GENDER, EDUCATION AND LABOUR MARKET IN INDONESIA: SOME ISSUES AND CHALLENGES

Raden Muhammad Purnagunawan

CEDS - Padjadjaran University

Universitas Padjararan

15 Agustus 2018

Outline • Introduction

• Structure and Key Features

of Indonesian Labor Market

• What should we do?

Introduction

‘Window of Opportunity” of Demographic Bonus is closing in

2015 - 2030

Estimated period of Demographic Dividend• UN ‘World Population Prospect’: 2015 -2030 • Dorojatun KuncoroYakti: 2010 - 2035 • Sri Moertiningsih : 2020 - 2030

Source: Worldbank (2009, p.30)

2015-2030

Indonesia is a country with young population

Source: Population Census, 2010

Population by Gender and Age Group

Indonesia, 2010

Age Group

Gender

Male Female TotalSex

Ratio

0-4 11,662,369 11,016,333 22,678,702 1.06

5-9 11,974,094 11,279,386 23,253,480 1.06

10-14 11,662,417 11,008,664 22,671,081 1.06

15-19 10,614,306 10,266,428 20,880,734 1.03

20-24 9,887,713 10,003,920 19,891,633 0.99

25-29 10,631,311 10,679,132 21,310,443 1.00

30-34 9,949,357 9,881,328 19,830,685 1.01

35-39 9,337,517 9,167,614 18,505,131 1.02

40-44 8,322,712 8,202,140 16,524,852 1.01

45-49 7,032,740 7,008,242 14,040,982 1.00

50-54 5,865,997 5,695,324 11,561,321 1.03

55-59 4,400,316 4,048,254 8,448,570 1.09

60-64 2,927,191 3,131,570 6,058,761 0.93

65-69 2,225,133 2,468,898 4,694,031 0.90

70-74 1,531,459 1,924,872 3,456,331 0.80

75-79 842,344 1,135,561 1,977,905 0.74

80-84 481,462 661,708 1,143,170 0.73

85-89 182,432 255,529 437,961 0.71

90-94 63,948 106,951 170,899 0.60

95+ 36,095 68,559 104,654 0.53

Total 119,630,913 118,010,413 237,641,326 1.01

But, still dominated by low educated population

Source: Population Census, 2010

Only 5,2 % of the population have tertiary degree

Education and Training in Indonesia

• Indonesia’s formal education system is not yet capable of producing

workers with even basic skills, such as literacy and numeracy

(Suryadarma, 2011; Di Gropello, 2013; OECD, 2016)

• Indonesia is the only ASEAN country (out of the five) where the

correlation between the educational attainment of the workforce

and enterprise productivity is small and statistically insignificant

(Vandenberg and Trinh, 2016)

• The performance of Indonesian students in international science and

mathematics assessments is 0.4 to 1.9 standard deviations lower

than Malaysia, Singapore, and Thailand (Suryadarma 2011)

• Indonesia will reach the 2009 OECD average reading skills in 2037

and the 2009 average mathematics skills in 2078 if it continue to

progress at the rate they did between 2000 and 2009 (Beatty and

Pritchett 2012)

Structure and Key Features of Indonesian Labor Market

Labor productivity increased

significantly in all sector

0

10

20

30

40

50

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Share of Employment by Sector (%)

Agriculture Manufacture Services

Significant structural

shift in employment,

but with slow growth in

manufacturing

0

5

10

15

20

25

30

35

40

45

50

Agriculture Manufacturing Services All Industries

5

38

16 15

10

47

2927

2001

2015

Most jobs created are in low productivity service sectors

Agriculture 35.1%

Mining 1.4%

Manufacturing 13.9%

Electricity, gas 0.2%

Construction 6.1%

Trade & retail 20.9%

Transport 4.5%

Finance 2.4%

Soc. & pers. services 15.4%

R² = 0,3327

-60

-40

-20

0

20

40

60

80

100

120

140

-20 -10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140

Sectorial relative to Total Value added per worker growth rate 2001-2012 (%)

Employment growth rate 2001-2012 (%)

Employment and labor productivity growth by sector(bubble area = sector share in total employment in 2012)

Benchmark: Total economy value added growth rate 2001-2012

Total employment growth rate 2001-2012

(Alatas, 2014)

Most jobs created are in low productivity service sectors

Agriculture 35.1%

Mining 1.4%

Manufacturing 13.9%

Electricity, gas 0.2%

Construction 6.1%

Trade & retail 20.9%

Transport 4.5%

Finance 2.4%

Soc. & pers. services 15.4%

R² = 0,3327

-60

-40

-20

0

20

40

60

80

100

120

140

-20 -10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140

Sectorial relative to Total Value added per worker growth rate 2001-2012 (%)

Employment growth rate 2001-2012 (%)

Employment and labor productivity growth by sector(bubble area = sector share in total employment in 2012)

Benchmark: Total economy value added growth rate 2001-2012

Total employment growth rate 2001-2012

(Alatas, 2014)

Labor force participation was stagnant

Source: Calculated from the Indonesian Labor Force Survey (Sakernas).

0

10

20

30

40

50

60

70

80

90

China Indonesia Malaysia Philippines Thailand Viet Nam

Female Male Male and female

Labour Force Participation Rates by Gender, 2001-2015

Labour Force Participation in selected countries, 2015

Quite the same compare to

Malaysia and Philippines

Education and Skill Trends

• Still dominated by

low educated

workers

• Increasing

demand for higher

education

0

2

4

6

8

10

12

14

Manufacturing Services

3

12

4,8

12,22009

2015

Source: World Bank Enterprise Survey

Firms Identifying an Inadequately Educated Workforce as a Major Constraint by Sector (%)

• More than 10% of firms have difficulties in finding adequately educated employees

• Similar to the Philippines , but worse than Viet Nam (8.1%) and Thailand (2.1%)

Unemployment rate is declining but youth unemployment is still high

Source: Calculated from the Indonesian Labor Force Survey (Sakernas).

