This study aims to test the theory of demand for Pappas and Mark Hirshey derivatives in the oil palm plantation sector in Sumatra, the absorption of labor in the oil palm plantation sector is a demand for derivative labor, because the demand is based on the development of the plantation sector on the island of Sumatra. This study modified the theory of Pappas and Mark Hirshey with the addition of supporting variables associated with the theory of labor demand. This study looked at the influence of variable minimum wage, general allocation funds, human development index and production on labor absorption in the oil palm plantation sector on the island of Sumatra. The analysis method used is a simultaneous analysis method using panel data, which is a combination of cross section data and time series data for a period of 10 years starting from 2011 to 2020 per 10 provinces on the island of Sumatra, the results of the first stage of estimates show that the Minimum Wage has a negative and insignificant effect on labor absorption so that the hypothesis is rejected. The General Allocation Fund (DAU) has a positive and significant effect on employment so that the hypothesis is accepted. The human development index (HDI) has a positive and significant effect on labor absorption so that the hypothesis is accepted. Production has a positive and insignificant effect on labor absorption so the hypothesis is rejected. Simultaneously the Minimum Wage (UM), the general allocation fund (DAU), the human development index (IMP), and production affect the absorption of labor so that the hypothesis is accepted.

Labor Absorption, Minimum Wage, General Allocation Fund, Human Development Index, Production.