Indonesia Jobs Outlook 2017

International
Labour
Organization
Indonesia Jobs Outlook 2017

Harnessing technology
for growth and job creation
Harnessing technology for growth and job creation
International Labour Organization

ILO Office for Indonesia and Timor-Leste
Copyright © International Labour Organization 2017

First published 2017
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This report was prepared by Owais Parray (ILO, Jakarta) with contributions from Dyah Retno Sudarto (Consultant) and
Greg Yameogo (ILO, Jakarta). The author would like to express gratitude to Sara Elder and Phu Huynh (ILO Regional
Office, Bangkok) for their technical review and inputs.
ISBN 978-92-2-030689-5 (print)

978-92-2-131450-9 (web pdf)
ILO
Indonesia Jobs Outlook 2017: Harnessing technology for growth and job creation/International Labour Office – Jakarta: ILO, 2017
xii, 76 p.
Laporan Ketenagakerjaan Indonesia 2017: Memanfaatkan Teknologi untuk Pertumbuhan dan Penciptaan Lapangan Kerja;
ISBN: 978-92-2-030689-5 (print); 978-92-2-830888-4 (web pdf)/Kantor Perburuhan Internasional – Jakarta: ILO, 2017
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ii
Foreword
I am pleased to present the Indonesia Jobs Outlook Report 2017: Harnessing technology for growth and job creation.
In the past, this flagship report of ILO Jakarta was published under a different title: Labour and Social
Trends in Indonesia. This year, the content and structure of the report was modified, which also made
it necessary to change the title.
This report provides an in-depth analysis of the employment and labour situation in Indonesia. These
trends are discussed in the context of the state of the economy. In particular, the report looks at
structural transformation and resultant effect on the job market.
As the report notes, structural changes in the past resulted in diversification of the economy and more
job opportunities. However, of late, less than desirable growth in manufacturing and other value-added
sectors is a cause for concern.
A look at the labour market shows that over the last two decades across several labour market indicators,
Indonesia has made noticeable improvements. Many more workers are now engaged in productive
employment. In the last five years unemployment rate has fallen significantly.
But, low unemployment also disguises several deficits in the labour market. Vulnerable employment
and those engaged in informal employment is decreasing, but there are still a significant number of
workers involved in low- productive work.
Besides analyzing past trends, the report explores the implications for jobs in light of rapid technological
advances. We believe it is a very topical issue which is taking center stage in the policy discourse.
As the report highlights, technology and jobs always had a symbiotic relationship. In the past,
technological change over time led to new jobs and industries. In other words, technology was a catalyst
for growth.
However, technological upgrading while improving productivity can lead to job losses. Historically,
technological disruptions in the labour market were short-term and often accompanied by the growth
of new sectors and industries.
The concern with the present technological advancements is the pace at which it is happening. Also, it
is happening when the global economy is not growing as fast as it did before the 2008 global financial
crisis. The report tries to explain some of the factors behind these shifts and what can be done to
protect jobs and using technology to stimulate growth and job creation in Indonesia.
I hope the report feeds the ongoing national dialogue on the “future of work”. The ILO remains
committed to supporting this process as well as the ongoing cooperation with the national stakeholders
to promote good jobs and decent employment in Indonesia.
Lastly, I would like to take this opportunity to thank Owais Parray who is the main author of this
report. I would also like to offer a world of appreciation to Greg Yameogo (ILO Jakarta) and Dyah
Retno Sudarto (ILO’s consultant), who contributed in the preparation of this report.
iii
Valuable comments were provided by Sara Elder and Phu Huynh from the ILO’s Regional Office in
Bangkok. Also, special thanks to Grace Halim, Tendy Gunawan and Gita Lingga from ILO Jakarta
Office for their help in the production of this report.
Michiko Miyamoto
Country Director
ILO Country Office for Indonesia and Timor-Leste
iv
Contents
Foreword iii
Contents v
List of Figures vi
List of Tables vii
Executive Summary ix
1. Introduction 1
2. State of economic development 3
3. Economic growth and jobs 7
4. Who is employed 13
5. Understanding unemployment 23
6. Youth, employment, and inactivity 27
7. Technology, productivity, and jobs 31
7.1 Blessing for job creation? 32
7.2 Threat to jobs? 34
7.3 Looking ahead: technology and firms 35
7.4 Towards a technology driven economy 44
8. Skills challenge in Indonesia 47
8.1 Working age population and labour force 47
8.2 Labour force and education 50
8.3 Skills gap 52
9. Conclusions 57
10. Recommendations 59
References 61
Annexes 65
Annex 1. Skills Mismatch & Measurement 65
Annex 2. Labour Force Survey Comparison 2006 and 2016 67
v
List of Figures
Figure 1. Annual GDP growth (percent) 2010-2016 5
Figure 2. Expenditure share in GDP 2010-2016 5
Figure 3. Sector share of GDP (%) 7
Figure 4. Sector share of GDP (LHS) and employment share of GDP (RHS) in percent 8
Figure 5. Sector growth in GDP and employment 1991-2016 9
Figure 6: Change in employment-to-population ratio by sex and age group, 2006 & 2016 13
Figure 7. Number in thousands (LHS) and percent (RHS) of people employed by sectors
(2006 & 2016) 14
Figure 8. Status of employment in 2006 and 2016 15
Figure 9. Occupations by sex, 2006 and 2016 16
Figure 10. Employed with second job, 1996-2016 17
Figure 11. Total number (LHS) and percent (RHS) of employed with second jobs
by occupations (2016) 18
Figure 12. GDP per capita (LHS) and average monthly wage earnings (RHS) by province 19
Figure 13. Share of employment (LHS) by broad sectors in four provinces with high
unemployment rate (RHS) 2016 24
Figure 14. Provinces with unemployment rate (left) lower than the national average and
share (right) of employment by broad economic sectors (2016) 25
Figure 15. Number of unemployed (RHS) and unemployment rate (LHS in %) among
youth by education (2016) 28
Figure 16. Youth unemployment rate in 2006 & 2016 28
Figure 17. NEET (%) in selected countries in Southeast Asia for latest year available 29
Figure 18. Number (LHS) and proportion (RHS in %) of NEET by education 30
Figure 19. Decline of mid-level jobs involving routine tasks 34
Figure 20. Action taken by enterprises shown by a) comparing with ASEAN
b) sectors c) size and d) age 36
Figure 21. Barriers to technology upgrade shown by a) comparison to ASEAN,
b) sectors, c) size and d) age 37
Figure 22. Employing different types of workers compared to ASEAN, sectors, and size 38
Figure 23. Conditions for recruiting international migrant, freelance, or remote workers 39
Figure 24. Long-term business prospects in future 40
Figure 25. Long-term future prospects by a) sector b) size 41
Figure 26. Impact of technology on business performance 42
Figure 27. Impact of technology on business performance by sectors 43
Figure 28. Impact of technology on business performance by size of enterprises 43
Figure 29. Impact from ASEAN economic integration by a) sector and b) size 44
Figure 30 Labour force participation rate by age and sex (1996 and 2016) 48
Figure 31: Female gender gap in labour force participation rate (LFPR) in provinces 49
Figure 32: Labour force participation rate in selected countries in Asia 49
Figure 33: Labour force by education 50
Figure 34. Field of study among university & TVET students 51
vi
Figure 35. Preferred sectors of employment by a) gender and b) qualification 52
Figure 36. Occupations and skills, 2006 and 2016 53
Figure 37. Trend over-education and under-education in Indonesia between 2006 and 2016 55
Figure 38. Incidence of undereducation and overeducation by age 56
List of Tables
Table 1. Growth of value added by sectors and employment 10
Table 2. Employment elasticity estimation using OLS, 1990-2016 11
Table 3. Share of vulnerable in total employment (percent) 15
Table 4. Share of vulnerable in total employment (percent) 16
Table 5. Average monthly earnings, male & female by sectors & gender pay gap, 2016 19
Table 6. Average monthly earnings by educational attainment, male & female, 2016 20
Table 7. Wage and gender regression results 21
Table 8. Average years of education (mean) of employed and standard deviation
per major occupation group 54
Table 9. Over-education and under-education by sex and urban/rural 55
vii
viii
Executive Summary
IN this edition of the “Indonesia Jobs Outlook 2017” we examine the economic and employment
trends in the country. We also explore the potential impact from the current wave of technologic changes
on future jobs. In the past, the International Labour Organization (ILO) has regularly published the
“Indonesia Labour and Social Trends Report”. A change of tile was felt necessary to better reflect the
content of the report.
Indonesia has maintained a steady growth rate in a global economic environment dubbed as the
new normal,1 a period that is likely to see more moderated levels of economic growth compared to the
period before the global financial meltdown in 2008. The commodity prices have recovered and are
steadily increasing. Being one of the larger commodity producing countries in the world, an uptick in
commodity prices will boost Indonesia’s exports and provide further impetus to the economy.
To adjust to the current global situation and help the country to further reduce its dependency
on commodities, the Government of Indonesia has launched several reforms to improve the business
and investment climate. As many as 15 business and economic policy packages were launched with
an aim to make Indonesia more competitive and boost economic development. In addition to this,
government is allocating more public funding for infrastructure which, if realized, should improve
connectivity and reduce cost for businesses.
Looking back, Indonesia can be considered as a good country example that has experienced a
relatively balanced growth, at least until the Asian Financial Crisis in 1997. In the past, structural change
in the Indonesian economy was characterized by an increase in value added, job creation, and labour
productivity. Our analysis shows that in the past structural transformation played a key role in ushering
productivity gains across and within the sectors. Jobs were created in non-farm sectors which not only
provided opportunities for new labour entrants, it reduced dependency on agriculture. Before the crisis
of 1997, Indonesian manufacturing sector was growing rapidly with a commensurate growth of jobs.
The period between 2006 and 2016 saw services becoming the fastest growing sector in the
economy achieving 7 percent growth annually,2 While there are alternative theories on evolving sector
composition as the country achieves higher levels of development, manufacturing has traditionally
1 The term is attributed to Mohamed A. El-Erian, Head of PIMCO, who questioned the notion that after the 2007-2008 financial
crisis, industrial economics would return to previous growth rate which was seen as an abnormal episode.
2 ILO staff calculation using BPS national accounts data.
ix
provided the pathway for industrialization and economic development. Almost all the developed
countries achieved industrialization through an expansion of manufacturing and subsequent growth
of high value services.
Considering that productivity in services is relatively low (USD 8,079) compared to manufacturing
(USD 14,282), 3 the slowdown of manufacturing growth which some have even termed as
“deindustrialization” does not augur well for employment. Although in absolute terms more people
are employed in manufacturing, the share of employment in this sector increased only slightly to 13.1
percent in 2016 compared to 2006 when it was 12.5 percent.4 Together services and trade now account
for 46.7 percent of the employed.
Unemployment rate has further fallen to 5.3 percent in 20175 from a high of 11.2 percent in 2005.
However, relatively low unemployment rate in Indonesia does not fully reveal the challenges that the
economy faces to create adequate number of good and decent jobs. There are still major deficits in
employment outcomes by productivity, quality of work, gender, and disparities across the provinces.
A lot of workers are engaged in low-productivity employment as seen by relatively high proportion
of workers in vulnerable employment (30.6 percent). If employers assisted by temporary workers and
casual workers are added, the vulnerable employment rate increases to as high as 57.6 percent. The
rate is even higher for female workers (61.8 percent).6
Compared to 1996, there are more workers and job seekers with higher educational qualifications
in the labour market. But, the proportion of them remains relatively low. Moreover, proportionally there
are still fewer women in the labour force. In fact, the labour force participation rate of females hardly
changed from 1996 when it stood at 50.6 percent compared to 2016 (50.8 percent). Although declining,
the unemployment rate among youth is still very high (19.4 percent). An equally worrying trend is the
number of young people who are neither employed, in education or training (NEET). The proportion
of NEET in Indonesia is quite high (23.2 percent) and in fact it is one of the highest rates in Asia.
As the country moves forward, Indonesia, like other emerging and industrialized economies, is
confronted by a new wave of rapid technological advancements which are likely to shape the economy
and jobs of the future. Technological forces including digitalization and use of machines are converging
and changing production, distribution, and consumption patterns. In Indonesia, there are understandably
divergent views on the way the technology will affect firms and jobs.
Some see technology playing its “creative destruction” role to spur innovation and growth.
According to this view, while jobs will be lost initially, new and better jobs will be created which in turn
will improve overall welfare of the people. This view emanates from past trends which historically have
seen improvements in technology indeed minimizing need for human intervention, but at the same
time creating new jobs and industries. In other words, technology complemented rather than made
labour totally redundant.
In Indonesia we can see rapid growth in online platforms creating opportunities for e-commerce,
on-demand services, and transportation. A digital marketplace has brought buyers and sellers as well
as potential workers and employers even closer. It appears that new work opportunities resulting from
technological uptake is much more widespread in the trade and services sector. It is possible that this
development may have contributed in lowering the unemployment rate in Indonesia. However, without
3 ILO staff calculations using 2016 GDP value added figures from World Bank database and employment figures by sector from
Sakernas 2016.
4 ILO staff calulations using the Sakernas microdata.
5 This figure is from the labour force survey (Sakernas) 2017, February series. In this report, only Sakernas data from August series
has been used owing to a larger sample and for the sake of consistency when making comparisons.
6 ILO calculations using Sakernas 2016.
x
detailed data on occupations and sub-sectors, which is difficult to obtain, is not possible to verify the
net effect on jobs.7
A clear trend in Indonesia is the growing number of people who are getting connected to the
digital space which is happening mainly through hand-held devices. Considering the growth in internet
users and a large number of people using social media, potentially, Indonesia is well placed to benefit
from the digital revolution. But, owing to the poor state of physical infrastructure especially outside
Java and Bali, low investment in research and development, Indonesia faces considerable challenges. In
technological readiness, Indonesia is placed very low (80) on the technological readiness, much lower
than its overall global ranking of 36 on the Global Competitiveness Index.8
Historically, technological upgrading was critical for continuous growth and economic development.
In this respect, the technology versus jobs debate is not new. However, the current wave of technological
advances are happening at a much faster rate. Artificial intelligence, internet-of-things, 3D printing, to
name a few, are some of the new technologies which are converging and reached at a stage that one
can foresee them achieving commercial viability in near future. This undoubtedly will have a major
impact on the production processes and the organization of work.
A slightly opposing view on jobs and technology is that the two are competing against each
other. And, it is not long that a large number of human occupations will be lost. Studies have shown
that several occupations involving routine tasks are facing the greatest threat from automation and
machines. According to an ILO estimate more than 60 percent of salaried jobs in Indonesia are at
risk.9 Increasingly, jobs will become more polarized i.e. a concentration of very high skilled and low
skill work. Occupations involving repeated functions that can be converted into an algorithm or can
be learned by machines will become obsolete.
One would assume that, at least for now, adoption of technology by firms will have far great
implications for industrialized economies. The argument being that the developing countries still have
some leeway before reaching the technological frontier. In the short-term, it is more economical for
firms in developing countries to deploy labour rather than switch to labour saving machines which
usually require a significant upfront investment.
However, recent developments show that compared to the past technological diffusion is happening
faster than before. And, this is happening alongside rapid reduction of costs and thus making it quickly
commercially viable. This could mean that developing countries may only have a temporary respite.
Interestingly, in the last few years the sale of industrial robots is increasing in countries like Indonesia.
According to a survey, more firms in Southeast Asia are planning to upgrade their technology.10 In
fact, in some quarters there are concerns that Indonesian manufacturing sector is quite susceptible
to technology and automation. It is important to note here that even before the current wave of
digitalization, Indonesia was already losing ground in manufacturing.
While there is still some disagreement on how technology will shape work in future, there is more
consensus that skills upgrading has become even more important for future growth and development.
Over the last two decades one can see improvement in the educational attainment of Indonesian
workers, but many still have low educational qualifications and labour productivity is low, especially
among small enterprises. There are skills gap which need to be addressed otherwise Indonesia’s future
development will be compromised.
7 Sakernas microdata from 2016 had occupations disaggregated at 2 digit level.

