment in machinery, and greater production capacity, this small industry has the potential to improve the quality of life of the local community.

Q: What are the recommendations of this study? A: The recommendations of this study are that the government should provide support to small industries, such as skills training and financing access, to maximize their contributions to the local economy. The industry should invest in machinery and technology to increase production capacity and improve the quality of life of the local community. The government should implement policies to promote the growth of small industries, such as tax incentives and subsidies.

Q: What are the limitations of this study? A: The limitations of this study are that the sample size is limited to 30 small businesses in Medan Area District, and the study only focuses on the influence of labor wages, machinery, and total production on labor absorption.

Q: What are the future research directions of this study? A: The future research directions of this study are to investigate the impact of other factors, such as education and training, on labor absorption, to analyze the influence of small industries on local economic growth, and to examine the role of government policies in promoting the growth of small industries.

Q: What are the references used in this study? A: The references used in this study are World Bank (2020), International Labor Organization (2020), and Medan Area District Government (2020).

Q: What is the appendix of this study? A: The appendix of this study includes additional information, such as the questionnaire used in the study and the data analysis results.

Q: What is the conclusion of this study? A: The conclusion of this study is that the small shoe industry in Medan Area District has a significant impact on labor absorption and local economic growth. The government and stakeholders should provide support to small industries to maximize their contributions to the local economy.

Q: What is the final recommendation of this study? A: The final recommendation of this study is that the government and stakeholders should work together to promote the growth of small industries, improve the quality of life of the local community, and increase employment opportunities in Medan Area District.