IO – A Case Story
In the early 2000’s, we were shocked and angered when we heard that Nirmala Bonat, an Indonesian citizen from the East Nusa Tenggara Province, had been savagely tortured by her employer when she was working in a domestic capacity in our neighboring country of Malaysia. She was not only verbally abused and beaten, but she was also attacked with an iron. Yes, with a burning hot clothes iron that she used to care for her employer’s clothing.
This is just one tragedy among thousands, or even millions, suffered by our citizens as they work in countries all over the world. The issue is, how come we allow them to leave our country and become such menial workers so easily? Don’t they have better, more decent alternative means of livelihood? If we have to allow them to go seek their fortune abroad, how can we protect them?
This Indonesian Worker Foreign Placement Government Program highly contrasts with the mandate of the Constitution. Article 27 Paragraph (2) of the Constitution of 1945 states that “All citizens have the right to work and livelihood that is sufficient for humanitarian purposes.” In other words, the State has the obligation to provide decent jobs and means of livelihood for the people, especially those of low socio-economic condition. Therefore, the people have the right to demand this from the Government.
The open unemployment rate in February 2019 was 5.01%, or 6.82 million people. This number is separate from the non-fully employed, i.e. part-time workers (22.67%) and partially unemployed workers (7.37%). In other words, the total of openly unemployed and partially unemployed is 35.05% of the population. However, we have not cared sufficiently about this problem as a national issue, even though the primary causes of increased unemployment run havoc without Government control. First, demographic volatility. To be specific, population growth rates affect the number of citizens entering the work market. Second, educational characteristics. This affects the quality and productivity of the work force. Third, the economy, which will affect the absorption of the work force in the work market.
We seek to help our newly-elected President and offer new plans and strategies for mitigation of national unemployment in the 2019-2024 agenda. This piece is something that we suggest the President do in order to prevent the humanitarian tragedy suffered by Indonesians who flock to foreign countries and domestic metropolises with nothing but their hopes and few skills, in order to be able to obtain a decent livelihood.
and Work Force in 2018/2019
According to Worldometers’ data, Indonesia now has a population of 269 million people or 3.49% of the total world population. Indonesia is the fourth-most-populated country in the world after China (1.4 billion people), India (1.3 billion people), and the United States (328 million people).
The National Development Planning Agency (Badan Perencanaan Pembangunan Nasional – “Bappenas”) estimates that Indonesia’s population in 2020 will be 271 million people, with a population growth rate of 1.9%. The high increase of our country’s work force is a huge issue, especially when we note the rapid population growth. That 1% annual average population growth means that Indonesia has to welcome an additional 2 million citizens each year! At this rate, it is no wonder that we are the fourth-most-populous country in the world.
Statistics Indonesia (Badan Pusat Statistik – “BPS”) data released in February 2019 stated that the current number of productive age population is 196.46 million, increasing greatly from that of the previous year at 193 million. There are 136.18 million people of the work force ready to enter the working world this year, or increasing more than 3 million people from the 133 million reported in 2018. The percentage of full-time workers (a minimum of 35 work hours a week) in the population is 69.96%. Meanwhile, non-fully employed population is divided into two, i.e. part-time workers (22.67%) and partially unemployed workers (7,37%)
To repeat: the average work force growth rate in Indonesia is two million people every year, increasing by 2.24 million people in 2018-2019. Of these 136.18 million, 129.36 million of them work. This is an increase of 6.82% from the 127.07 million workers in 2018. A full 60.28 million of 196.46 million total population is not part of the work force, with 16.5 million of the working-age population at school in 2019. They are not part of the work force. They grew 0.54 million or 3.46% from the previous year’s population. We need to monitor them carefully, because they might become newly-unemployed persons when they complete their formal education in the future.
The number of people working in the following fields have declined: Agriculture (1.00%); Government Administration (0.23%); and Information and Communications (0.06%). Meanwhile, 74.08 million people (57.27%) work in the informal sector. Within the past year (February 2018-February 2019), the number of informal workers decreased by 0.95%.
The average monthly worker salary according to the National Work Force Survey (Survei Tenaga Kerja Nasional – “Sakernas”) in February 2019 was IDR 2.79 million. The average monthly salary for male workers is IDR 3.05 million, while for female workers it is IDR 2.33 million. 7 out of the 17 national professional categories have a lower monthly salary than the national monthly salary average. The average monthly wage for workers with university education is IDR 4.34 million, while that of workers with elementary school or lower education is IDR 1.73 million.
Unemployment in 2018/2019
The open unemployment rate is the proportion of clearly unemployed working-age population. In February 2019, the open unemployment rate was 5.01%, or 6.82 million. This figure is separate from that of non-fully-employed population, i.e. part-time workers (22.67%) and partially unemployed workers (7.37%). The total portion of unemployed population, whether openly or partially unemployed, is thus 35.05%. It is useful for the Government’s reference in opening up new job opportunities, serves as the benchmark of the success of labor programs year after year, and is the second most important thing to consider when evaluating the success of economic development after poverty rates.