8 Global Competitiveness Report 2016-2017, World Economic Forum.
9 ILO, 2016 ASEAN in Transformation.
10 Ibid.
xi
To ensure that technology is a blessing for the Indonesian economy and jobs, the report offers
the following recommendations.
1. Indonesia needs a “second wave” of structural transformation. The country has to move away
from its dependency on extractive industries and create new sources of growth in manufacturing
and other high value services. Technology can be used a catalyst for ushering in this next wave of
structural transformation. Indonesia needs to pursue a pro-employment industrial policy. In this
regard, the government can tailor its support in the revival of manufacturing as well as growth
of new and creative industries.
2. In a globalized world, resisting the use of technology in the production processes may be difficult,
if not impossible. Adoption of improved technology should be the means for achieving higher
levels of development. It is inevitable that with new technology including digitalization and
machines carrying out certain tasks, in the short-term, there will be disruptions in the labour market
including jobs losses. It is here that public policy can be critical. Active labour market policies and
programmes can be initiated to enable people to learn new skills, assist them in job placements,
and provide incentives to firms to invest in human capital.
3. Related to above, there is now even a stronger case for continued and even more public investment
in skills development. Indonesia already spends 20 percent of its budget on education. While
education spending has increased over the years, the quality of education and learning achievement
of students is still fairly low. With a single ASEAN market, there is greater urgency to ensure
that investment in education is closely linked to outcomes. Education and learning should not be
limited to academic institutions, but it should form an integral part of the work place. A culture
of life-long learning should be instituted to enable workers to adapt to the changes in the labour
market.
4. With a large young population, many Indonesians are receptive to technology. There are already a
large number of internet users who use social media quite regularly. Connectivity will be important
for those living in the outer islands of Indonesia where access is still a problem. Bringing more
people to the digital world will undoubtedly spur innovation, encourage use of new mediums for
learning, and open up avenues for small enterprises and young entrepreneurs. The opportunities
for businesses can come in the form of greater market penetration and raising capital through
online portals.
5. In light of the changes in the labour market and growth of the so called gig economy, the current
labour governance systems should be revisited. In this regard, an ongoing dialogue on the standards
of work should be initiated among key stakeholders such as the government, private sector
employers, worker representatives, and other civil society organizations representing youth who
after all will be most affected in future. Moreover, social security coverage should include non-
standard forms of work. A simplified and portable system for independent workers or groups
with innovative financing options should be explored to provide greater coverage.
6. Indonesia needs to rethink its social protection framework. The country already spends a
considerable amount of public resources for social transfer including cash and non-cash
supplements to the poor. While social security schemes can provide temporary support to the
unemployed, there may be those who need longer to get back on their feet. Globally, the idea of
a universal basic income (UBI) is gaining more currency as a measure to provide a social safety
net for workers against job losses. This is something worth looking into.
xii
1

Introduction
THE current edition of the “Indonesia Jobs Outlook 2017” report takes stock of the economic
and employment situation in the country. The report also provides a synthesis of the ongoing debate
concerning the impact of technological advancements on the production processes and employment.
Since 2008 the ILO Office in Jakarta has regularly published its flagship report titled “Labour and
Social trends in Indonesia”. Besides providing the reader an updated and comprehensive overview of
the labour market, each report focused on a specific theme to highlight a topical issue. The purpose
of the report is to feed the national policy discourse, stimulate discussions, and help shape economic
and employment policies and programmes in the country.
The present report continues this tradition. A change of title was felt necessary to better represent
the content of these reports. Previous reports mainly featured a chapter on past and current trends and
another chapter on a chosen theme. In the present report, an attempt was made to integrate the two to
provide a continuous narrative in which trend analysis also provides the context for the selected theme.
Past themes have included productivity through decent work (2014-2015), role of decent work in
equitable growth (2013), working for sustainable and equitable economy (2012), promoting job-rich
growth in provinces (2011), translating economic growth into employment creation (2010), recovery
and beyond through decent work (2009), and pathways to job-rich growth (2008).
Globally, the “future of work” has become one of the key policy issues in the development
discourse. ILO is at the forefront of moderating this debate and helping stakeholders to formulate
employment-centric policies and solutions for future. In Indonesia, a number of national consultations
provided the basis for the selection of the theme for this report. The aim of these dialogues was to
identify measures to minimize disruptions in the labour market and to ensure that the adoption of
technology yields decent work outcomes and greater welfare for Indonesia.
In November of 2016 a dialogue was organized to discuss the labour market implications as
Indonesia moves towards a low-carbon economy. Another “future of work” national dialogue which
focussed on digitalization and employment was held in April of 2017. It provided an opportunity to
crystallize views from various stakeholders. Several experts were invited to explain the emergence of
new technologies, changes observed in the economy, and the job market.
1
With the recent slowdown of the economy, job creation and poverty reduction is again high on
the national agenda. The current government has undertaken several policy reforms with an objective
of improving the investment climate and stimulating growth. Infrastructure spending was prioritized
as well to improve connectivity across the archipelago. Indonesia is also trying to increase both public
and private investment to create good jobs for people entering the labour force.
The present report focuses on a very important policy dimension in the public discourse. It is
critical for Indonesia to reflect on how the economy will evolve in future and respond to technology, and
what public policy can to do shape a course that yields greater development benefits. While the theme
is more forward-looking, the report also dwells on structural changes in the past to better understand
the present state of the economy and the job market. Limited data on the adoption of technology at
the firm level no doubt constrained the analysis, but to offset that, and to the extent possible, the report
relied on existing literature and studies which have explored the relationship between employment and
technology.
The drafting of the report was done in-house by ILO Jakarta with feedback and peer reviews
provided by the experts in the ILO Regional Office in Bangkok. The data sources for this report
include statistics from Statistics-Indonesia (BPS). Data was also obtained from global databases such
as ILOSTAT and World Bank Open Data maintained by ILO and World Bank respectively. Microdata
sets from the National Labour Force Surveys (Sakernas) were obtained from BPS which were then
processed and analyzed by the ILO staff. In most of the cases standard international definitions were
used for calculation of labour and employment indicators. It is, however, possible that some of the
figures reported may vary from the published figures in BPS reports or website. To ensure proper
comparisons only the August data series of Sakernas was used.
The report is divided into several sections. We first look at the present state of the economy
which is followed by an analysis of the relationship between economic growth and job creation in the
country. In this section we have estimated the growth elasticity of jobs by different sectors. Following
that we examine trends over a decade (2006-2016) and in some cases over two decades (1996-2016).
The trend analysis covers several employment and labour indicators.
Unfortunately, changes in the way data is collected and codified for Sakernas made it difficult to
make full comparisons between 1996 and 2016. After the section on trends, we discuss the more recent
technological changes and possible impact on the labour market globally as well as in Indonesia. This
section contains a synthesis of literature, expert views, and perspectives from the business community,
and students. The latter two are part of the ASEAN wide survey that ILO Regional Office in Bangkok
commissioned in 2016. In the last two sections of the report we draw key conclusions and offer some
policy recommendations.
2
2

State of economic
development
INDONESIA has come a long way from a low-income country with a per capita GDP of
USD 772 in 1970 to a middle income status with a per capita GDP of USD 3,974 in 2016.11 In 1966,
the first National Long-Term Development Plan (Garis-Garis Besar Haluan Negara/GBHN) which was
broken down into five-year plans or Repelita (Rencana Pembangunan Lima Tahun) articulated a vision to
transform the country, which at that time was primarily a subsistence agriculture-based economy. In
the plan, agriculture development, transition to processing of raw materials for domestic consumption,
and then gradually moving into export-driven manufacturing were laid out as the broad stages of
structural transformation.
With an annual gross domestic output of USD 932 billion, and a workforce of over 125 million, out of
whom 21.8 million (17 per cent) are youth (15-24 years old), 12 Indonesia is one of the larger economies in the
world and an important member of the G20. In Asia, after China and India, Indonesia is considered as the
most attractive destination for foreign investment. In a survey conducted by the Economist in 2016, around
48 percent executives of businesses operating in Asia expected to increase their investment in Indonesia.13
In 2016, Indonesia received more than USD 16 billion in realized foreign direct investment (FDI).14
Over the last three decades, Indonesia has recorded impressive gains in human development.
With a human development index (HDI) score of 0.68, Indonesia is placed in the “medium human
development” group of countries. Overall, the country was ranked 113 among 188 countries in 2015
having moved up three places from 2010.15 The annual HDI growth slowed in the period from 2010
to 2015 (0.78 percent increase) compared to 2005-2010 (0.92 percent increase). One can argue that
part of the reason for the slower growth of HDI in the last five years is that for countries which are
already in the medium to high human development category it is harder to increase HDI score at the
same pace as those which start at a much lower level.
In 1996 poverty rate in Indonesia was 17.4 percent, but the financial crisis that struck Asia resulted
in a steep increase in the proportion of people living below the poverty line (24.2 percent in 1998).
11 World Bank Dbase, accessed July 18, 2017.

12 These figures are from 2016: GDP data from World Bank database and labour force data from Sakernas.
13 http://ftp01.economist.com.hk/ECN_papers/2016ABOS
14 www.bkpm.go.id
15 http://hdr.undp.org/en/composite/trends
3
Since then, the headcount poverty ratio has decreased, albeit slowly. Between 2010 and 2017, the drop
in the poverty rate was almost negligible.16 It only decreased from 11.1 percent to 10.6 percent. During
this period income inequality also rose. In 2011, inequality in the distribution of income, measured
by the Gini Coefficient, spiked from 0.37 to 0.41. Since then the Gini Coefficient has fallen, but very
slightly to 0.39 in 2017.17
Indonesia can be considered as a good example of achieving a relatively balanced growth, especially
prior to the financial crisis in 1997. Structural transformation of the Indonesian economy shows that
labour productivity, employment and demographics have all positively contributed to economic growth
(Khatiwada and Lennon, 2017). Structural transformation is described as the reallocation of resources
across the three broad sectors of the economy which are agriculture, industry, and services (Herrendorf,
Rogerson, & Valentinyi, 2011).
A key feature of structural transformation is the increase in the share of output in industry and
services with a concurrent decrease in the share of agriculture in the total GDP. As countries start to
industrialize, “surplus” labour from agriculture is often freed and employed in industry and services.
The movement of labour and expansion of the non-agriculture sectors provide the foundation for
economic development (Lewis, 1954).
Sustained growth is only possible when all sources of growth are balanced. As such, employment
growth without improvement in labour productivity might lead to an impoverishment of the labour
force as a result of stagnant wages. At the same time, labour productivity gains that do not result in
more job opportunities benefit only those who are already employed, thereby increasing the social divide
and rising inequality. Similarly, improvement in education without increasing physical capital, reduce the
return to education and new skills are underutilized when latest technology is not deployed. Conversely,
underutilization of physical capacity might result when investment by firms is not accompanied by
upgrading skills of the labour force.
In the aftermath of the global meltdown of 2008 and in a period that is being described as the new
normal, Indonesia maintained its growth momentum. As can be seen from Figure 1, global growth has
declined since 2010. Lower-middle income countries such as Indonesia are still experiencing a relatively
healthy growth, but growth is slowing down except in the case of Philippines.
In 2016, the Indonesian economy grew by 5 percent, a slight increase compared to the growth
rate in 2015 (4.8 percent)18. In the second quarter of 2017, the economy grew (yoy) 5 percent, thus
somewhat maintaining its current trajectory. However, several estimates suggest that overall annual
growth rate in 2017 will be slightly higher than 2016 and it may pick up further in 2018.19 Driven by
strong household consumption and investment, GDP growth is projected to reach 6 percent by 2020.20
16 Susenas, BPS Indonesia.

17 Susenas, BPS Indonesia.
18 BPS, Indonesia.
19 IMF (2016), ADB (2017), World Bank (2017) have forecast growth rate of 5.1-5.3 for Indonesia.
20 World Economic Outlook, IMF, October 2016.
4
Figure 1. Annual GDP growth
Figure (percent)
1. Annual 2010-2016
GDP Growth (percent) 2010-2016
12.00
10.00
8.00
6.00
4.00
2.00
-
2010 2011 2012 2013 2014 2015 2016
China Indonesia India

Lower middle income Philippines Thailand
Vietnam World
Source: World Bank Database, accessed September 20, 2017

Source: World Bank Database, accessed September 20, 2017
The positive outlook for

The for Indonesia’s
Indonesia’sgrowth
growthstemsstemsfromfromboth
bothexternal
external andand
internal factors.
internal First of
factors.
all, global economy
First of as economy
all, global a whole isas finally showing
a whole signs
is finally of an uptick.
showing signs ofSecondly,
an uptick.the price of the
Secondly, commodities
price
is increasing which for
of commodities a resource which
is increasing rich country like Indonesia
for a resource can boost
rich country its exports.can
like Indonesia Indonesia
boost itsis the
largest producer
exports. of crude
Indonesia palm
is the oil and
largest thermalofcoal.
producer crudeOther
palm major
oil andcommodity
thermal coal.exports
Otherinclude
major gas,
crudecommodity
oil, and rubber.
exports include gas, crude oil, and rubber. Thirdly, the Government of Indonesia or
Thirdly, the Government of Indonesia has launched a series of reforms
“economic packages”
has launched to address
a series regulatory
of reforms bottlenecks
or “economic and attract
packages” private regulatory
to address investment.bottlenecks
Public funding
for infrastructure is also investment.
and attract private prioritized and it is funding
Public likely tofor
increase further. is also prioritized and it is
infrastructure
On the
likely macroeconomic
to increase further. front, a low inflation rate and an accommodative monetary policy
which has underpinned growth may continue to spur domestic demand. Over the years household
On the macroeconomic
consumption front,driver
has been the main a lowofinflation
economicrategrowth.
and an Between
accommodative monetary
2010 and 2016 thepolicy
share of
which consumption
household has underpinned growth
averaged may continue
50 percent to spur
of the GDP. domestic demand.
Government Over and
consumption the gross
yearsfixed
household
capital consumption
formation has been
averaged around the main
9 percent and driver of economic
32 percent growth.
of the GDP Between 2010 and
respectively.
2016 the share of household consumption averaged 50 percent of the GDP. Government
consumption
Figure 2. and gross fixed
Expenditure capital
share
Figure formation
in GDPshare
2. Expenditure averaged
2010-2016 around 9 percent and 32 percent of
in GDP 2010-2016
the GDP respectively.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2010 2011 2012 2013 2014 2015 2016
Household Consumption Consumption Non-Profit Organizations

Government Consumption Gross Capital Formation
Change Inventory Net Exports 5
Statistical Discrepancy
Source: ILO staff calculations based on BPS national accounts data

Source: ILO staff calculations based on BPS national accounts data
Despite the positive outlook and a relatively healthy growth in the last decade, Indonesian
economy is not expanding at the desired level that the current administration aims to reach. 5
With higher infrastructure spending, the government expected that by 2017 the economy
Despite the positive outlook and a relatively healthy growth in the last decade, Indonesian
economy is not expanding at the desired level that the current administration aims to reach. With higher
infrastructure spending, the government expected that by 2017 the economy would be growing at 7
percent21. Part of the reason for a lower than expected growth is the global environment characterized
by low demand.22 In the last two decades, Indonesian growth was driven mainly by high commodity
prices. Naturally, with less external demand, Indonesia’s exports have suffered.
The nature of growth in Indonesia has also changed considerably. Before 1997 manufacturing
played a more dominant role in the economy. Between 1990 and 1997, for example, the growth of
value added in manufacturing was 9.8 percent annually. During this period, economy, as a whole, grew
6.9 percent per annum. On the other hand, while the economic growth for the period between 2006
and 2016 averaged 5.4 percent annually, growth in the manufacturing sector averaged only 4.4 percent.
Agriculture grew at less than 4 percent annually while industry as a whole which includes mining,
construction and manufacturing grew at the same rate (4.4 percent) as manufacturing.23
Between 2006 and 2016, the fastest growing sector of the economy was services which recorded an
average annual growth rate of 7 percent.24 A commonly held view (Szirmani, 2012) is that manufacturing
is the catalyst that leads to industrialization and productive jobs. Thus, growth of manufacturing can
be seen as more development and welfare enhancing.
However, an alternative view is that services can also be the leading sector in economic development
and it is possible for countries to follow a different path as the economy starts to diversify (Bhagwati,
2011). In the case of Indonesia, it may be premature for services to play a dominant and more
development role in the economy considering that overall labour productivity in services is relatively
low (USD 8,079) compared to manufacturing (USD 14,282).25
Besides slower growth in value added sectors like manufacturing, Indonesian economy also faces
some downside risks. As mentioned, public investment in infrastructure is expected to spur growth.
But, actual spending may be constrained owing to tight fiscal space and difficulty to run larger budget
deficits. The current budget deficit level is already close to the 3 percent legal threshold limit.
Moreover, based on GDP data from the first two quarters of 2017, it appears that household
consumption is slowing down. With a large population and a growing middle-class, household
consumption is one of the key drivers of economic growth in Indonesia. Lately, the price of commodities
has started to increase, but it is not clear how long this will last in light of the economic slowdown in
China. Depending on policy response, the dampening appetite for commodities can be a blessing in
disguise and an opportunity for Indonesia to revive its manufacturing and other value-added sectors
of the economy.
21 http://www.thejakartapost.com/news/2014/12/24/jokowi-aims-7-percent-annual-growth.html
22 https://www.bloomberg.com/news/articles/2017-04-07/indonesia-seeks-growth-boost-to-meet-7-target-indrawati-says
23 ILO staff calculations using 2016 GDP value added figures from World Bank database.
24 Ibid.
25 ILO staff calculations using 2016 GDP value added figures from World Bank database and employment figures by sector from
Sakernas 2016.
6
3