• Increasing the last 3 years

• 4-7 times higher than adult

• 7 times higher than Thailand

• 4 times higher than Vietnam

• 2 times higher than Malaysia

and India

0

5

10

15

20

25

30

35

Primary Junior High SeniorHigh

SeniorVocational

Diploma University

2010

2015

Source: Calculated from the Indonesian Labor Force Survey (Sakernas).

Significant shortage for specific

skills in labor market (Di Gropello

et all., 2011) but high youth

unemployment, especially among

better educated youth

Unemployment rate is higher for female, in urban area,

youth and for senior secondary educated person

2001 2006 2011 2015

Gender

Male 6.59 8.52 5.90 6.07

Female 10.55 13.35 7.62 6.37

Location

Urban 10.99 12.94 8.23 7.31

Rural 6.09 8.39 4.96 4.93

Age Group

15-24 24.08 30.59 19.99 22.59

25-49 4.12 5.48 3.92 3.57

50-64 2.88 3.05 2.53 1.48

65+ 5.67 3.57 4.28 0.07

Education attainment

Less than Primary 3.77 4.38 3.74 2.16

Primary 5.30 6.91 3.42 3.09

Junior Secondary 10.60 12.94 8.37 6.22

Senior Secondary 15.65 17.82 10.59 11.16

Tertiary 11.01 10.23 7.71 6.68

Total 8.10 10.28 6.56 6.18

Underulitizationis still a major

problem

Less than 35 hours/week

Less than 40 hours/week

2001 2015 2001 2015

GenderMale 26.6 23.7 38.4 33.0

Female 45.3 40.4 56.6 51.2

LocationUrban 19.4 19.2 29.6 27.8

Rural 42.8 41.3 55.4 52.5

Age Group

15-24 34.0 29.8 43.2 37.8

25-49 30.1 26.1 42.1 35.9

50-64 41.8 36.3 54.7 47.6

65+ 53.1 52.5 64.5 62.8

Sector

Agriculture 52.4 53.4 65.6 65.7 Manufacture 15.1 14.1 21.5 19.9

Services 20.7 20.4 33.2 30.5

Edu

cati

on

a

tta

inm

ent

Less than Primary 46.7 45.1 58.3 56.3

Primary 35.8 36.2 46.8 46.3 Junior Secondary 27.5 28.5 37.4 36.8 Senior Secondary 18.6 18.6 30.9 26.7

Tertiary 24.9 20.4 45.2 34.4

Total 33.5 29.9 45.2 39.7

Informal sector still has

a dominant role,

especially in rural area, in agriculture

sector and for workers with low level of education

2001 2006 2011 2015

Gender

Male 58.2 61.8 53.2 50.1

Female 67.7 65.7 58.3 56.0

Location

Urban 39.0 42.0 37.4 36.0

Rural 76.6 77.3 71.6 69.6

Age Group

15-24 56.8 58.7 48.6 42.1

25-49 59.0 60.2 52.0 48.6

50-64 72.0 73.0 66.4 64.3

65+ 83.6 84.1 80.0 78.5

Sector

Agriculture 90.7 92.0 89.7 87.1

Manufacture 28.8 36.8 33.3 34.3

Services 44.3 44.8 37.1 35.6

Education attainment

Less than Primary 81.6 84.8 79.6 78.4

Primary 71.8 77.0 70.2 69.8

Junior Secondary 57.6 63.5 54.0 56.3

Senior Secondary 30.8 34.9 32.7 32.8

Tertiary 9.7 9.5 7.7 9.3

Total 61.7 63.1 55.2 52.3

Labor policies

Labor Regulations and Policies

• Manpower Law 13/2003Main regulation on Labor

– Continuously challenged in Constitutional Court

– at least 7 constitutional court decision that ruled

out or partially ruled out some articles and clauses

of the Manpower Law

• New Government Regulation on Wages (PP 78/2015)

Large Variation and Growth of Minimum Wages

ratio of the highest to the lowest district's minimum wage in each province

0,00

0,50

1,00

1,50

2,00

2,50

3,00

2001200220032004200520062007200820092010201120122013201420152016

tahun

Rat

io o

f M

axim

um

/Min

imu

m M

Ws

West Java Central Java East Java

Banten National*

Non-compliance with Minimum Wage laws is still high and has not been declining.

PP 78 /2015

• It has been delayed for more than 12 year

• Complementing the Labor Law No 13/2003

• Specifically include the formula to calculate MW

National Real GDP

growth

National Inflation

rate

Next Year Minimum wage in

province i

MWt+1 = MWt + MWt * (inflationt + % GDPt)

Current Minimum wage in

province i

What should we do?

Improvement the quality of Human Resources

1) improve the quality of education

2)create a skills development system that would allow

workers to continually acquire new skills, both general and

firm-specific skills, through non-formal or on-the-job

training or apprenticeship

3) Better support the movement of labour across the ASEAN

region.

4)Controlling population growth and improving health

services

Nevertheless, attempting to improve competitiveness through

improvement of Human Resources will only start to bear fruit in

the medium to long term

Improved Access to

employment for women and Youth

• The government can make

policies/incentives for companies that

hire young people

• Employment policy transformation

from 'passive' to 'active‘

Sustainable Employment

Creation and

Expansion

• Encouraging the growth of new

entrepreneurs and empowering the

Micro, Small and Medium Enterprises

• Improving coordination between

ministries/agencies in the employment-

related programs and MSMEs