The Sakernas divides open unemployment into four groups: First, those who do not work and are looking for work. Second, those who do not work because they are preparing to open their own business. Third, those who do not work and are not looking for one, because they feel that it is impossible to get employed. Fourth, those who do not work because they have been accepted for employment somewhere, but have not started working yet.
The open unemployment rate decreased slightly (0.12%) from 5.13% in 2018 to 5.01% in 2019. Even though overall open unemployment rate has decreased, its percentage in urban areas is higher than in rural areas, with urban open unemployment at 6.30% (decreasing only 0.04% from the previous year) and rural open unemployment at 3.45% (decreasing 0.27% from the previous year). The highest open unemployment rate by education level is among Vocational School graduates at 8.63%, followed by combined College Diploma I/II/III graduates at 6.89%. This is because the work market for these two levels of education is insufficient. However, graduates of elementary school or lower have a higher absorption rate in the working market. Maybe this is because they tend to be less demanding about work conditions.
The overall unemployment rate did decrease, from 7.01 million people in 2017 to 6.87 million in 2018, and down even further (5.01%) to 6.82 million in 2019. However, we need to note about the partially unemployed, those who do not receive much public attention. As a reminder, the percentage of full-time workers is 69.96% of the work force, and the total of non-fully employed workers (part-time workers and partially-unemployed workers) in Indonesia is 35.05% or 45.27 million of the total 129.36 million work force in Indonesia. However, this unemployment figure is open for debate.
Causes of Unemployment in
In most markets, prices self-adjust in order to balance between demand and supply. In an ideal labor market, wages will also adjust themselves to balance between the quantity of the offered work force and the required work force. This wage rate adjustment will ensure that everyone works.
Naturally, the reality is far from being ideal. There are always people who do not work, even though the economy grows rapidly in general. In other words, the unemployment rate will never become 0%. This is because: a) work force supply is bigger than work force demand, b) there is a mismatch between the quality of the required work force from those available in the work market, and c) job fairs are ineffective.
Oversupply of workers means that so many remain unemployed, or insufficiently employed. These include: a) people in the work force who do not have work, b) people outside of the work force who need and/or seek work, c) people who work less than what they want because of reasons beyond their power, and d) people who do work that is clearly below their skills or potential. They have low productivity, either because they were forced to take in work lower than their qualifications, or because the management in their workplace is inefficient.
The a) and b) groups are job seekers, and they are generally considered to be openly unemployed. Some in the b) group work force do not have work, while others have given up on seeking employment due to their belief that there is nothing available. They are desperate. Those in c) group are partially unemployed, because they work less than the normal 35 hours a week. Members of d) group are mismatched with their work. Their skills are too high for their work, or entirely unused. For example, an engineering doing administrative work that even college graduates can do. There is usually very little data for this group.
Types of Unemployment
It is important for us to know about types of unemployment, so that we can start mitigating the overall issue. They are:
1) Transitional Unemployment
This type of unemployment generally occurs because job seekers generally do not know that there are opportunities that match their qualifications and interests. On the other hand, entrepreneurs are also unaware that there are job seekers who satisfy the requirements for the positions available in their company.
2) Seasonal Unemployment
This type of unemployment occurs because of fluctuations in the production of goods and services due to seasonal conditions. Such fluctuations may occur because of climate (e.g., land processing is usually performed during the rainy season) or due to social habits (the people shop more during Eid-el-Fitr, Christmas, and the New Year). This type is predictable, because they occur regularly.
3) Conjunctive Unemployment
This occurs because of reduced economic conditions or recessions. To be exact, reduced effective demand for goods and services lowers production and distribution activities. This causes both full and partial unemployment.
4) Technological Unemployment
This type occurs because of changes in production technology. These changes may be related to the work process, type of material used, or work productivity level. Technological unemployment frequently occurs simultaneously with structural unemployment, because the use of new technology may change the economic structure of a market.
5) Structural Unemployment
Structural unemployment may occur because of structural changes in the market of goods, usually in turn caused by the drop in the sales of specific commodities due to the appearance of a similar new commodity. This type of unemployment frequently occurs in developing countries because the economic structure is insufficiently developed. It does not sufficiently generate productive and remunerative job opportunities for the existing work force.
6) Special Case Unemployment
This type of unemployment occurs because some special groups in society cannot get jobs because of their limitations, such as physical, mental, or social disability.
Anticipated Work Force in
Unemployment issues indicate the condition of our national social-economic health. Unemployment may be seen as a labor issue, but in reality, it is strongly affected by national economy. Furthermore, increased population as well as increased number of educated citizens means that even more educated workers are available. However, our current economic growth at a mere 5% per annum is far too weak to absorb these new workers. Even worse, the administrators of industrial relations are insensitive towards the Constitution’s mandate to continue to seek a way to eliminate, or at least minimize unemployment rates.