Economic growth and jobs
BY 1990, the share of industry in GDP was already close to 40 percent of which manufacturing
accounted for almost half of the total value added. In 1997, just before the Asian Financial Crisis (AFC),
the share of manufacturing in total GDP had reached 26.7 percent. AFC resulted in a sharp decline
in the industrial output. By 2001 manufacturing had recovered and in that year contributed almost 30
percent of the total value added. However, since then, the share of industry and manufacturing has
shrunk with only a slight increase in 2016.
Figure 3. SectorFigure
share3. of GDP
Sector (%)
share of GDP (%)
60
50
40
30
20
10
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Industry Agriculture Services
Source: World
Source: Bank
World Database,
Bank accessed
Database, accessed JulyJuly 18, 2017
18, 2017
Between
Between 1990
1990 and
and2016,
2016,the
theshare
shareofofagriculture fellfell
agriculture from 21.521.5
from percent to 13.4
percent percent.
to 13.4 ApartApart
percent.
26
fromfrom
19971997 to 1999,
to 1999, the the relative
relative share
share of of agricultureininthe
agriculture theeconomy
economydeclined steadily26 .During
declined steadily. During this
thisthe
period, period, the contribution
contribution of industry
of industry remained remained almost unchanged.
almost unchanged. A comparison
A comparison between between
the growth
the growth and
of employment of employment
value added by andbroad
valuesectors
added shows
by broad sectors shows
a relationship thataone
relationship that one
would normally expect
in anwould
industrializing
normallyeconomy.
expect in an industrializing economy.
Although slower than other sectors, agriculture continued to grow but employment growth
in agriculture was either slow or even negative. In Figure 5, we can see the trend lines for
26
agriculture and employment growth are not positively correlated. This is consistent with
ILO staff calculations using 2016 GDP value added figures from World Bank database.
structural transformation wherein “surplus” labour moves from agriculture to industry and
services.
7
Although slower than other sectors, agriculture continued to grow but employment growth in
agriculture was either slow or even negative. In Figure 5, we can see the trend lines for agriculture and
employment growth are not positively correlated. This is consistent with structural transformation
wherein “surplus” labour moves from agriculture to industry and services.
Figure 4. Sector share of GDP (LHS) and employment share of GDP (RHS) in
27
Figure 4. Sector
percent27 share of GDP (LHS) and employment share of GDP (RHS) in percent
50.0% 60.0%
45.0%
50.0%
40.0%
35.0%
40.0%
30.0%
25.0% 30.0%
20.0%
20.0%
15.0%
10.0%
10.0%
5.0%
0.0% 0.0%
1990 1996 2000 2005 2010 2016
GDP Agriculture GDP Manufacturing GDP Services

Emp Agriculture Emp Manufacturing Emp Services
Source: ILO ILO

Source: staffstaff
calculations
calculationsusing GDP data
using GDP dataand
and Sakernas,
Sakernas, BPS BPS
On
On the other hand,
the other hand, the
therelationship
relationshipbetween
between output
output growth
growth andand employment
employment growth
growth in
in industry
industry
in general in general or manufacturing
or manufacturing in particular
in particular is more is associated
positively more positively associated
with each withsteep
other. The eachspike
other. The
in agriculture steep spikegrowth
employment in agriculture
in 1998 employment growth
and equally steep fall in
in 1998
industryand(including
equally steep fall in
manufacturing)
industry output
and services (including
wasmanufacturing) andAFC
the result of the services
whichoutput washit
mainly thethese
resulttwo
of the AFC which
sectors mainly
in urban areas of
Java.hit these twowas
Agriculture sectors
less in urban areas
affected. of owing
In fact, Java. Agriculture
to huge jobwas less in
losses affected.
industryIn and
fact,services,
owing tomany
workers
hugemay
job have
lossesmoved to agriculture
in industry to earn
and services, manya livelihood.
workers may have moved to agriculture to earn
a livelihood.
27 RHS: right hand side; LHS: left hand side of the panel.
27
RHS: right hand side; LHS: left hand side of the panel
8
9
Figure 5. Sector growthFigure
in GDP and
5. Sector employment
growth 1991-2016
in GDP and employment 1991-2016
15.0% 0.30
0.25
10.0% 0.20
0.15
5.0% 0.10
0.05
0.0% -
1991
1993
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
(0.05)
-5.0% (0.10)
(0.15)
-10.0% (0.20)
Agriculture EMP Agriculture GDP Industry EMP Industry GDP
30.0% 15.0%
25.0% 10.0%
20.0%
5.0%
15.0%
10.0% 0.0%
1991
1993
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
5.0% -5.0%
0.0%
-10.0%
-5.0%
-15.0%
-10.0%
-15.0% -20.0%
Manufacturing EMP Manufacturing GDP Services EMP Services GDP
Source: ILO staff calculations based on Sakernas and data from World Bank
Source: ILO staff calculations based on Sakernas and data from World Bank
Next,
Next, wewe look
lookatatthe
theoutput
output
andand employment
employment growth
growth ineconomic
in the the economic
sectorssectors
during during different
different
time periods between
time periods 19901990
between and and
2016. Again,
2016. apart
Again, from
apart 1997-2002,
from 1997-2002,agricultural
agriculturalemployment
employment growth
duringgrowth
all the selected periods was negative. In the last period (2009-2016), agriculture
during all the selected periods was negative. In the last period (2009-2016), output grew by 30
percent, the fastest
agriculture sincegrew
output 1990,by
but30the number
percent, offastest
the peoplesince
engaged in but
1990, agriculture declined
the number by 9 percent.
of people
engaged in agriculture
Employment growth isdeclined by 9responsive
positively percent. to the changes in the output growth in industry,
manufacturing, and services. It appears that the elasticity of employment to growth in the industrial
sectorEmployment
improved ingrowth
the lastisfive
positively responsive toInthe
years (2009-2016). thechanges in the outputfor
period 1990-1996, growth
everyin industry,increase
1 percent
manufacturing,
in industrial and services.growth
output, employment It appears that the
increased byelasticity of employment
0.71 percent. to growth
Between 2009 in the
and 2016, for every
industrial
1 percent growthsector improved
in industry, in the last five
employment years
growth (2009-2016).
increased In the
by 0.79 period 1990-1996, for
percent.
every 1 percent increase in industrial output, employment growth increased by 0.71 percent.
Between 2009 and 2016, for every 1 percent growth in industry, employment growth
increased by 0.79 percent.
10
9
Table 1. Growth of value added by sectors and employment
Sector /Emp 1990-1996 1997-2002 2003-2008 2009-2016 1990-2016 1990-2016

Growth (Average
Annual)
Agriculture VA 19% 10% 18% 30% 119% 3%

Agriculture Emp -10% 18% -4% -9% -6% -0.2%
Industry VA 70% 0% 24% 37% 223% 5%

Industry Emp 50% 6% 17% 29% 150% 4%
Manufacturing VA 84% 6% 26% 40% 289% 5%

Manufacturing Emp 42% 10% 9% 21% 108% 3%
Services VA 51% -4% 47% 58% 299% 5%

Services Emp 42% -1% 26% 27% 145% 4%
Source: Sector GDP and employment growth by periods
Using descriptive statistics for estimating employment elasticity has limitations. The simple formula
which uses change in employment as the nominator by the change in GDP as the denominator can only
measure arc elasticity i.e. elasticity is computed between two points of time rather than point elasticity
which is a more robust method. Here, for robustness of results, we have used an ordinary least square
regression (OLS). The other major advantage of using OLS is that in the equation other independent
variables can be included which may affect employment. This can include changes in employment to
GDP in different locations.
For our purpose we only focus on output and employment growth in different sectors. The
estimation results using OLS show that (Table 2) 1 percent of growth results in 0.41 percent increase
in employment growth. The elasticity varies across the main sectors of the economy. The highest
employment elasticity is for industry (0.77) followed by services (0.57) and manufacturing (0.53). It
is important to note here that industry also includes manufacturing, mining, and construction as the
main sub-sectors.
10
Table 2. Employment elasticity estimation using OLS, 1990-2016
LAllEmp Coef. Std. Err. t P>t [95% Conf. Interval]
LAllGDP 0.4118136 0.0160168 25.71 0 0.3787564 0.4448707

_cons 7.224864 0.4330505 16.68 0 6.331092 8.118637
LManEmp Coef. Std. Err. t P>t [95% Conf. Interval]
LManGDP 0.5397265 0.0289955 18.61 0 0.4798827 0.5995703
_cons 2.485182 0.7408539 3.35 0.003 0.9561343 4.014229
LSerEmp Coef. Std. Err. t P>t [95% Conf. Interval]
LSerGDP 0.5751816 0.0321713 17.88 0 0.5087833 0.6415799
_cons 2.41136 0.8392054 2.87 0.008 0.6793249 4.143394
LIndEmp Coef. Std. Err. t P>t [95% Conf. Interval]
LInduGDP 0.7726217 0.0254608 30.35 0 0.7200731 0.8251703
_cons -3.614535 0.6682906 -5.41 0 -4.993819 -2.235251
LAgrEmp Coef. Std. Err. t P>t [95% Conf. Interval]
LAgrGDP 0.0254962 0.0419788 0.61 0.549 -0.0611438 0.1121361
_cons 16.84833 1.057327 15.93 0 14.66611 19.03054
Source: ILO staff calculations using GDP data from World Bank dbase and Sakernas 1990-2016 (November/August series)
The employment elasticity of agriculture is the lowest (0.02) among all the sectors. Also, it is
statistically not significant at 95 percent confidence level. On the whole during this period employment
growth rate in agriculture at various points of time was negative. As discussed, workers have either
moved out of agriculture, and more new entrants in the labour force are getting employment in non-
agricultural sectors. Apart from 1998 when it fell by 1.3 percent, output growth in agriculture has
remained positive, averaging 3.07 percent per annum. The average annual growth rate of value added
in industry was 4.6 percent, 5.3 percent in manufacturing, and 5.4 percent in services.
11
12
4

Who is employed
THE employment-to-population ratio (EPR) is a useful measure to understand the number of

people engaged in economic activity. The indicator counts the percentage of people in employment
from the total working age population. Overall, the ratio of employed population increased by 3.3
percentage points between 2006 and 2016.28 Among the different age groups, the proportion of 25-
34 old in employment increased the most by 5 percentage points. The ratio for 55-64 age group is
relatively higher compared to those who are 35-54 years old. There was also an increase of more than
8 percentage points for females in the age-group 55-64.
Across all the age groups, EPR significantly increased for females compared to males. The
employment-to-population gap between females and males is narrowing faster than the labour
participation gap. The labour force participation rate (LFPR) of men has slightly fallen in the last
decade. Overall though, female EPR is still significantly lower than male EPR. In 2006 male EPR was
77 percent which remained almost unchanged by 2016. On the other hand the female EPR increased
during the last decade, but at 48 percent (2016) it is much lower compared to men. In fact over the last
two decades (1996-2016) EPR has fallen slightly from 63.6 percent to 62.6 percent.
Figure 6. Change in employment-to-population ratio by sex and

Figure 6: Changeage
in Employment-to-population
group, 2006 & 2016 ratio by sex and age group, 2006 & 2016
15+
65-98
55-64
45-54
35-44
25-34
15-24
-6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0
Both Sexes Female Male
Source: ILO staff calculations using Sakernas 2006 and 2016

Source: ILO staff calculations using Sakernas 2006 and 2016
Between
28 Unless otherwise1996
all theand 2016
data in the analysis
the trend number of employed
is from increased
Sakernas microdata byseries)
(August more than 34
processed by million
ILO staff.people.
On an average, annually, 1.74 million additional workers found employment. Between 1996
and 2006, 11.9 million workers were added while in the period from 2006 to 2016, the13
number of employed increased by almost 23 million. In other words, the pace of employment
Between 1996 and 2016 the number of employed increased by more than 34 million people. On
an average, annually, 1.74 million additional workers found employment. Between 1996 and 2006, 11.9
million workers were added while in the period from 2006 to 2016, the number of employed increased
by almost 23 million. In other words, the pace of employment growth quickened significantly in the last
decade compared to the decade before it. However, looking further back jobs creation between 1990
and 1996 was much more robust. On average jobs were added at a rate of 2.2 percent annually. The rate
dropped (1.1 percent) significantly between 1996 and 2006 before increasing again (1.7 percent) in the
period from 2006 to 2016. In the three periods discussed, the slow growth of jobs from 1996 to 2006
maybe attributed to the prolonged effect of the AFC which hit Indonesia the hardest in the region.
A sectoral breakdown of employment data show that agriculture is still the largest source of
employment (31.9 percent) followed by services (24.2 percent) and trade (22.5 percent). Combined
together though, trade & services, account for almost half (46.7 percent) of the people employed in
Indonesia. In the last decade the share of employment in manufacturing has marginally increased from
12.5 percent (2006) to 13.1 percent (2016). During this period, around 3.7 million more workers were
added to the manufacturing sector. However, the rate of employment growth in manufacturing is a
lot slower than trade and services.
Figure 7. Number in thousands (LHS) and percent (RHS) of people

Figure 7. Numberemployed
in thousandsby
(LHS) and percent
sectors (2006(RHS) of people employed by sectors (2006 & 2016)
& 2016)
45,000.0 45.0%
40,000.0 40.0%
35,000.0 35.0%
30,000.0 30.0%
25,000.0 25.0%
20,000.0 20.0%
15,000.0 15.0%
10,000.0 10.0%
5,000.0 5.0%
0.0 0.0%
Number (2006) Number (2016) Percent (2006) Percent (2016)
Source:
Source: ILO ILO
staffstaff calculationsusing
calculations using Sakernas
Sakernas 2006 & 2016
2006 & 2016
The data show that between 2006 and 2016 the employment situation improved both in
The data show that between 2006 and 2016 the employment situation improved both in terms
terms of jobs added to the economy, and, relatively speaking, the quality of jobs as well. The
of jobs added to the economy, and, relatively speaking, the quality of jobs as well. The latter can be
latter can be supported by the data on the status of employment. The share of employees
supported by the data on the status of employment. The share of employees and employers who are
and employers who are assisted by permanent or paid staff increased while the share of own-
assisted by permanent or paid staff increased while the share of own-account workers, employers
account workers, employers assisted by temporary workers, casual employees in agriculture,
assisted by temporary workers, casual employees in agriculture, and family/unpaid workers decreased.
and family/unpaid
It is generally workers
understood decreased. Itworkers
that own-account is generally understood
and those engagedthat own-account
in temporary or workers
unpaid work
and those engaged in temporary or unpaid work are likely to be in more precarious
employment without provisions for social protection and standards of work are generally low.
14
are likely to be in more precarious employment without provisions for social protection and standards
of work are generally low.
Figure 8. Status of employment inof2006

Figure 8. Status and 2016
employment in 2006 and 2016
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Own-account Employer assisted Employer assisted Employees Casual employee in Casual employee in Family / unpaid
workers by temporary by permanent agriculture non-agriculture workers
workers/unpaid workers /paid sectors
workers workers
2006 2016
Source: ILO staff calculations

Source: using Sakernas
ILO staff calculations 2006 and
using Sakernas 2006 2016
and 2016
Between 2006 and 2016, the proportion of those categorized to be in vulnerable employment
Between 2006 and 2016, the proportion of those categorized to be in vulnerable employment
decreased from 37.4 percent to 30.6 percent. According to ILO, those in vulnerable
decreased from 37.4 percent to 30.6 percent. According to ILO, those in vulnerable employment include
employment include and
own-account workers own-account workers
unpaid family andWhile
workers. unpaid family workers.
reduction While
in vulnerable reduction in
employment was higher
vulnerable employment was higher for females, the proportion of female workers who are
for females, the proportion of female workers who are currently (2016) in vulnerable employment is
currently
still almost(2016)
doublein(43.3
vulnerable employment
percent) than males is(22.7
still percent).
almost double (43.3 percent) than males
(22.7 percent).
Table 3. 3.Share
Table Share ofof vulnerable
vulnerable in total employment
in total employment (percent) (percent)
Sex Sex 20062006 2016

