This study aims to determine the effect of wages, capital, and the amount of production on employment absorption in small industry of silver craft in Kecamatan Kotagede Yogyakarta. Subjects in this study are entrepreneurs who have a small silver industry located in Kotagede Kota Yogyakarta. In this study using primary data with a sample of 73 respondents selected by purposive sampling method. And the analytical tool used in this study is Multiple Linear Regression Analysis with the help of software SPSS version 16. Based on the analysis that has been done results that wages and quantities of production have a effect and significant effect on employment. While the capital has no effect and not significant on the absorption of labor in small industries of silver handicrafts in Kotagede Subdistrict, Yogyakarta City.