INDONESIA EMPLOYMENT POLICIES: PROBLEMS AND CHALLENGES Rahma Iryanti Deputy Minister for Poverty, Labor, and SMEs National Development Planning Agency 24 February 2015
BACKGROUND From 2005 to 2014 , Indonesia’s economic growth has allowed employment to growth more than the labor force: Average economic growth during 2005-2014 was 5.8 percent. Average employment growth during the same period was 2.0 percent, while the labor force grew 1.7 percent. Therefore, unemployment rate was down to 5.9 percent in August 2014. The Government has also raised investment on hard and soft infrastructure by providing labor-intensive infrastructure projects, poverty reduction programs, and skill and competitiveness-enhancement programs. Structures of Str of th the Ind Indonesian Eco conomy: The economic growth mostly came from service sector, which created most of employment. The share of manufacturing sector to GDP is declining Eksports dominated by primary products Employment in manufacturing sector only around 13-14 percent 2
BACKGROUND Around 56% of the labor force are low-skilled (primary school or lower background) and most jobs are informal (68%). Labor force are abundant, but decent jobs are limited. Skill mismatch is still high. Low recognition of certificates of competency, domestically and internationally. Very few international competency standards adopted by training institutes. Our migrant workers are mostly low-skilled and susceptible to cases of human rights violation. 3
Issues and Challenges in Labor Market 4
Demographic Bonus (DB) and it ’ s Policy Implications DB can not be harvest automatically, there must be appropriate policies to support it, such as: – Increase in health services – Skill improvement through education and training – Population growth controll – Economic policies supporting labor market • DB started from 2012 the lowest of dependency ratio will flexibility, trade occure between 2028-2031 openness, and private • DB will increase labor force with productive-age in line with saving private saving source of economic growth Source: BPS & Bappenas 5
EDUCATIONAL BACKGROUND Vs Vs ECONOMIC SE SECTOR 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Basic Secondary Higher Share of Employment Source: National Labor Force Survey, 2013, (Bappenas Calculation) Almost 40% of employment are in agriculture, but around 90% of workers in this sector are low-skilled. Sectors such as social/personal services; electricity, gas, water; and finance require more skill (higher education). The rest is dominated by people with basic education. 6
In Indonesia Youth Unemployment Facts 47% are low educated University 5% 53% are educated (higher ≤ Primary than senior high school and 22% Diploma 3% above) Junior If they are educated, why High Vocational School School can ’ t they work? 17% 25% Senior - Limited opportunities High School - Limited attracted 28% opportunities at rural level Source : Bappenas Calculation (Indonesia labour force situation. 7
Labor market is not yet efficient… Negative growth of several labor intensive industries results from, among others, the high increase of minimum wage. High minimum wage increase has influenced our competitiveness, indicated by low ranking of our labor market efficiency, according to WEF Global Competitiveness Report. LABOR MARKET EFFICIENCY PILLAR, from 142 countries Redundancy 2013- 2012- 2011- 2010- 2009 costs and No. Labor Market Efficiency 14 13 10 09 -08 flexibility of 1 Redundancy costs, weeks of salary 137 131 127 119 117 wage- determination 2 Rigidity of employment index - 104 100 82 87 concern the (firing, contracting, outsourcing) private sector the most. 3 Hiring and firing practices 52 51 38 34 19 In 2012-13, from 4 Flexibility of wage determination 114 113 98 92 79 147 countries, Indonesia stood 5 Cooperation in labor-employer 61 68 47 42 19 at rank 137 and relations 114. Source: Global Competitiveness Report, World Economic Forum 8
Manufacturing Industries: Production Growth Medium and Large Manufacturing Industries: In general, production of manufacturing industries indicates a positive growth in 2012. However, not all industries show a production increase. Positive Growth Negative Growth Types of Industries Growth Types of Industries Growth Pharmacies 13,19% Basic metal -8,48% Food 12,75% Textile -8,32% Tobacco 5,42% Leather and footwear -6,96% Clothing 4,91% Furniture -6,60% Transport equipment 3,57% Paper -4,37% Road vehicles 3,23% Beverages -0,50% 9
Over the last decade, poverty rates decreasing but inequality increasing ..... GINI ratio & Poverty rate Population of Poverty rate Poverty target Poverty rate GINI ratio the poor Source: BPS & Bappenas Source: BPS & Bappenas Since 2010, poverty reduction slowed, in absolute terms declined by about 1 million poor people per year. Poverty level (September 2013) 11.47% 11.37% up from (March 2013) because of high inflation dominated by the increase of staple food prices, mainly due to fuel price hike in June 2013. 10
However, we see some improvement… Formal workers, in terms of number and contribution, have been improving over the years. On the other hand, the number of informal workers as well as unproductive workers, such as casual workers in agriculture and non- agriculture, and unpaid family workers, has been declining. Segment of Formal and Informal Workers Informal Formal 80% 60% 40% 20% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 11
Structure of sectoral workers 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Pertanian Industri Perdagangan Bangunan Jasa Kemasyarakatan Workers in non-agricultural sector has been improving significantly, followed by diminishing number of workers in agricultural sector, despite some deceleration. However, workers in industry tends to be stagnant. The proportion of workers is relatively steady at 12 percent to 14 percent for more than a decade. Meanwhile, workers in service sector continues to grow well, reaching more than 50 percent. 12
But we have social protection system in place… SOCIAL PROTECTION IMPLEMENTATION Social Assistance National Social Security Labor Market System Interventions • Varied programs to protect the poor and vulnerable • Basic insurance coverage for • Labor policy supporting workers against shocks economic plan and social • Prevent irreversible loss of welfare improvement for the human capital – links to • Mandatory contributions people education and health • Increases labor mobility outcomes • Skill building • Rapid response to crises • Job search 13
FUTURE CHALLENGES Indonesia Economic Transformation and Employment Creation (Medium Term Development Plan-MTDP 2015 – 2019)
Why Economic Transformation? Escaping from the middle income trap Responding the global economic challenges Strengthening competitiveness Improving economic resilience Assuring food, energy, and water security. Improving the quality of development through inclusive growth Reducing poverty and unemployment Environmental sustainability 15
GDP Growth, Poverty and Unemployment 2012 DEMOGRAPHIC BONUS 2031 Middle Income Trap Threshold USD 12.000 2010 2020 2015 2025 2035 Medium Term Plan 2 Medium Term Plan 3 GDP Growth 2014: 5,7 - 8 % 5,02 % Per year 2013: 2019: GDP per capita USD 3.500 Towards USD 7.000 Poverty rate 2014: 10,96 2019: 7 - 8 % 2014: 2019: Unemployment Rate 5,94% 4,0-5,0% 16 Source: Technocratic Plan and MTDP-Bappenas
CHALLENGES TO CREATE QUALITY EMPLOYMENT 1. Improving productivity , by reallocation of workers to economic activities with high-productivity. This challenge relates to structural transformation of the economic sector to highly-productive sector. The expected growth is growth that can absorb employment in a large number without lowering productivity. 2. Improving worker’s standard of living , especially those who are among 40 percent of population with lowest income (including working poor), by providing productive employment opportunities. This challenge relates to: (a) Availability of new employment opportunities as a means to improve income; (b) Creation of new jobs needs new investment, FDI or local; (c) Availability of productive employment opportunities for unemployed and working poor; (d) Working poor’s standard of living is improved by providing jobs to vulnerable workers. 3 . Improve Industrial Relations: (a) Rights at work, (b) Promote union-employer collective bargaining processes, (c) new trend/best practice – decentralized system with strengthened union movement and collective bargaining, (d) Dispute settlement. 17
Recommend
More recommend