2016 Change Change
Male
Male 29.529.5 22.7
22.7 -6.8 -6.8
Female 51.9 43.3 -8.5
Female 51.9 43.3 -8.5
Both sexes 37.4 30.6 -6.7
Both sexesSource: ILO staff37.4

calculations based on Sakernas data
30.6 -6.7
Source: ILO staff calculations based on Sakernas data
Sometimes countries use a broader definition of vulnerable employment to understand the
Sometimes countries use and
extent of precariousness a broader definition
insecurity among of workers.
vulnerableInemployment
the case of to understand
Indonesia the the
table below
extent of precariousness and insecurity among workers. In the case of Indonesia the
includes employers assisted by temporary workers and casual workers, own-account and unpaid family table
below includes
workers. employers
The combined totalassisted by temporary
shows that 57.6 percent workers and casual
of workers can beworkers, own-account
categorized to be in vulnerable
employment. The percentage
and unpaid family workers. Theof female workers
combined totalinshows
vulnerable employment
that 57.6 is considerably
percent of workers can higher
be (61.8
percent) compared
categorized to be into men (54.9
vulnerable percent). InThe
employment. both cases (using
percentage standard
of female and extended
workers definition of
in vulnerable
vulnerable
employmentemployment) vulnerable
is considerably higher employment
(61.8 percent)has decreasedtoinmen
compared the (54.9
last decade.
percent). In both
15
15
Table 4. Share of vulnerable in total employment (percent)
Sex 2006 2016 Change
Male 67.1 54.9 -12.2

Female 72.3 61.8 -10.5
Both sexes 68.9 57.6 -11.3
Source: ILO staff calculations based on Sakernas data
The occupational profile of Indonesian workers also improved in the last decade with more
workers holding occupations that normally require higher level of skills and education. The breakdown
of occupations by sex shows that a higher percentage (10.3 percent) of females were working as
professionals/technicians in 2016. In fact, in 2006 the proportion of females working as professionals
was also higher. However, very few women in 2016 were in leadership and management role (0.5
percent) compared to men (1.6 percent). Between 2006 and 2016 the increase in the percentage of
women in leadership and management was also less (0.2 percentage points) compared to men (0.9
percentage points).
As shown in Figure 9, the concentration of occupations is in agriculture, sales, and other blue
collar workers in the services sector. In business and sales, the proportion of women in 2016 was higher
(24.4 percent) than men (13.9 percent).
Figure 9. OccupationsFigure 9. Occupations

by sex, 2006 andby2016
sex, 2006 and 2016
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Male (2006) Female (2006) Male (2016) Female (2016)
Source:
Source: ILO staffILO staff calculations
calculations usingusing Sakernas
Sakernas data2006
data 2006 and
and2016
2016
Interesting, the proportion of those having a second job increased considerably in the last
16decade. Between 1996 and 2006 those with a second job (9 percent) hardly changed, both
for the overall average, as well as for different age groups. By 2016, the proportion had
Interesting, the proportion of those having a second job increased considerably in the last decade.
Between 1996 and 2006 those with a second job (9 percent) hardly changed, both for the overall
average, as well as for different age groups. By 2016, the proportion had increased to over 15 percent.
Among the 45-64 age bracket, the proportion was close to 20 percent. This shift may be attributed
to the changing nature of work, particularly the impact of technology which has made it possible for
flexible work arrangements, contracting or outsourcing of work. The increase may also be a response
to manage higher levels of household consumption.
Figure 10. EmployedFigure

with 10.
second job,with
Employed 1996-2016
second job, 1996-2016
25.0
20.0
15.0
10.0
5.0
0.0
2016 2006 1996
15-24 25-34 35-44 45-54 55-64 65-98 15-98
Source:ILO
Source: ILO staff
staff calculationsusing
Sakernas data
data1996,
1996,2006 andand
2006 2016
2016
A disaggregationof
A disaggregation ofemployed
employedwith
withsecond
second jobs
jobs byby their
their firstfirst or main
or main occupation
occupation further
further shedssheds
light.light.
The proportion of those with second jobs is much higher among those involved
The proportion of those with second jobs is much higher among those involved in in agriculture
workagriculture
(24.4 percent) and
work professionals
(24.4 (19.2professionals
percent) and percent). The seasonal
(19.2 nature
percent). Theand relatively
seasonal lowerand
nature returns
fromrelatively
agriculture possibly explain the higher incidence among those involved in agriculture. In the case
lower returns from agriculture possibly explain the higher incidence among those
of professionals it may be largely due to more outsourcing opportunities and possibility for them to
involved in agriculture. In the case of professionals it may be largely due to more outsourcing
perform their tasks remotely and without having to follow a routine office time schedule.
opportunities and possibility for them to perform their tasks remotely and without having to
follow a routine office time schedule.
17
Figure 11. Total number (LHS) and percent (RHS) of employed

Figure 11. Total number (LHS) and percent (RHS) of employed with second jobs by occupations (2016)
with second jobs by occupations (2016)
8,000,000 30.0%
7,000,000
25.0%
6,000,000
20.0%
5,000,000
4,000,000 15.0%
3,000,000
10.0%
2,000,000
5.0%
1,000,000
0 0.0%
Total Percent
Source:
Source:ILO staff
ILO staffcalculations
calculations using
using Sakernas data2016
Sakernas data 2016
In 2016,
In 2016, on an an average,
average,a aperson
personemployed
employed earned Rupiah
earned Rupiah(Rp) 2.29
(Rp) 2.29million a month.
million a month. TheThe
average
monthly earning
average of men
monthly was of
earning higher
men (Rp. 2.44 million)
was higher compared
(Rp. 2.44 to womento(Rp.
million) compared 1.98 (Rp.
women million).
1.98 The
differential
million).inThe
earnings between
differential men andbetween
in earnings womenmen was and
found acrosswas
women all found
the major occupations
across all the majorexcept
“administrative
occupations except “administrative and managerial workers”. In this cohort of occupations,more
and managerial workers”. In this cohort of occupations, women earn slightly
(Rp 5.87
womenmillion)
earn than menmore
slightly (Rp 5.83 million).
(Rp 5.87 Thisthan
million) cohort
menalso
(Rpearned more than
5.83 million). other
This occupational
cohort also
groups. The second highest average earning group of occupations was “clerical
earned more than other occupational groups. The second highest average earning group of and related workers”
(Rp 3.22 million).
occupations was “clerical and related workers” (Rp 3.22 million).
In terms of economic sectors, one can see that workers in finance, real estate, and business support
services earned
In terms of the most (Rp
economic 3.63 million)
sectors, one canfollowed
see that by those in
workers employed
finance,in theestate,
real “miningandand quarrying”
business
sector. The lowest
support earnings
services earnedwere for workers
the most (Rp 3.63inmillion)
the agriculture,
followedforestry,
by thoseand fisheryinsector.
employed Within the
the “mining
sectors,
andthe wage/earning
quarrying” sector.differentials between were
The lowest earnings male for
andworkers
female were
in thequite significant
agriculture, in agriculture,
forestry, and
manufacturing, construction, trade, and social services.
fishery sector. Within the sectors, the wage/earning differentials between male and female
In 2016,
were thesignificant
quite highest average monthly
in agriculture, earning was recorded
manufacturing, in Jakarta
construction, trade,(Rp
and3.9 million),
social followed
services.
by Kalimantan Timur (Rp 3.6 million), and Papua (Rp 3.4 million). On the other hand, average wage in
Lampung was the
In 2016, the lowest
highestin average
the country (Rp 1.64
monthly million)
earning followed
was by Nusa
recorded Tenggara
in Jakarta (Rp Timur (NTT) (Rp
3.9 million),
1.62 followed
million) and Central JavaTimur
by Kalimantan (Rp 1.69 million).
(Rp 3.6 million), In and
Figure 12 average
Papua monthlyOn
(Rp 3.4 million). earnings are hand,
the other compared
with average
the provincial
wage inGDP per capita.
Lampung The
was the first infive
lowest theranked
country provinces
(Rp 1.64 follow
million)a followed
somewhatby consistent
Nusa
pattern i.e. higher GDP per capita and higher average wages.
Tenggara Timur (NTT) (Rp 1.62 million) and Central Java (Rp 1.69). In Figure 12 average
Generally,earnings
monthly wages are
arehigher than with
compared the national averageGDP
the provincial in those provinces
per capita. The with a concentration
first five ranked
of industries and natural resources or in the case of Bali which has a larger service sector including
hospitality. In these provinces, poverty levels are also lower than the national average of 10.6 percent.
The case of Papua and Papua Barat is interesting because the average wage is high so is the GDP 19
per
capita but in both of these provinces the proportion of people living below the poverty line is quite
high, in fact more than double (27.6 percent in Papua and 25.1 percent in Papua Barat) compared to
the national average. The case of Papua shows that a larger economic output and concentration of
18
average of 10.6 percent. The case of Papua and Papua Barat is interesting because the average
wage is high so is the GDP per capita but in both of these provinces the proportion of people
living the poverty line is quite high, in fact more than double (27.6 percent in Papua and 25.1

percent
wealth in oneinorPapua Barat) compared
two sectors to the national
of the economy does notaverage. Thetranslate
necessarily case of Papua shows
into better that afor a
welfare
largerlarger economic
segment output and concentration of wealth in one or two sectors of the economy
of population.
does not necessarily translate into better welfare for a larger segment of population.
Figure 12. GDP per capita (LHS) and average monthly wage earnings (RHS)
Figure 12. GDP per capita (LHS) and average monthly wage earnings (RHS) by province
by province
160,000,000 4,500,000
140,000,000 4,000,000
3,500,000
120,000,000
3,000,000
100,000,000
2,500,000
80,000,000
2,000,000
60,000,000
1,500,000
40,000,000
1,000,000
20,000,000 500,000
- -
Sulawesi Barat
Riau
Gorontalo
Nusa Tenggara Barat
Maluku
Kepulauan Riau
Sumatera Barat
Sulawesi Selatan
Sulawesi Tengah
Jawa Barat
Kalimantan Barat
Aceh
Bengkulu
Jambi
Kalimantan Tengah
Sumatera Selatan
Bali
Jawa Tengah
Dki Jakarta
Papua
Di Yogyakarta
Maluku Utara
Kalimantan Timur
Jawa Timur
Sulawesi Utara
Kalimantan Utara
Sumatera Utara
Sulawesi Tenggara
Nusa Tenggara Timur

Kepulauan Bangka Belitung
Lampung
Papua Barat
Banten
Kalimantan Selatan
GDP Per Capita Avg Wage
Source:ILO
Source: ILO staff
Sakernas data
data2016
2016and provincial
and GDP
provincial datadata
GDP BPSBPS
2015 in IDR
2015 in IDR
Next,we
Next, welook
lookatat the
the average
average earnings
earningsby
byeconomic
economicsector
sectorand
andsex
sex(Table
(Table5).5).Across
Acrossallallthe
themajor
sectors of the
major economy,
sectors of the average female
economy, monthly
average earning
female monthlywasearning
almost was
19 percent
almost 19 lesspercent
than theirlessmale
counterparts. In the agriculture sector women earn less than 45 percent compared to men. In the
than their male counterparts. In the agriculture sector women earn less than 45 percent
mining, transportation, and finance, and real estate there were minor differences between the average
compared to men. In the mining, transportation, and finance, and real estate there were
earnings of men and women. In construction average female earnings are much higher (71.1 percent)
minor differences between the average earnings of men and women. In construction average
than average male earnings. But, that is due to the fact that a large number of female workers are in
female earnings are much higher (71.1 percent) than average male earnings. But, that is due
higher occupations compared to men, many of whom are employed as elementary workers.
to the fact that a large number of female workers are in higher occupations compared to men
many of whom are employed as elementary workers.
Table 5. Average monthly earnings, male & female by sectors & gender pay gap, 2016 29
Sector Male Female Gender pay gap

20 (%)
Agriculture, Forestry, Hunting and Fishery 1,417,696 784,901 44.6
Mining and Quarrying 3,464,845 3,423,991 1.2
Manufacturing Industry 2,504,110 1,853,283 26.0
Electricity, Gas and Water 3,362,139 2,961,208 11.9
Construction 1,977,451 3,383,419 -71.1
Wholesale Trade, Retail Trade, Restaurant and Hotels 2,343,853 1,684,642 28.1
Transportation, Storage and Communication 2,974,590 2,916,603 1.9
Financing, Insurance, Real Estate and Business Services 3,629,667 3,612,145 0.5
Community, Social and Personal Services 2,954,178 2,233,862 24.4
Average All Sectors 2,435,619 1,977,207 18.8
Source: ILO staff calculations using Sakernas data 2016
29 Gender pay gap= (Wage male – Wage female)/W male * 100
19
The finding that average female earnings are lower than male is true even when both have similar
educational level (Table 6). The gender earning gap is lowest between female and male at the doctoral
level (16 percent) while at primary school or less, average earnings of females are 43 percent less than
the male average earnings. Apart from doctoral degree, there is no distinct pattern to suggest that higher
education leads to more equal earnings between men and women.
Table 6. Average monthly earnings by educational attainment, male & female, 2016
Sector Male Female Gender pay gap
Primary school or less 1,573,188 895,528 43%
Junior high school 1,776,486 1,309,806 26%
Senior high school 2,514,644 1,891,584 25%
Vocational high school 2,556,230 1,909,828 25%
Diploma I/II 3,270,967 2,213,674 32%
Diploma III 3,727,622 2,786,353 25%
Diploma IV/Bachelor 4,714,893 3,359,886 29%
Master Degree 8,346,159 5,329,114 36%
Doctoral Degree 10,132,084 8,495,678 16%
To further test the assertion that with all things being equal such as education, experience etc. sex
still accounts for the difference in the earnings, we use the Mincer equation to run a regression.30 The
conventional Mincer equation considers wages as a function of years of schooling, work experience,
and investments in human capital which among others can be in the form of training.
This equation can also be used to see the monetary returns (earnings) of different groups in a
society to understand whether there is discrimination in the labour market. In our case, we have only
used the Mincer equation to examine whether the sex of the person employed is a factor besides
education and work experience. It is important to note here that a relationship between education,
experience or sex with wages does not imply causality rather an association.
Ideally, hourly wages should be estimated rather than weekly or monthly because it is possible that
people with higher education work more hours or it could be the way around for those with low level
of education work more to ensure adequate household consumption.
There are obviously challenges to test the function empirically with limited available data. Sakernas
collects data on earnings (both cash and in-kind), educational attainment, as well as age. For our purpose,
we have grouped the education attainment into three levels: primary, secondary, and tertiary. In the
Sakernas there is no data on the total years of experience. There is a variable for “month/years working
in the current primary job”. Using this as a proxy for total experience did not show any significant
relationship with earnings. Instead, we used age as a proxy for work experience assuming that those
who are older have more work experience. A binary variable for location “urban or rural” was also
added in the regression to see if there was any association between wages in rural and urban areas.
Log Wage= β_1+ +Femaleδ_1+Educδ_2+Urbanδ_3++Ageβ_1+Ageβ_2+ε
30 Heckman, James J., Lochner, Lance J., and Todd, Petra E., “Fifty Years of Mincer Earnings Regressions,” First draft June 1998,
Revised March 19, 2003.
20
The regressions analysis (Table 7) shows that education and living in urban areas is strongly related
to higher wages. The estimated coefficient for the square of age (age2) is negative which means that
after a certain age/experience we observe a diminishing marginal effect on wages. The coefficient for
female is negative which implies that if the sex of the person is female the wages are lower. We can
see that for female workers there is a -44.5 percent differential compared to men. By adjusting for
approximation error, we get a differential of -35.9 percent. We can thus conclude that sex is a key factor
and females tend to receive less in wages than men. Similarly an urban worker is likely to earn close to
30 percent (adjusted) more in earnings.
Table 7. Wage and gender regression results
Log Wage Coef. Std. Err. t P>t [95% Conf. Interval]
Female -0.4454251 0.000208 -2141.7 0 -0.445833 -0.445017

Age 0.0556103 0.0000457 1215.96 0 0.0555207 0.0556999
Age2 -0.0005856 5.73E-07 -1022.77 0 -0.000587 -0.000585
Educ 0.4661312 0.0001459 3195.47 0 0.4658452 0.4664171
Urban 0.2618337 0.0002054 1274.84 0 0.2614311 0.2622362
_cons 13.16135 0.0008713 1.50E+04 0 13.15964 13.16306
Source: ILO staff calculations using data from Sakernas 2016
21
22
5

Understanding unemployment
THE unemployment rate in Indonesia has continued to fall in the last ten years. In 2006 the
unemployment rate was in doubt digits (10.3 percent), but since then it fell gradually and by 2016 the
unemployment rate had fallen to 5.6 percent. Among the 15-24 year age group unemployment rate
dropped significantly (11.1 percentage points) compared to the overall reduction (4.7 percentage points)
in the overall working-age population. The decrease is even sharper for females (15.7 percentage points)
compared to the overall average for the 15-24 years old.
Based on the above data, it can be said that labour market situation for young people improved
in the last ten years. The unemployment rate among youth (15-24) fell from a high of 30.6 percent in
2006 to 19.4 percent in 2016. It is important to note, however, that the current rate of unemployment
among youth is still high compared to countries in the ASEAN region. We will look more into youth
unemployment and inactivity in the next section. For now, we will focus on the unemployment for the
15+ old population across the provinces.
In Indonesia, Banten and West Java have the highest rate of unemployment (8.9 percent). These
provinces are close to each other and in fact Banten used to be part of West Java. Decentralization
and the so called pemekaran (division) led to several new districts and provinces which were established
from 2004 onwards. Both Banten and West Java host a number of industrial zones and factories for
several large manufacturing companies including multinationals. It is likely that the present slowdown
of the economy has contributed to a higher unemployment rate in these two provinces.
Commodity rich provinces such as East Kalimantan and Riau Island have unemployment rate of
8 percent and 7.7 percent, which is well above the national average of 5.6 percent. It is possible that a
higher unemployment rate in these provinces mirrors the drop in demand for commodities. Historically
though unemployment rate in these provinces was generally higher than the national average.
It is, thus, plausible that owing to the manufacturing prowess and commodities these provinces
attracts a fair number of job seekers. Considering many more are actively seeking work, the unemployment
rate can go up compared to other provinces where fewer are looking for work. In Banten and West Java
cyclical unemployment owing to changes in the manufacturing business cycle may be a factor as well.
On the other hand in resource rich provinces seasonal nature of work, such as work on plantations,
may be driving up the unemployment rate.
Figure 13 shows four provinces with the highest unemployment rate and the share of employment
in the three broad economic sectors. There are some common features. Firstly, the share of employment
in industry, trade, and services is higher (except East Kalimantan) than national average of 21.4 percent.
23
Figure 13 shows four provinces with the highest unemployment rate and the share of
employment in the three broad economic sectors. There are some common features. Firstly,
the share of employment in industry, trade, and services is higher (except East Kalimantan)
Secondly, the share
than national of employment
average in agriculture
of 21.4 percent. Secondly, isthe
quite lowofcompared
share to the
employment national average
in agriculture is of
31.9 percent.
quite low compared to the national average of 31.9 percent.
Figure 13. Share of13.

