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 2015-2030 Source: Worldbank (2009, p.30) Estimated period of Demographic Dividend UN World Population Prospect : 2015-2030 Dorojatun KuncoroYakti: 2010-2035 Sri Moertiningsih : 2020-2030
Indonesia is a country with young population Population by Gender and Age Group Indonesia, 2010 Age Group Gender Male Female Total Sex 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 Source: Population Census, 2010 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
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Labor productivity increased significantly in all sector 50 45 40 38 47 2001 2015 35 30 29 27 25 20 16 15 15 10 5 5 10 0 Agriculture Manufacturing Services All Industries 50 40 30 20 10 0 Share of Employment by Sector (%) Agriculture Manufacture Services Significant structural shift in employment, but with slow growth in manufacturing
Sectorial relative to Total Value added per worker growth rate 2001-2012 (%) 140 120 100 80 60 40 20 0-20 Most jobs created are in low productivity service sectors Agriculture 35.1% Employment and labor productivity growth by sector (bubble area = sector share in total employment in 2012) Transport 4.5% Trade & retail 20.9% Manufacturing 13.9% Total employment growth rate 2001-2012 Soc. & pers. services 15.4% Benchmark: Total economy value added growth rate 2001-2012 Construction 6.1% Electricity, gas 0.2% R² = 0,3327-40 -60 Mining 1.4% Finance 2.4% -20-10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Employment growth rate 2001-2012 (%) (Alatas, 2014)
Most jobs created are in low productivity service sectors Sectorial relative to Total Value added per worker growth rate 2001-2012 (%) Employment and labor productivity growth by sector (bubble area = sector share in total employment in 2012) 140 120 100 80 60 40 20 0-20 -40-60 Agriculture 35.1% Transport 4.5% Trade & retail 20.9% Manufacturing 13.9% Total employment growth rate 2001-2012 Soc. & pers. services 15.4% Benchmark: Total economy value added growth rate 2001-2012 Construction 6.1% Electricity, gas 0.2% Mining 1.4% R² = 0,3327 Finance 2.4% -20-10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Employment growth rate 2001-2012 (%) (Alatas, 2014)
Labour Force Participation Rates by Gender, 2001-2015 Labor force participation was stagnant Labour Force Participation in selected countries, 2015 Source: Calculated from the Indonesian Labor Force Survey (Sakernas). 90 80 70 60 50 40 30 20 10 0 China Indonesia Malaysia Philippines Thailand Viet Nam Female Male Male and female Quite the same compare to Malaysia and Philippines
Education and Skill Trends Still dominated by low educated workers Increasing demand for higher education 14 12 10 8 6 4 2 0 2009 2015 4,8 3 12 12,2 Manufacturing Services 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 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 Source: Calculated from the Indonesian Labor Force Survey (Sakernas). 35 30 25 Significant shortage for specific skills in labor market (Di Gropello et all., 2011) but high youth unemployment, especially among better educated youth 20 15 10 5 0 Primary Junior High Senior High Senior Vocational Diploma University 2010 2015
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
Education attainment Underulitization is still a major problem Less than 35 Less than 40 hours/week hours/week 2001 2015 2001 2015 Gender Male 26.6 23.7 38.4 33.0 Female 45.3 40.4 56.6 51.2 Location Urban 19.4 19.2 29.6 27.8 Rural 42.8 41.3 55.4 52.5 15-24 34.0 29.8 43.2 37.8 Age Group 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 Agriculture 52.4 53.4 65.6 65.7 Manufactu Sector re 15.1 14.1 21.5 19.9 Services 20.7 20.4 33.2 30.5 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 13/2003 Main 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)
Ratio of Maximum/Minimum MWs Large Variation and Growth of Minimum Wages 3,00 ratio of the highest to the lowest district's minimum wage in each province 2,50 2,00 1,50 1,00 0,50 0,00 West Java Central Java East Java Banten National* 2001200220032004200520062007200820092010201120122013201420152016 tahun
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 MW t+1 = MW t + MW t * (inflation t + % GDP t ) Next Year Minimum wage in province i Current Minimum wage in province i National Inflation rate National Real GDP growth
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 employmentrelated programs and MSMEs