Many factors affect the increase of unemployment, both upstream and downstream within the production flow. We need strategies that can mitigate these reasons. We can conclude that the people expect the following condition for the reduction of unemployment in the next Governmental term: As the Indonesian work force is projected to increase from 136.19 million people in 2019 to 146 million people in 2024, they expect an increase of employed work force from 129 million people in 2019 to 140 million people in 2024. They also expect a reduction of unemployment from 6.82 million people (5.01%) in 2019 to 4 million people 94%) in 2024. In other words, we need to have an economic growth rate of higher than 5%.
The highest drop in unemployment is especially expected on: young unemployed, low-education unemployed, the unemployed living in Java island, urban unemployed, female unemployed, educated unemployed, and partially unemployed (the latter mostly live in rural areas).
Even though the people expect labor stability in Indonesia, it is not easy to set a target for reducing unemployment. Such a target depends on several basic assumptions: Annual average job opportunity growth increases from 1.9% in 2015-2019 to 2% in 2019-2024; work force growth is reduced from 1.67% in 2014-2019 to 1% in 2019- 2024; annual average economic growth increases from 4.1% in in 2000-2004 to 6.0% in 2004-2009; and transformation from informal sector to formal can be accelerated in both urban and rural areas, especially in agriculture, trade, services, and industry.
Efforts to Eradicate
Indonesia’s current labor environment faces both internal and external challenges. Internal challenges include factors such as the low quality of Indonesian workers, while external challenges include our signing of international agreements such as AFTA, APEC and WTO. Such agreements pave the way for foreign workers to enter Indonesia. This must be anticipated with competence-based work training that upgrades the quality, professionalism, competence, and competitiveness of our workers in all fields. The various efforts and programs created to resolve these labor issues include: expansion and creation of job opportunities, improvement of work force quality, improvement of work market and job fair information, work force control, and industrial relations direction.
Despite these various efforts, in reality unemployment continues to rise. We need to check whether this is simply related to the gap between work force supply and demand in the work market, or is it something else that can unite job seekers and employers.
The unemployment issue is a national issue that touches the very livelihood of the people. It is one of the Government’s responsibilities, and as such it must be considered seriously. Unemployment in Indonesia is highly complex, meaning it requires wise conceptual resolutions. This is only possible by involving all relevant elements in the State, namely, the Government, the business world, the banking world and the common people.
Mitigation of unemployment in the future must prioritize the very root and basic concepts of the issue, instead of utilizing gradual resolutions. This is something we need to emphasize, because we frequently take temporary and rushed decisions only to appease the masses’ wrath, while a wise and intelligent leader would make visionary decisions. Therefore, the writer is now setting homework for the President in resolving unemployment issues. The homework is an amalgamation of the many opinions submitted by the people.
Expansion and Generation of Job
For the past few years, the Government has not provided sufficient job opportunities. However, our current volatile economy provides an opportunity for the common people to generate informal job opportunities. This condition cannot guarantee the generation of qualified and highly competitive workers, because the informal sector does not depend much on specific technical qualifications. It is no wonder that the number of partially-unemployed workers increased greatly to nearly 38 million.
Total unemployment in 2017 increased 10,000 people from 7.03 million to 7.04 million people. In August 2017, open unemployment was 5.59%, increasing from 5.33% in February 2017. The elasticity of labor absorption has also decreased since 2010: The Institute for Development of Economics and Finance (INDEF) stated that each 1% of annual economic growth in 2016 could only absorb 110,000 workers. This is far lower than the rates in 2011, wherein each 1% of economic growth absorbed 225,000 workers.
Indonesia’s economic growth is expected to remain stagnant from 2017 to 2020, hovering in the 5% range. This means that we will not be able to absorb any new work force during that period. Neither the recent large investments coming in nor the large number of national infrastructure projects have exerted any direct impact on the formal absorption of workers. In fact, most of these investments are in the capital-intensive sector.
Bappenas also stated that the elasticity of worker absorption in Indonesia has not changed much since 2015. Within the past 3 years, each 1% annual economic growth absorbed only an average of 250,000 workers. This is much lower than the elasticity rate 10 years ago, i.e. up to 500,000 workers absorbed each year. The State is still unable to find solutions. This lowered absorption rate of the Indonesian work market is caused by the profusion and complexity of business regulations, worsened by the fact that our work force grows at 2.9 million a year.
In the future, there must be changes in the economic structure and flexibility in the work market. This must improve our worker absorption flexibility rate. One of the basic strategies that we can use to create and expand job opportunities is by changing the orientation of these strategies to job creation opportunities, business productivity, and human resource capacity building. It is this kind of human resource-oriented, demographic-centered development that we need to carry out, as we have so many citizens in need of such support.