Figure employment
Share of(LHS) by broad sectors
employment in fourby
(LHS) provinces
broadwith high unemployment
sectors in four rate
(RHS) 2016
provinces with high unemployment rate (RHS) 2016
70.0 9.0
8.8
60.0
8.6
50.0 8.4
8.2
40.0
8.0
30.0
7.8
20.0 7.6
7.4
10.0
7.2
- 7.0
Banten West Java East Kalimantan Riau Island
Agriculture Industry Trade & Services Unemp Rate
Source:ILO
Source: ILO staff
Sakernas data
data2016
2016
In Indonesia, Bali Bali

In Indonesia, has has
the the
lowest unemployment
lowest unemployment rate of (1.9
rate (1.9percent),
percent),followed
followedbybyBangka
BangkaBelitung
Belitung
(2.6 percent)(2.6
andpercent) and (2.7
Yogyakarta Yogyakarta
percent).(2.7
Thepercent).
other twoThe other two
provinces provinces
where where the rate is
the unemployment
unemployment
below 3 percent arerate is belowSulawesi
Southeast 3 percent areGorontalo.
and Southeast The
Sulawesi and Gorontalo.
economies The economies
of Bali, Yogyakarta, and Bangka
Belitung are more developed which could explain low unemployment in these provinces. low
of Bali, Yogyakarta, and Bangka Belitung are more developed which could explain
unemployment in these provinces.
But, low unemployment in Southeast Sulawesi, Gorontalo, and NTT and Sulawesi Tengah probably
cannot be attributed to economic development as these are some of the most underdeveloped provinces
inBut, low unemployment in Southeast Sulawesi, Gorontalo, and NTT and Sulawesi Tengah
Indonesia. The reason for low unemployment is probably because fewer people are actively looking for
probably
work. cannot
Perhaps be attributed
not expecting to findto economic
work development
discourages as these
them to look are some of
for employment. the most
Moreover, in several
provinces where the share of employment in agriculture is high also tend to have low unemployment rate.
24
24
underdeveloped provinces in Indonesia. The reason for low unemployment is probably
because fewer people are actively looking for work. Perhaps not expecting to find work
discourages them to look for employment. Moreover, in several provinces where the share
of employment in agriculture is high also tend to have low unemployment rate.

Figure 14. Provinces with unemployment rate (left) lower than the
national average
Figure 14. Provinces with unemployment andhigher
rate (left) share (right)
than of employment
the national by (right) of
average and share
employment by broad economic
broad economic sectors (2016) sectors (2016)
70.0 6.0
60.0 5.0
50.0
4.0
40.0
3.0
30.0
2.0
20.0
10.0 1.0
- -
Agriculture Industry Trade & Services Unemp Rate
Source:ILO
Source: ILO staffcalculations
using Sakernas
Sakernas data
data2016
2016
In conclusion, based on the data and analysis presented above, it is clear that employment
In conclusion, based on the data and analysis presented above, it is clear that employment rate
rate alone is not sufficient to understand the labour market situation. A low unemployment
alone is not sufficient to understand the labour market situation. A low unemployment rate does not
rate
necessarilydoes not that
mean necessarily
labour mean
marketthat labour market
conditions conditionsfor
are favourable arejob
favourable forsome
seekers. In job seekers.
cases it can
In some cases it can mean fewer job seekers looking for work, perhaps not expecting
mean fewer job seekers looking for work, perhaps not expecting to find work in the first place. to find Also,
therework in the
can be first place.
instances whenAlso, there
people stopcan be instances
looking for workwhen
afterpeople stop looking
a long period for work
of searching after
(discouraged
a longOn
workers). period of searching
the other (discouraged
hand a slightly workers). On rate
higher unemployment the can
other hand
result froma more
slightly higher
people joining
unemployment
the labour force as arate can result
response from more
to favourable people
labour joining
market the labour
conditions. We force as a seen
have also response to
that business
cycles and seasonality
favourable labour of workconditions.
market may also be Wedriving up unemployment
have also ratecycles
seen that business in some
andprovinces.
seasonality
of work may also be driving up unemployment rate in some provinces.
6. Youth, employment, and inactivity
Indonesia has a young population. More than half of the population is below 30 years of age.
The proportion of population who are aged 65 and above is around 5.3 percent31. According
to Sakernas 2016, close to a quarter (23.1 percent) of the working age population were youth
31
https://www.populationpyramid.net/indonesia/2016/
25
25
26
6

Youth, employment, and
inactivity
INDONESIA has a young population. More than half of the population is below 30 years
of age. The proportion of population who are aged 65 and above is around 5.3 percent.31 According
to Sakernas 2016, close to a quarter (23.1 percent) of the working age population were youth between
the ages 15 and 24 years. LFPR of youth was around 48 percent which is below the national average
of 66.3 percent. Among the 15-19 old, LFPR is understandably low (28 percent) compared to the age
group of 20-24. Generally, a large number of young people from ages 15 to 19 are attending school
while a higher proportion of those aged between 20 and 24 may have already made the transition from
school to work.
The national average unemployment rate is only 5.6 percent, but it is as high as 19.4 percent in
youth. Among male youth the rate is slightly higher (19.8 percent) compared to females (19 percent).
Across different educational attainments, the percentage of unemployed with a senior high school (22.4
percent) and vocational high school (24.4 percent) was relatively higher compared to other age groups.
Interesting, the data show that all the 2,127 youth with a master degree in the labour force were
unemployed. Most of the unemployed youth with a masters degree were around 23 years old. Considering
their age, it is possible that many of them had graduated recently and had just started looking for work.
In terms of the national average for all ages, only 1.2 percent of the labour force with a master degree
were unemployed. It is thus unlikely that an advanced degree would make it harder for young people
to find work. It may simply be the case of just starting the job search and perhaps even waiting for
the right job.
31 https://www.populationpyramid.net/indonesia/2016/
27
of the labour force with a master degree were unemployed. It is thus unlikely that an
advanced degree would make it harder for young people to find work. It may simply be the
case
Indonesia Jobs of just
Outlook 2017starting the job search and perhaps even waiting for the right job.
Figure 15. Number of unemployed (RHS) and unemployment rate (LHS in %) among youth by education
Figure 15. Number of unemployed (RHS) and unemployment rate
(2016)
(LHS in %) among youth by education (2016)
1,400,000 120.0
1,200,000 100.0
1,000,000
80.0
800,000
60.0
600,000
40.0
400,000
200,000 20.0
- -
Number Unemployed Unemployment Rate (%)

The share of unemployed youth in total unemployed is disproportionally high (57.9 percent).
TheThe share of unemployed youth in total unemployed is disproportionally high (57.9 percent).
proportion of young females who are unemployed in total unemployed is higher (59.5 per cent)
The proportion of young females who are unemployed in total unemployed is higher (59.5
compared to men (57 percent). The ratio of youth-to-adult unemployment rate of 6.9 is equally quite
perAtcent)
high. compared
the global level,toyouth
men (57 percent). Theisratio
unemployment of youth-to-adult
generally higher than unemployment rate regions
adults and in some of it is
6.9 is equally quite high. At the global level, youth unemployment is generally higher than
as high as 30 percent. In 2016, the average global youth unemployment rate was 12.8 percent and in
adults and in some regions it is32as high as 30 percent. In 2016, the average global youth 26
fact unemployment
the rate was identical to 2006.
rate was 12.8 percent and in fact the rate was identical to 200632.
The youth unemployment rate in Indonesia is much higher than the global average as well as
The youth
compared unemployment
to different rategroups.
income in Indonesia is much
In high highercountries,
income than the global average
the rate as well
is also highas(14 percent),
compared
but lower thantoIndonesia.
different income groups. In income
In lower-middle high income countries,
countries, the rate is group
a comparator also high
for(14
Indonesia, the
unemployment rate of youth is considerably lower at 12.2 percent. It is importantgroup
percent), but lower than Indonesia. In lower-middle income countries, a comparator to note here that
forlast
in the Indonesia,
decade,the unemployment
with rate of youth
economic conditions is considerably
improving, lower at 12.2
unemployment percent.
among It isin Indonesia
youth
important
decreased to note here that in the last decade, with economic conditions improving,
considerably.
unemployment among youth in Indonesia decreased considerably.
Figure 16. Figure

Youth 16.unemployment
Youth unemploymentrate
rate inin2006
2006 & 2016
& 2016
2006
2016
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0
Indonesia World: High income

World: Upper-middle income World: Lower-middle income
World: Low income World
Source: ILOSTAT for global figures and Sakernas for Indonesia

Source: ILOSTAT for global figures and Sakernas for Indonesia
32 Figures are from ILOSTAT database.
28
As mentioned previously, unemployment rate alone does not fully capture the dynamics of

As mentioned
the previously,
labour market. And, thisunemployment
indicator on itsrate
ownalone
does does notafully
not give captureofthe
full picture thedynamics of the
quality and
labour market. And, this indicator on its own does not give a full picture of the quality
productivity of employment. In the case of youth, one of the common indicators used is toand productivity
of employment. In the case of youth, one of the common indicators used is to understand the level
understand the level of inactivity. The indicator groups together those who are not employed,
of inactivity. The indicator groups together those who are not employed, studying (education), and
studying (education), and attending training (NEET). NEET can also include discouraged young
attending training (NEET). NEET can also include discouraged young workers who may previously
workers who may previously have looked for work, but at the time of the survey are no longer
have looked for work, but at the time of the survey are no longer actively searching for employment.
actively searching for employment.
At a young age more people are in schools or receiving training to acquire skills prior to joining
At a youngThose
the workforce. age more
whopeople arestudying
are not in schools
andornot
receiving training
actively seeking to work,
acquireinskills prior to joining
an economic sense, can
the workforce. Those who are not studying and not actively seeking work, in
be considered as “idle”. Looking at the data from several middle or low-middle income countries, an economic
sense, can of
the proportion beNEET
considered as “idle”.isLooking
in Indonesia relativelyathigh
the (23.2
data from several
percent). middle
Among theorselected
low-middle
countries
shown in Figure 17, Indonesia is second after Sri Lanka where NEET was as high as 27.7 percent.
income countries, the proportion of NEET in Indonesia is relatively high (23.2 percent). Among
In Philippines thecountries
the selected rate (22.7shown
percent) is equally
in Figure 17, high, but slightly
Indonesia is secondlower than
after Sri Indonesia.
Lanka where In NEET
Vietnam,
Thailand,
was asand Malaysia
high as 27.7NEET rate
percent. In is almost half
Philippines thecompared
rate (22.7to Indonesia.
percent) is equally high, but slightly
lower than Indonesia. In Vietnam, Thailand, and Malaysia NEET rate is almost half compared
to Indonesia.
Figure 17. NEET (%) in selected countries in Southeast Asia for
Figure 17. NEET (%) year
latest in selected countries in Southeast Asia for latest year available
available
25.0
20.0
15.0
10.0
5.0
0.0
Cambodia Malaysia Myanmar Philippines Singapore Thailand Viet Nam Indonesia
(2012) (2015) (2015) (2016) (2014) (2016) (2016) (2016)
Source: ILOSTAT and Sakernas for Indonesia

Source: ILOSTAT and Sakernas for Indonesia
The breakdown of NEET youth by education shows that the percentage among those who
The breakdown
have of NEET
primary school or lessyouth
(30.9 by education
percent), shows
senior highthat the percentage
school among
(27.6 percent) andthose who have
vocational
primary
high school (29.9 percent) level education is higher than the national NEET average. In fact(29.9
school or less (30.9 percent), senior high school (27.6 percent) and vocational high school
percent)
the level education
highest is higher
proportion thanwas
of NEET the found
national NEET
among average.
those who In facta the
have highest
masters proportion
degree. It is of
NEET was found among those who have a masters degree. It is important to note here that in absolute
important to note here that in absolute terms there are relatively few (3,709) in the 15-24
terms there are relatively few (3,709) in the 15-24 age group who have a masters degree. Among them
age group who have a masters degree. Among them 1,582 are in the labour force. Apart from
1,582 were not in the labour force. Apart from the cohort of primary school or less, the picture of
the cohort of primary school or less, the picture of inactivity by education and unemployed is
inactivity by education and unemployed is not all that different with the unemployment rate. In both
(unemployed and inactive) youth, the percentage is higher among senior high and vocational high
school graduates. 28
29
not all that different with the unemployment rate. In both (unemployed and inactive) youth,
the percentage is higher among senior high and vocational high school graduates.
Figure 18. Number (LHS) and proportion (RHS in %) of NEET

Figure 18. Number (LHS) and proportion (RHS in %) of NEET by education
by education
3,000,000 70.0%
2,500,000 60.0%
50.0%
2,000,000
40.0%
1,500,000
30.0%
1,000,000
20.0%
500,000 10.0%
0 0.0%
Number of NEET Percent NEET

29
30
7

Technology, productivity,
and jobs
THE world is witnessing significant changes in the production and distribution of goods
and services which have been unleashed by technological innovations. These innovations are shaping
future industries and employment. Evolving nature of technology always has had significant impact
on human life vis-à-vis consumption behavior, welfare, and in the production of goods and services.
The first major advancement in the production process started around the second half of the 18th
century and continued through the first half of the 19th century in Britain. This period, in what came
to be known as the first industrial revolution, was characterized by new inventions and machines which
allowed replacing a lot of manual labour by machines. The use of machines enabled mass production
and gave birth to a factory. Steam power, cotton spin and iron making are some of the technological
changes that made it possible for goods to be produced in large quantities for consumption.
Between 1870 and 1914, the invention and use of electricity as source of energy further accelerated
industrial output of manufactured goods. Meanwhile, the widespread use of telegraph as a means of
communication, and transportation infrastructure supported the logistics and distribution of goods.
In countries that later came to be known as industrialized, massive development and expansion of
railway network, water supply, and sewage system not only boosted production, it improved the living
conditions in cities. With widespread use of machinery, businesses starting innovating and adopting
modern management and organizational systems to oversee mass production (Levy and Murnane, 2004).
Productivity increased and it became possible for businesses to reach a larger number of consumers.
The use of mainframe computers in the 1960s was followed by personal computers in the 1970s
and 1980s. The miniaturization of semiconductors, fiber optics, and the development of the internet
provided the prelude to what came to be known as the digital revolution. According to some analysts,
we are now in the midst of a fourth industrial revolution (Schwab, 2016). The latest industrial changes
build on the digital revolution and combines multiple technologies such as advanced machine learning,
internet of things, and 3D printing, to name a few.
Our current thinking on long-term economic growth is largely shaped by the theoretical framework
of Solow-Swan (Solow and Swan, 1956). This model posits technology as the key ingredient for long-
term growth and economic development. Previously, growth accounting was simply seen as a process
of increasing capital and labour for achieving higher output. The Solow-Swan model shows that owing
to diminishing returns, there is a limit to continuously increasing the quantity of capital and labour for
achieving growth on a sustainable basis. Technologic improvement can thus offset diminishing returns
and allow countries to experience productivity grow.
31
As mentioned, technology has always been at the forefront of economic growth and productivity.
Increasing capital and labour inputs in the production process alone is not sufficient to maintain
growth on a sustainable basis. Productivity is the key driver of growth once a country reaches a limit
in deploying its available capital and labour. Recognizing the importance of technology in industrial
growth, more and more countries and private sector firms are allocating resources in research and
development (R&D).
Technological advancement has contributed towards human welfare, be in terms of new jobs,
goods, health care, travel, communication, to name a few. At the same time, technology can be disruptive.
It can affect the way labour is employed and companies operate. Arguably, the technological changes
in the so called fourth industrial revolution may not necessarily be as drastic as in the past, but the pace
of technological improvement and adoption is happening much faster. Previous industrial revolutions
took decades to evolve which allowed time for adjustments, especially in the labour market.
7.1 Blessing for job creation?

Several studies (Frey & Osborne, 2013); (Tassey, 2014); (Leopold et.al., 2016) suggest that,
broadly speaking, technological improvements can have both positive and negative impact on jobs.
When technology takes over, some jobs are lost and workers have to upgrade or learn new skills to
remain in the labour market. In some cases technology directly replaces workers while in other cases
technology augments human labour. On the output side, technology can increase productivity as well
fuel consumer demand for new products, services, and even industries. This expansion can, in turn,
create new employment opportunities.
While undoubtedly disruptive in the beginning, technology, in the past, has often paved the way
for new industries and occupations. For example, the use of online platforms in Indonesia has resulted
in rapid growth of ride-hailing services which, in turn, is creating new work opportunities for people.
According to one report, around 250,000 people are contracted by Go-Jek which is one of the leading
Indonesian ride hailing services. Some even argue that part of the reason for relatively low unemployment
rate in Indonesia is the growth of application based online services.33
In 2017, the Indonesian e-commerce industry is estimated to grow to USD 9.3 billion.34 Online
sales could reach 8 percent of the total retail sales by 2020 which currently stand at 1 percent. Despite
low digitization across Indonesia’s key sectors, start-ups are growing and spreading. In 2016, the total
disclosed funding of start-ups in Indonesia was estimated to have reached USD 1.7 billion (McKinsey,
2016). According to GNP Venture Report, from 4.6 million online shoppers in 2013, the number had
grown to 8.7 million by 2016 (Malau, 2016). According to Mckinsey (2016), by embracing digitization
the economic growth in Indonesia will further accelerate and by 2025, approximately USD 150 billion
can be added annually to the economy.
Online application based platforms is making it possible for people to find work outside the
firm or offices. This new form of work called “crowdworking” enables people who need services to
connect with those who can provide the required services. These can include house repairs, cleaning,
repairing vehicles and so forth. There is evidence from some high income countries such as the USA
that alternative work arrangements such as crowdworking is on the rise (Katz & Kreuger, 2017).
33 http://www.thejakartapost.com/news/2016/11/07/ri-sees-unemployment-drop-to-5-61-in-august.html
34 http://www.thejakartapost.com/longform/2017/03/03/the-2017-indonesian-startup-popular-sector-forecast.html
32
With limited data, it is difficult to say how many Indonesians are engaged in crowdworking. The
presence of online platforms (e.g. Go-Jek) and number of people using these services does seem to
suggest that crowdworking may be on the rise. At minimum, the growth of online job platforms is
creating a better interface between employers and jobseekers. This can address frictional unemployment
which often results when employers are not able to widely disseminate vacancies and likewise potential
job seekers may not have information about available job openings. Internet and social media is thus
becoming a common matchmaker in the labour market (Kuhn, 2014).
Furthermore, an online market place is levelling the playing field for small businesses and
entrepreneurs. Among others, internet e-commerce platforms such as Tokopedia, Blibli, Bukalapak
etc. is enabling small enterprises in Indonesia to market their products directly to the customers. Social
media can also help businesses to directly reach their potential customers and promote their products.
In absence of any major studies or data on the role of social media in Indonesia, it is difficult to tell
to what extent online channels are creating opportunities for small businesses. However, research of
small Chinese firms in retail fashion shows that there is greater engagement between small businesses
and customers through social media and it can lead to higher sales (Ha et.al, 2016).
When it comes to technological uptake between developing and industrialized economies, it is
usually assumed that the former still have a long way to go before reaching the technological frontier.
Also, countries with more skilled workforce are generally more receptive to sophisticated technology
compared to countries with more unskilled workers (Caselli & Coleman, 2006). With relatively larger
supply of (unskilled) labour in developing countries, firms often find it more economical to deploy
additional labour rather than to adopt sophisticated technology to replace humans.
However, absorption of technology in developing countries may be changing as firms as well as
governments try to become more competitive in a globalized world. For example, the sale of industrial
robots which can displace human workers is increasing in developing countries.35 The top 10 countries
in terms of sale of industrial robots are mainly industrialized, but that trend may be changing. In
2015, China was the leading destination for industrial robots accounting for 27 percent of the 253,748
robots sold that year. Although the stock of industrial robots in Indonesia remains low, there has been
a twenty-fold increase in the sale of robots from 314 in 2005 to 6,265 in 2015 (IFR, 2016).
The rise in the use of robots in Indonesia may be attributed to firms trying to become more
competitive and probably not being able to do so through a labor-intensive approach that has
characterized production processes in the past. Without data, it is difficult to say how the use of
robots is impacting jobs in Indonesia. Understandably, the government considers rapid automation as
a challenge which can lead to layoffs, create imbalances, and exacerbate income inequality.36
The productivity and efficiency gains from adoption of technology is not limited to the private
sector. Technological advancements are helping governments around the world to overcome physical
accessibility. At present many more countries are offering public services through online portals. And,
this trend is likely to increase. Instead of people having to spend a lot of time visiting government
offices, which can be an issue especially for remote areas with poor accessibility, it is becoming possible
for people get these services online. For example, the use of electronic ID cards including biometric
identifiers is enabling India to make direct social transfer payments to eligible people to avoid leakages
and promote transparency.37 In Indonesia, efforts are being made to have electronic ID cards and
digitize more and more public services.
35 http://www.huffingtonpost.com/hal-sirkin/robots-workers-countries_b_9992960.html
36 https://asia.nikkei.com/Spotlight/The-Future-of-Asia-2017/Beware-of-robots-says-Indonesian-Vice-President-Kalla
37 https://uidai.gov.in/your-aadhaar/about-aadhaar.html
33
7.2 Threat to jobs?

On the other end of the jobs versus technology debate, there are growing concerns that automation
and digitalization is making jobs even harder to find especially as the global economic growth remains
subdued. According to the ILO (2017), not enough decent jobs are being created globally to significantly
reduce informal and vulnerable employment. Even in purely quantitative terms, employment growth
There seems to be a consensus that work involving repetitive tasks is increasingly being
(1.4 percent) has slowed since 2011 compared to 2000-2007 when it grew by 1.7 percent.
automated. Automation has led to labour replacement in industry (Akst, 2013). Some argue
There
that seems
jobs to be
at high riska are
consensus
simple that
and work involving
elementary repetitive
in nature. tasks iswith
Workers increasingly being
“ordinary” automated.
skills will
Automation has led to labour replacement in industry (Akst, 2013). Some argue that
end up losing their jobs to machines and automation (Brynjolfsson & McAfee, 2014). The riskjobs at high risk
are simple and elementary in nature. Workers with “ordinary” skills will end up losing their jobs to
of job substitution may not be limited to only elementary or blue collar workers.
machines and automation (Brynjolfsson & McAfee, 2014). The risk of job substitution may not be
limited to only elementary or blue collar workers.
White collar jobs which involve repetitive and administrative tasks are also likely to be taken
White
over by collar jobs or
machines which involve
artificial repetitive(AI).
intelligence and Inadministrative
fact, there istasks are alsotrend
a growing likelyoftomid-level
be taken over
by machines or artificial intelligence (AI). In fact, there is a growing trend of
jobs are being squeezed (Figure 19) resulting in a polarization of occupations (World Bank, mid-level jobs being
squeezed
2016).(Figure 19) similar
There are resulting in a polarization
trends in the larger of occupations
global economies (World
of theBank,
world2016).
such There
as the are
USA,similar
trends in the larger
European Union, global economies
and India where of the world
higher such asof
proportional thejobs
USA, European
involving Union,
routine tasksandareIndia
beingwhere
higher proportional of jobs involving routine tasks are being lost. 38
lost38.
Figure
Figure 19. 19. Decline
Decline of of mid-level jobs
mid-level jobsinvolving routine
involving tasks tasks
routine
Developing Countries
Developed Countries
-14% -12% -10% -8% -6% -4% -2% 0%
Source: World
Source: WorldDevelopment Report,
Development Report, 20162016
Jobs
Jobsrequiring
requiringsocial
socialand
and creative skills,
creative complex
skills, complex decision-making
decision-making processes in aninuncertain
processes an uncertain
environment are harder to replace by machines or AI. It is, therefore, likely
environment are harder to replace by machines or AI. It is, therefore, likely that such jobs which that such jobs
require
complex
whichproblem solving, problem
require complex social andsolving,
cognitive skills
social andwill be far skills
cognitive morewill
in be
demand in future
far more (Leopold,
in demand
2016). Also, a(Leopold,
in future significant number
2016). Also, of future middle-level
a significant number ofjobs future willmiddle-level
require specific vocational
jobs will require skills
combined
specificwith foundational
vocational levels
skills of literacy,with
combined numeracy, adaptability,
foundational and problem
levels solving
of literacy, (Autor, 2015).
numeracy,
In addition to this,
adaptability, and future workers
problem will(Autor,
solving need skills to be
2015). able to operate
In addition to this, and collaborate
future withneed
workers will machines
and skills
digitization. These include wearable computing, internet of things (including
to be able to operate and collaborate with machines and digitization. These include analytic and big data),
using multi-function
wearable computing,devices for work,
internet and (including
of things augmentedanalytic
reality and
(Mercer, 2015).using multi-function
big data),
devices for work,
According to anandILOaugmented
study on ASEANreality (Mercer, 2015). more than 60 percent of salaried jobs in
(ILO, 2016a)
electronics, automotive, and textiles and clothing are at threat and possibly could be lost to automation.
TheAccording
percentagetoofanjobs
ILOatstudy
risk ison
as ASEAN
high as 85 percent
(ILO, in more
2016a) retail trade. Overall,
than 60 percenttheof
findings from
salaried jobsthe
in study
show that within a couple of decades 56 percent of all employment may be automated
electronics, automotive, and textiles and clothing are at threat and possibly could be lost to in ASEAN-5
(the Philippines, Cambodia, Indonesia, Thailand and Viet Nam). Among them, the risk of jobs being
38
http://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilo-
38 http://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilo-jakarta/documents/presentation/wcms_552678.pdf
jakarta/documents/presentation/wcms_552678.pdf
34 34
automated is highest in Viet Nam (70 percent), followed by the Philippines (57 percent) and closely
behind is Indonesia (56 percent). The probability of job losses in Thailand is the lowest (44 percent).
The estimations for Indonesia and other selected countries in ASEAN are based on a methodology
developed by Frey and Osborne to find out the type of occupations at risk of being replaced by machines
and automation. Occupations in ASEAN were characterized by nine variables grouped under three non-
automatable tasks requiring perception and manipulation, creative intelligence, and social intelligence.
In their research on 702 occupations in the USA, Frey and Osborne (2013) estimated 47 percent of
the jobs were at risk. In another study McKinsey concluded that 45 percent of tasks that workers carry
out now could be made obsolete through automation (McKinsey, 2017). Both studies show a very high
proportion of occupations being lost. However, Arntz et al. (2016) found that only 9 percent of jobs
were at risks in the member states of the Organization of Economic Cooperation and Development
(OECD). This study tried to differentiate between tasks within an occupation. Generally, a job or an
occupation involves several tasks and it is possible that automation may affect some of these tasks and,
therefore, not completely eliminate the occupation. In such a situation an occupation can evolve over
time in which some functions or tasks are made redundant while other tasks are added to the same
occupation or even leading to an entirely new occupation.
7.3 Looking ahead: technology and firms

To better understand how Indonesian firms perceive the role of technology and its impact
on businesses, below we present the findings from an enterprise survey. A total of 732 enterprises
participated in this survey. ILO commissioned the survey in 2015 as part of a regional report on
“ASEAN in Transformation: How technology is changing enterprises and future work”. The purpose of the
survey was to understand current developments, and perception of private sector vis-à-vis technology,
industrial development, regional integration, and jobs.
The respondents of the survey were 67 percent businesses in the services and 33 percent businesses
in manufacturing sector. More than 14 percent were small enterprises employing between 5 and 19
workers, 27 percent were medium enterprises employing between 20 and 99 workers, and 59 percent
were large enterprises employing over 100 workers. Nearly 4 percent of the businesses were established
before 1950, 30 percent between 1950 and 1989, 51 percent were established between 1990 and 2009,
and 15 percent were founded between 2010 and 2015.
About 35 percent of enterprises in Indonesia reported upgrading technology, higher than the
ASEAN average of 27 percent (Figure 20, panel a). Moreover, around 34 percent of enterprises
in Indonesia delegated responsibility for protecting data, again higher than the ASEAN average of
28 percent. In addition, 20 percent of Indonesian enterprises reported investing in research and
development (R&D) and protecting intellectual property (IP).
A higher proportion of manufacturing enterprises conducted technology related activities compared
to enterprises in the services sector (Figure 20, panel b). Almost 45 percent of manufacturing enterprises
reported protecting data and upgrading technology, compared to about 30 percent of enterprises in
the services. Additionally, about 25 percent of manufacturing enterprises reported investing in R&D
and protecting IP, compared to less than 20 percent in the case of enterprises in the services sector.
Not surprising that large enterprises scored significantly higher for technology-related functions
compared to medium and small enterprises (Figure 20, panel c). Of the total large enterprises, 44
percent protected data, 45 percent upgraded technology, 27 percent invested in R&D and 26 percent
protected IP. These results compare to a lower proportion of medium enterprises that protected data and
upgraded technology (about 27 percent), and invested in R&D (9 percent). An even lower proportion
35
of small enterprises reported protecting data and upgrading technology (15 percent), and investing in
R&D (10 percent). Interestingly, approximately 10 percent of small enterprises claimed to protect IP
data, slightly higher than the share (8.9 percent) of medium enterprises that reported doing so.
Longer-running enterprises, particularly those established before the 1950s, are at the forefront
of technology-related functions in Indonesia (Figure 20, panel d). Conversely, younger the enterprise
the less it upgrades technology, protects data, invests in R&D and protects IP. This trend is related to
the fact that older enterprises are also larger compared to younger enterprises. Indeed, the enterprises
founded before 1950 were mainly large firms employing over 100 workers. It is important to note here
that only 4 percent of the enterprises interviewed were founded before 1950.
Figure 20. Action taken by enterprises shown by a) comparing with ASEAN b) sectors
Figure 20. Action taken by enterprises shown by a) comparing with ASEAN b) sectors c) size and d) age
c) size and d) age
a. b. 50%
40%
40%
30%
30%
20%
20%
10% 10%
0%
0%
Protects IP Invests in Protects data Upgrades
Protects IP Invests in Protects data Upgrades
R&D technology
R&D technology
ASEAN Indonesia Indonesia Manufacturing Services
c. 50% d.
60%
40%
40%
30%
20% 20%
10%
0%
0% Protects IP Invests in Protects data Upgrades
Protects IP Invests in Upgrades Protects data R&D technology
R&D tech.
Indonesia Small Medium Large Indonesia Pre-1950s 1950-1989 1990-2009 2010-2015
Source:
Source: ILO:
ILO: “ASEAN
“ASEAN in in transformation” Enterprise
transformation” EnterpriseSurvey (Bangkok,
Survey 2016) 2016)
(Bangkok,
Enterprises in Indonesia face a number of barriers to upgrading technology (Figure 21, panel a).
SlightlyEnterprises
higher thaninthe
Indonesia
ASEAN face a number
average, of barriers
around to upgrading
one in three technology
enterprises (
in Indonesia cited high fixed
capital costs as the main obstacle. The second major barrier for enterprises in both Indonesia and
across ASEAN was lack of skilled workforce.
Figure 21, panel a). Slightly higher than the ASEAN average, around one in three enterprises
For
in enterprises in manufacturing
Indonesia cited andcosts
high fixed capital services,
as thethe highobstacle.
main cost of The
fixed capitalmajor
second was reportedly
barrier for the
key barrier to upgrading
enterprises in bothtechnology (Figure
Indonesia and 21, panel
across ASEANb).was
Manufacturing
lack of skilledenterprises
workforce.reported that other
major obstacles to upgrading technology were high licensing costs (14.5 percent), and lack of skilled
For enterprises in manufacturing and services, the high cost of fixed capital was reportedly
operators (12.4 percent). By comparison, according to enterprises in services, the other main obstacles
the
to upgradingkeytechnology
barrier to upgrading
were lacktechnology
of skilled (operators (14.3 percent) and high licensing costs (11.2
percent).
Figure 21, panel b). Manufacturing enterprises reported that other major obstacles to
upgrading technology were high licensing costs (14.5 percent), and lack of skilled operators
36 (12.4 percent). By comparison, according to enterprises in services, the other main obstacles
to upgrading technology were lack of skilled operators (14.3 percent) and high licensing costs
Small, medium and large enterprises all reported that the biggest barrier to technology
upgrading was high fixed capital costs (

Small, medium and large enterprises all reported that the biggest barrier to technology upgrading
Figure
was high 21 , panel
fixed c). For
capital costsboth small21,and
(Figure large
panel c).enterprises,
For both smalllackand
of skilled operators and
large enterprises, lack high
of skilled
licensing costs were the second and third major barriers respectively to technology upgrading.
operators and high licensing costs were the second and third major barriers respectively to technology
By comparison,
upgrading. medium-sized
By comparison, enterprises
medium-sized reported
enterprises that
reported thatthe secondand
the second andthird
third largest
largest obstacles
obstacles were high licensing cost and lack of skilled operators
were high licensing cost and lack of skilled operators respectively. respectively.
Figure 21 . Barriers to technology upgrade shown by a) comparison to ASEAN, b) sectors, c) size and d) age
Figure 21. Barriers to technology upgrade shown by a) comparison to ASEAN, b) sectors,
c) size and d) age
a. b. 40%
30%
30%
20%
20%
10% 10%
0%
0%
Risk is Lack Licensing Lack Fixed Risk is Lack Licensing Lack Fixed
currently knowledge costs too skilled capital currently knowledge costs too skilled capital
too high on high operators costs too too high on high operators costs too
capabilities high capabilities high
ASEAN Indonesia Indonesia Manufacturing Services
c. 40% d. 40%
30% 30%
20% 20%
10% 10%
0% 0%
Risk is Lack Licensing Lack Fixed Risk is Lack Licensing Lack skilled Fixed
currently knowledge costs too skilled capital currently knowledge costs too operators capital costs
too high on high operators costs too too high on high too high
capabilities high capabilities
Indonesia Small Medium Large Indonesia Pre-1950s 1950-1989 1990-2009 2010-2015
Source: ILO: “ASEAN in transformation” Enterprise Survey (Bangkok, 2016)

All All
thethe enterprises,regardless
enterprises, regardlessofof their
their age,
age, reported
reported that
thathigh
highfixed
fixedcapital as as
capital thethe
main obstacle
main
toobstacle
technology upgrading (Figure 21, panel d). Enterprises founded after 1950 reported lack of skilled
to technology upgrading (
operators and high licensing costs as the second and third key obstacles respectively to technology
upgrading. It is worth noting that for those founded before 1950, high licensing costs and high risk
Figure
were the 21, paneland
second d). third
Enterprises
leadingfounded
barriers after 1950 reported
to upgrading lack of skilled operators and high
technology.
licensing costs as the second and third key obstacles respectively to technology upgrading. It
Lately, non-traditional forms of employment with functional or geographical mobility is becoming
is worth noting that for those founded before 1950, high licensing costs and high risk were
more common in the labour market. In this regard, enterprises were asked whether they currently engaged
the second and third leading barriers to upgrading technology.
freelance workers, international migrant workers, or employees who worked remotely (Figure 22).39
38
39 These three types of workers fall into the category of non-traditional workers. According to the ILO definition, non-traditional, or
non-standard work refers to jobs falling outside the realm of standard work arrangements. This includes temporary or fixed-term
contracts, temporary agency or dispatched work, dependent self-employment, and part-time work).
37
Lately, non-traditional forms of employment with functional or geographical mobility is
Indonesiabecoming
Jobs Outlook 2017more common in the labour market. In this regard, enterprises were asked whether
they currently engaged freelance workers, international migrant workers, or employees who
worked remotely (Figure 22).3922. Employing different types of
Figure
workers compared to ASEAN,
Figure 22. Employing differentsectors, and size
types of workers compared to ASEAN, sectors, and size
70%
60%
50%
40%
30%
20%
10%
0%
Freelance workers International migrant workers Remote workers
Source:
Source: ILO: ILO: “ASEAN
“ASEAN in transformation”Enterprise
in transformation” Enterprise Survey
Survey(Bangkok, 2016)2016)
(Bangkok,
Of the total enterprises surveyed in Indonesia, 55 percent employed freelance workers, about
Ofpercent
36 the totalemployed
enterprises surveyed inmigrant
international Indonesia, 55 percent
workers and 30employed
percent freelance
employedworkers, about 36
people who
percent employed
worked international
remotely. migrantless
By comparison, workers and 30 across
enterprises percentASEAN
employed peoplefreelance
employed who worked remotely.
workers
By comparison, less enterprises across ASEAN employed freelance workers (44 percent), and remote
(44 percent), and remote workers (27 percent), but more enterprises employed international
workers (27 percent), but more enterprises employed international migrant workers (41 percent).
migrant workers (41 percent). Relatively low share of international migrant workers in
Relatively low share of international migrant workers in Indonesian enterprises can be associated to
Indonesian enterprises can be associated to the fact that, after Myanmar, Indonesia is the 40
the fact that, after Myanmar, Indonesia is the second largest migrant sending country in the region.
second largest migrant sending country in the region.40
A higher share of manufacturing enterprises employed the three types of non-traditional workers
A higher
compared share ofenterprises.
to services manufacturing enterprises employed
Of manufacturing thealmost
enterprises, three70
types of non-traditional
percent employed freelance
workers compared to services enterprises. Of manufacturing enterprises, almost
workers, and 43 percent employed international migrant workers and remote workers. Among 70 percent
enterprises
employed freelance workers, and 43 percent employed international migrant workers and
in the services sector, 48 percent of employed freelance workers, 33 percent employed international
remote
migrant workers.
workers Among
and 23 enterprises
percent employedin remote
the services sector, 48 percent of employed freelance
workers.
workers, 33 percent employed international migrant workers and 23 percent employed
Additionally, in Indonesia, a higher share of small and medium enterprises employed freelance
remote workers.
and remote workers compared to large enterprises. Around 66 percent of small enterprises and 65
percent of medium
Additionally, in enterprises
Indonesia, provided
a higher employment
share of small to freelance
and mediumworkers, comparedemployed
enterprises to 48 percent
of large enterprises.
freelance The share
and remote of small
workers and medium
compared to largeenterprises that
enterprises. employed
Around remote of
66 percent workers
small was
twiceenterprises
that of largeandenterprises (41 percent for small enterprises and 43 percent
65 percent of medium enterprises provided employment to freelance for medium enterprises
compared to 21 percent for large enterprises). Moreover, 54 percent of small enterprises employed
international migrant workers, compared to 33 percent of medium enterprise and 30 percent of large
39
These that
enterprises threereported
types of workers
doingfall
so.into the category of non-traditional workers. According to the ILO definition,
non-traditional, or non-standard work refers to jobs falling outside the realm of standard work arrangements.
Enterprises
This were alsoorasked
includes temporary aboutcontracts,
fixed-term the characteristics of the
temporary agency or positions
dispatched for which
work, they normally
dependent self-
employment, and part-time work).
hire freelance
40
workers, international migrant workers, and remote workers, and their willingness to do
UNDESA: United Nations Global Migration Database (2017).
so (Figure 23, panels a, b, and c). In the questionnaire, enterprises could choose one or more options,
namely, i) practically any position; ii) only if temporary; iii) only if low-paid; iv) only if low-skill;
39 v)
only if low-responsibility; or; vi) not hiring them under any condition.
40 UNDESA: United Nations Global Migration Database (2017).
38
choose one or more options, namely, i) practically any position; ii) only if temporary; iii) only
if low-paid; iv) only if low-skill; v) only if low-responsibility; or; vi) not hiring them under any
condition.

Figure 23. Figure 23. Conditions for recruiting international migrant, freelance, or remote workers
Conditions for recruiting international migrant, freelance, or remote workers
b. International migrant workers

a. Freelance workers
ASEAN
ASEAN
Indonesia
Indonesia
Manufacturing
Manufacturing
Services
Services
Small
Small
Medium
Medium Large
Large
0% 20% 40% 60% 80% 100% 120%
0% 50% 100% 150%
Practically any position Only if temporary
Only if low-paid Only if low-skill Only if low-paid Only if low-skill
Only if low-responsibility Never (under no condition) Only if low-responsibility Never (under no condition)
c. Remote workers
ASEAN
Indonesia
Manufacturing
Services
Small
Medium
Large
0% 30% 60% 90% 120% 150%

Only if low-paid Only if low-skill
Only if low-responsibility Never (under no condition)
Source:Source: ILO: “ASEAN in transformation” Enterprise Survey (Bangkok, 2016)

ILO: “ASEAN in transformation” Enterprise Survey (Bangkok, 2016)
More
More Indonesian
Indonesian enterprises (41percent)
enterprises (41 percent)preferred
preferred to hire
to hire international
international workersworkers for
for temporary
temporary
periods comparedperiods compared
to ASEAN to ASEAN
(31 percent). In(31 percent).
terms In freelance
of hiring terms ofworkers,
hiring freelance
Indonesian workers,
enterprises
Indonesian
preferred enterprises
that such preferred
employment was that such employment
temporary, was temporary,
low-paid, low-skilled low-paid,
or requiring low-skilled
little responsibility.
Moreover, morelittle
or requiring thanresponsibility.
one third of Moreover,
enterprisesmore
in Indonesia
than one reported that they would
third of enterprises never hire
in Indonesia
international workers, and almost half reported they would never hire remote workers. The share of
Indonesian enterprises that would hire international migrant workers and remote workers for practically
40
any position were 19 percent and 14 percent, respectively.
Responses by sectors in Indonesia were significantly different. Manufacturing enterprises were more
inclined to hiring these three types of workers under specific conditions (primarily that of employment
being temporary), compared to services. Among enterprises in services, 53 percent would never hire
remote workers, 43 percent would never employ international migrant worker, and 27 percent would
never hire freelance workers. Conversely, of manufacturing enterprises, 32 percent would never hire
remote workers, 23 percent would never employ international migrant workers and 12 percent would
not hire freelance workers. It is worth highlighting that almost 19 percent of manufacturing and 20
percent of enterprises in services reported being willing to hire international migrant workers for
practically any position and without any condition.
Large enterprises were more likely to rule out all three types of workers compared to small and
medium enterprises. Among Indonesian enterprises employing more than 100 workers, 57 percent
reported they would never hire remote workers, 45 percent reported that they would not engage
international migrant workers, and 26 percent reported they would never employ freelance workers.
By comparison, small enterprises appeared more willing to hire these three types of workers under
specific conditions.
39
About 64 percent of small enterprises expressed willingness to hire international migrant workers
for a temporary position, 42 percent would employ freelance workers on a temporary basis, and 41
percent would hire remote workers for a temporary position. Likewise, a similar share of medium
enterprises reported willingness to hire these three types of non-traditional workers under temporary
contractual conditions. It is likely that small and medium enterprises are more open to hiring these
types of workers in order to lower operational costs, given the greater financial constraints small and
medium enterprises typically face compared to large enterprises.
Overall, enterprises in Indonesia were optimistic about their future business prospects (Figure 24).
More than 60 percent believed that their profits, labour productivity, domestic sales and the number of
high-skilled workers they employed would all increase through 2025. About 50 percent felt that their
exports and total employment would increase, and 44 percent thought that the number of women
energythey
workers would increase,
employed and increase
would 47 percent thought
as well. that the
However, regulatory
more burden
than half in Indonesia
of enterprises would
expect that their
increaseonbylabour
spending 2025. costs, staff training and R&D would increase. Additionally, of total enterprises,
52 percent believe that demand for energy would increase, and 47 percent thought that the regulatory
burden in Indonesia would increase by 2025.
Figure 24. Long-term business prospects in future

Figure 24. Long-term business prospects in future
Profits
Labour productivity
Domestic sales
High-skill workers emp.
Total workers employed
Exports
Women employed
Labour cost per worker

Spending on training
Spending on R&D
Demand for energy
Regulatory burden
0% 50% 100%
Increase No impact Reduce Don’t know

The comparison of responses by different types of enterprises regarding future outlook through
Thereveals
2025 comparison of responses
interesting by different
findings (Figure typesa of
25, panel & enterprises
b). Compared regarding future
to services, outlook
a larger share of
through 2025 reveals interesting findings (
manufacturing enterprises believed that profits, labour productivity, high-skilled workers, total workers
and women workers would increase. However, more manufacturing enterprises reported that the
regulatory burden, and costs associated to energy and labour as well as spending on R&D and staff
training would increase. Likewise, a higher proportion of small enterprises expected that both potential
benefits as well as costs would increase in near future. There were no major differences in the responses
between medium and large enterprises.
40
Figure 25. Long-term future prospects by a) sector b) size

Figure 25. Long-term future prospects by a) sector b) size
a. 80%
70%
60%
50%
40%
30%
20%
10%
0%
Indonesia Manufacturing Services
b. 90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Indonesia Small Medium Large
Source:
“ASEAN in transformation”Enterprise
in transformation” Enterprise Survey
Survey(Bangkok, 2016)2016)
(Bangkok,
In the survey, enterprises were asked to consider the likely impact of technological advances on
their Inoperations
the survey,inenterprises
the long-term were(2025).
asked Overall,
to consider the likely enterprises
Indonesian impact of technological advances
seemed optimistic on this
on their operations in the long-term (2025). Overall, Indonesian enterprises
front (Figure 26). More than half believe that labour productivity, domestic sales, profits and high- seemed
optimistic
skilled workers onwillthis front (Figure
increase owing to 26). More than half
technological believe that About
improvements. labour 40
productivity,
percent feltdomestic
that exports
will increase as well.
sales, profits andInhigh-skilled
terms of job displacement,
workers compared
will increase owingtotothe ASEAN average,
technological enterprises in
improvements.
Indonesia
Aboutbelieve that thefelt
40 percent aggregate impactwill
that exports of technology
increase asonwell.
jobs In
would
termsbe high.
of jobHowever, 29 percent
displacement,
of enterprises
compared also believe
to the ASEANthat total number
average, of jobs
enterprises will increase
in Indonesia while
believe 32the
that percent believe
aggregate that total
impact
number of workers employed will reduce. By comparison, among ASEAN
of technology on jobs would be high. However, 29 percent of enterprises also believe thatenterprises, 34 percent
reported
totalthat technology
number of jobswill
willincrease
increasethe total32number
while percentofbelieve
jobs, and
that23total
percent said that
number technology
of workers
will reduce
employedthe total numberByofcomparison,
will reduce. workers employed. 41
among ASEAN enterprises, 34 percent reported that
44
41 ILO: ASEAN in transformation: Perspectives of enterprises and students on future work, op. cit.
41
reduce the total number of workers employed.41
Figure
Figure26.26.
Impact of technology
Impact on business
of technology performance
on business performance
Labour productivity
Domestic sales
Profits
High-skill workers emp.
Labour cost per worker
Exports
Total workers employed
Women employed
0% 50% 100%
Increase No impact Reduce Don’t know
Source:
“ASEAN in transformation” Enterprise
in transformation” Enterprise Survey (Bangkok,
Survey 2016)
(Bangkok, 2016)
Comparing responses by sector, it is worth highlighting that manufacturing enterprises were more
Comparing responses
optimistic about the by sector,
impact it is worth
of technology onhighlighting
future businessthat manufacturing
performance enterprises
than enterprises were
in the service
moreindustry (Figure
optimistic 27). For
about theinstance,
impactof oftotal manufacturing
technology on enterprises, about 40performance
future business percent reportedthanthat
the number
enterprises in theof service
both women workers
industry and total
(Figure 27,workers willFor
panel a). increase, compared
instance, to over
of total 20 percent of
manufacturing
enterprises in the services sector. Nevertheless, 52 percent of manufacturing enterprises also expect
enterprises, about 40 percent reported that the number of both women workers and total
that labour costs will increase due to technological progress, compared to 38 percent of enterprises
workers will
in the increase,
services sector.compared to over
Moreover, small 20 percent
enterprises of enterprises
were more in the
optimistic about services progress
technological sector.
Nevertheless,
and impact52 on percent of manufacturing
their business performance thanenterprises
medium andalso large expect that
enterprises labour
(Figure 28).costs will
increase due to technological progress, compared to 38 percent of enterprises in the services
Lastly, the enterprises were asked about the long-term impact on their business as a result of
sector. Moreover,
increased small
economic enterprises
integration were including
in ASEAN, more optimistic
the creationabout
of thetechnological
ASEAN Economic progress and
Community
impact on their
(AEC) business
(Figure performance
29). Overall Indonesianthan medium
enterprises wereand largeon
positive enterprises
this front as( well. Approximately
half reported that their profits, labour productivity and number of high-skilled workers would increase
due to the AEC. Likewise, about 43 percent of enterprises said that both exports and domestic sales
would increase. About one third of enterprises in Indonesia reported that the number of total workers
and women workers employed would increase, reflecting a slightly lower level of optimism than ASEAN
27, panel b).
Figureenterprises in general. However, almost half of Indonesian enterprises said that increased sub-regional
integration would result in higher labour costs.
41
ILO: ASEAN in transformation: Perspectives of enterprises and students on future work, op. cit.
45
42 ILO: ASEAN in transformation: Perspectives of enterprises and students on future work, op. cit.
42
Figure
Figure 27. Impact
27. Impact of technology
of technology on business
on business performance by a)performance byofsectors
sectors and b) size enterprises
a. 70%
60%
50%
Figure 27. Impact
40% of technology on business performance by a) sectors and b) size of enterprises
30%
a. 70%
20%
60%
10%
50%
0%
40%
30%
20%
10%
0%
b. 80%
60%
Figure
40%28. Impact of technology on business performance by size of enterprises
20%
0%
b. 80% Women Total Exports Labour cost High-skill Profits Domestic Labour
60% employed workers per worker workers sales productivity
employed emp.
40%
20% Indonesia Small Medium Large
0%
Women Total Exports Labour cost High-skill Profits Domestic Labour
employed workers per worker workers sales productivity
employed
Source: ILO: emp.
“ASEAN in transformation” Enterprise Survey (Bangkok, 2016)
Lastly, the enterprises wereIndonesia asked aboutSmall Medium

the long-term impact onLargetheir business as a result of
increased economic integration in ASEAN, including the creation of the ASEAN Economic
Community (AEC)Source: (Figure 28). Overall Indonesian enterprises were positive on this front as
ILO: “ASEAN in transformation” Enterprise Survey (Bangkok, 2016)
well. Approximately
Responses by sectorhalf andreported
size of that their profits,
enterprise labour productivity
reveal interesting findings and number
(Figure of high-
29, panel a & b).
Lastly, the enterprises were asked about the long-term impact on their business as a result
saidof on
Manufacturing
skilled workersand small
wouldenterprises
increase due were tomore
the AEC.optimistic about
Likewise, the 43
about impact of economic
percent of enterprisesintegration
mostthatincreased
aspects economic
bothofexports
their andintegration
businesses compared
domestic in ASEAN,
sales towould including
enterprises the creation
in services,
increase. About and of theofASEAN
onemedium
third and largeEconomic
enterprises enterprises.
in
As for Community
manufacturing (AEC) (Figure
enterprises, 28). Overall Indonesian
betweenof40total andworkers enterprises
56 percent were positive on this front as
Indonesia reported that the number andsaid
womenthat increased economic would
workers employed integration
would well.
increase,Approximately
increase the number
reflecting halfofreported
a slightly total
lower that
leveltheir
workers profits,women
(including
of optimism labour productivity
and high
than ASEAN and number
skilled
enterprises workers), ofdomestic
in general. high-
42
skilled workers
sales,However,
exports and
almost would
labour ofincrease
halfproductivity.
Indonesian due
Thisto the AEC. said
compares
enterprises Likewise,
to betweenabout 3043
that increased andpercent of enterprises
50 percent
sub-regional of said in
enterprises
integration
that result
the service
would both
sector. exports
higherand
inAdditionally, domestic
labour about
costs.54 sales would
percent of increase. Aboutenterprises
manufacturing one third reported
of enterprises in
that labour
costs would increase
Indonesia compared
reported that the to 43 percent
number ofof enterprises
total workers in andservices.
womenFor small enterprises,
workers employed would between
47 andincrease,
66 percent thoughtathat
reflecting increased
slightly lowereconomic integrationthan
level of optimism wouldASEANalso increase
enterprisesthe in number of 42total
general.
workers (including
However, women
almost halfand high skilledenterprises
of Indonesian workers), domestic
said that sales, exports
increased and labourintegration
sub-regional productivity.
Medium
42
ILO:and
ASEANlarge
in enterprises
transformation: were
would result in higher labour costs. significantly
Perspectives of less
enterprises optimistic
and studentsabout
on increased
future work, economic
op. cit. integration
in ASEAN. 46
42
ILO: ASEAN in transformation: Perspectives of enterprises and students on future work, op. cit.
46
43
productivity. Medium and large enterprises were significantly less optimistic about increased
economic integration in ASEAN.
Figure 29. Impact

Figure 29.from ASEAN
Impact economic
from ASEAN economicintegration bya)a)
integration by sector
sector and and b) size
b) size
a. 60% b. 70%
50% 60%
40% 50%
40%
30%
30%
20% 20%
10% 10%
0% 0%
Indonesia Manufacturing Services Indonesia Small Medium Large

47
7.4 Towards a technology driven economy

Indonesia has jumped five places on the 2017 Global Competitiveness Index (GCI).43 The country
is currently ranked 36th on GCI. Across the 12 pillars for which the competitiveness of a country
is measured, Indonesia does well in terms of its market size and macroeconomic environment. In
innovation and business sophistication, it ranks slightly higher than its overall global ranking. However,
on technological readiness Indonesia is ranked 80th. Within the technological readiness sub-index,
Indonesia fares poorly in terms of internet users, broadband connections, as well as internet bandwidth.
Indonesia’s ranking in availability of latest technologies is slightly better within the technological
readiness sub-index.
There is just one broadband connection for every 100 people. However, according to the
Association of Indonesia Internet Provider Services or Asosiasi Jasa Penyelenggara Jasa Internet Indonesia
(APJII) slightly over half of the population (51.8 percent) was already using internet in 2016 (APJIII,
2016). There has been a significant increase in internet users from 34.9 percent in 2014. While in
aggregate terms, connectivity in Indonesia is increasing, a much higher proportion of internet users
(65 percent) in 2016 were on the island of Java.
Poor infrastructure outside Java limits connectivity. However, the use of mobile phones is offsetting
this by enabling people to go online through their mobile phones. Unlike the past, when cost was quite
high, greater competition in cellular telephony is making it cheaper and affordable for more and more
customers to access the internet through their mobile devices. A large number of Indonesians are actively
using social media and, in fact, Indonesia is ranked 3rd globally in social media growth (Kemp, 2017).
While lack of infrastructure can be a major constrain to connectivity, technology itself can
address some of these constraints and engender innovation. As an “early adopter” of technology, we
can see financial industry using innovative ways to increase their clientele. A lot of banks these days
are providing online services which make it possible for people to transfer money and pay for goods
and services from their homes rather than visit bank offices.
43 World Economic Forum, Global Competitiveness Report 2017-2018.
44
In fact the marriage between finance and technology has given birth of what are called as the fintech
companies. These companies rely primarily on digitalization for their operations. A good example of
fintech to overcome poor infrastructure is M-PESA in Kenya. Compared to Indonesia, mobile banking
started and expanded much earlier in Kenya which has fewer bank branches in rural areas. M-PESA
is one of the leading mobile payment systems in Kenya and already has 2.5 million registered users.44
The rapid growth of ride-hailing services in several cities of Indonesia may also be a response
to the poor state of public transportation. Traffic congestion makes online buying more appealing to
consumers who prefer to shop from their homes rather than spend a lot of time stuck in the traffic.
Also, for Indonesians living in smaller towns and rural areas, away from the shopping malls in cities,
online shopping means having access to a greater range of things that they can purchase with a click
of their cellular phones.
Based on available information, it appears that digitalization in Indonesia’s trade and services
sector seems to be more widespread. Without detailed firm level data, it is difficult to tell the pace of
technology uptake in the other sectors of the economy such as manufacturing. As discussed above, the
use of industrial robots has increased in Indonesia, albeit from a low base. In several labour intensive
sectors of manufacturing such as garments technology uptake is probably less widespread owing to
the nature of production which, at least for now, requires humans to perform several tasks which are
difficult for machines to do.
Overall though Indonesia’s manufacturing sector is still growing, but the pace of growth and
job creation has diminished compared to the period prior to the financial crisis in 1997. Growth in
manufacturing has not picked up significantly in Indonesia in the post 1997 period. Between 2003 and
2015 while the economy grew at 5.6 percent annually, the annual growth rate in the manufacturing
sector was only 4.9 percent.
Indonesia has lost some of its global market share in manufacturing. Arguably, this has more to
do with the investment climate and competitiveness (World Bank, 2012). Before the launch of the
current set of business reforms (paket kebijakan), Indonesia was losing its export competitiveness in
several niche manufacturing sub-sectors such as furniture, garments and textiles (Kuncoro, 2013). More
recently, there are also cases of several large furniture companies relocating to Viet Nam owing to low
cost and a more conducive business environment.45
In the global manufacturing value added (MVA), Indonesia is ranked 11th in the world (UNIDO,
2016). Indonesia’s share in global MVA shows a slight increase from 1.55 percent in 2005 to 1.83
percent in 2016. In the same period, for example, China’s global share of MVA more than doubled
from 11.6 percent to 24.3 percent. It is important to note here that almost all the countries other than
China which are ranked in the top 15 saw their MVA shrink. In other words, the decline in the relative
contribution of manufacturing in the economy seems to be a “global phenomenon”.
Based on available evidence, it appears that automation or adoption of sophisticated technology, at
least for now, is not the only factor which is slowing the growth of manufacturing or jobs in this sector.
According to Rodrik (2015) technology played a less significant role in the premature deindustrialization
of several developing countries. Compared to the past, Indonesia is no doubt facing greater competition
from China as well as countries like Bangladesh, Vietnam, Cambodia, to name a few which have increased
their footprint in low-end manufacturing. It was expected that with the development in China, the so
called “sunset industries” will relocate to other emerging markets. But, this shift to emerging markets
is not happening in any significant manner yet.
44 http://www.cgap.org/blog/why-has-m-pesa-become-so-popular-kenya
45 http://jakartaglobe.id/business/furniture-producers-relocate-vietnam-due-cheap-labor-costs-business-friendly-regulations/
45
As discussed in the previous section, the findings from the enterprise survey present a picture of
firms in the manufacturing sector being more optimistic about technology. Compared to firms in the
services sector, manufacturing firms see a lot of benefits from technology including higher revenue,
rising corporate profits as well as labour productivity. Interestingly, more of these firms also expect that
the number of workers will grow. The main challenge cited by the businesses vis-à-vis technology is
the high investment (fixed) costs. Besides that, manufacturing firms seem to be more concerned about
domestic regulatory environment and not so much about economic integration in ASEAN.
The reason that manufacturing is singled out in our technology and jobs discussion is owing to
its developmental impact. Historically, manufacturing offered the pathway for low-income countries
to reduce their dependency on agriculture (World Bank, 2017). Very few countries have made the
transition and industrialized without experiencing a significant increase in the manufacturing output.
Manufacturing provided dual benefits: economic growth as well as jobs which often were more
productive than agriculture.
Without finding new sources of growth that have the same dual effect as manufacturing, it will
be difficult for Indonesia to manage technological upgrading without undermining job creation. An
optimistic way of looking at the current challenge is to use the opportunities that technology offers to
shape the Indonesian economy in a way that it unleashes productive growth and benefits are spread
more equitably among the population.
46
8

Skills challenge in
Indonesia
IN several of the preceding sections of this report we have touched upon human skills. As
discussed, future technology will disproportionally impact routine tasks that can be codified and done
by computers and machines. Besides fixed costs, finding skilled workers was one of the constraints
identified by firms which makes adoption of technology difficult in Indonesia.46
The ability of the workforce to continuously improve their skills will be a key determinant
whether technology becomes a blessing or spells doom for jobs. In this section, we will delve deeper
to understand available skills and gaps in Indonesia’s human capital.
8.1 Working age population and labour force

The total working age population (15yrs +) of Indonesia in 2016 was estimated to be slightly over
189 million people. Between 1996 and 2016 the working-age population increased by over 57 million
people. During this period, the labour force, which includes both unemployed and employed, increased
by 37.6 million which translates into a net annual increase of approximately 1.8 million people. The
labour force participation rate (LFPR) indicates the potential supply of labour from the working-age
who can engage in the production of goods and services. In 2016 a total of 125.4 million or 66.3
percent of the working age population was in the labour force. Apart from 2015 when it dropped to 65.8
percent, LFPR in the last two decades has remained somewhat constant, hovering around 66 percent.
As shown in Figure 30, the age group 30-34 has the highest LFPR (95.8 percent). We can see
that LFPR for men starts to fall gradually for those aged 35 and above. On the other hand, the peak
in LFPR for women is achieved when they are in their early to mid-forties (62.3 percent). The rate
drops slightly for the 45-49 age group and then marginally increases again (50-54 years) before it starts
to fall. The fact that the participation of women peaks in the forties compared to men can probably
be explained by additional domestic and childbearing responsibilities for women. The latter being the
case usually for women below 45.
The LFPR pattern for different age groups has remained relatively unchanged over the last two
decades. The one noticeable change is the participation rate of 15-19 years old. LFPR for this age
group (both male and female) dropped considerably between 1996 and 2016. It dropped approximately
12.7 percentage points. During this period school enrolment rate for different levels increased. On the
other hand, the proportion of NEET declined between 1996 (27.1 percent) to 2016 (23.2 percent).
46 ILO, 2016 ASEAN in Transformation Enterprise Survey.
47
Figure 30. Labour

Figure 30force
Labour participation
Force Participation rate byAgeage
Rate by and and sexand
Sex (1996 (1996
2016)and 2016)
120.0
100.0
80.0
60.0
40.0
20.0
0.0
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+
Male (1996) Female (1996) Male (2016) Female (2016)
Source: ILO staff

Source: calculations
ILO staff calculationsusing
using Sakernas data
Sakernas data (1996
(1996 & 2016)
& 2016)
As compared to women, the participation of men in the labour force, although dropped
As compared
slightly, to women,
continues the participation
to be high. In 1996, 83.5 of men in
percent ofthe
thelabour force, although
male working droppedwas
age population slightly,
continues
in the labour force while in 2016 the proportion had slightly decreased to 82 percent. On theforce
to be high. In 1996, 83.5 percent of the male working age population was in the labour
whileother
in 2016 theonly
hand proportion had working-age
half of the slightly decreased
womento 82 percent.
were in theOn the other
labour force.hand
Thisonly
trendhalf
hasof the
working-age women were in the labour force. This trend has remained virtually unchanged. LFPR of
remained virtually unchanged. LFPR of females (50.8 percent) in 2016 was almost identical
females (50.8 percent) in 2016 was almost identical (50.7 percent) compared to 1996.
(50.7 percent) compared to 1996.
However, the seemingly steady pattern in female LFPR conceals differences among different
cohorts. Analysing
However, the urban/
the seemingly rural pattern
steady dynamics in female
in female LFPR,
LFPR Das differences
conceals & Schaner (2016)
amonghave observed
different
that cohorts.
in recentAnalysing
years younger women
the urban/ in urban
rural areasin have
dynamics increased
female their& labour
LFPR, Das force
Schaner participation,
(2016) have
largely through wage employment. On the other hand the LFPR of younger women
observed that in recent years younger women in urban areas have increased their labour in rural areas has
decreased.
force participation, largely through wage employment. On the other hand the LFPR of
To see the
younger difference
women in LFPR
in rural areas geographically,
has decreased. we consider the gender-gap which is the comparative
proportion of female and male LFPR. Looking across the provinces in Indonesia, Kalimantan Utara has
the highest
To see female gender gap
the difference in in LFPR
LFPR which is as high
geographically, weasconsider
46.4 percent. On the other
the gender-gap hand,isthe
which thegap in
Bali comparative
is only 13.3 percent. Theofgender-gap
proportion female andinmale
the capital city of Jakarta
LFPR. Looking is close
across the to theinnational
provinces average.
Indonesia,
Kalimantan Utara has the highest female gender gap in LFPR which is as high as 46.4 percent.
On the other hand, the gap in Bali is only 13.3 percent. The gender-gap in the capital city of
Jakarta is close to the national average.
52
48
Figure 31. Female
Figure 31:gender gap in
Female gender gaplabour force
in labour forceparticipation
participation Raterate (LFPR)
(LFPR) in provinces
in provinces
50.0
45.0 Figure 31: Female gender gap in labour force participation Rate (LFPR) in provinces
40.0
35.0
50.0
30.0
45.0
25.0
40.0
20.0
35.0
15.0
30.0
10.0
25.0
20.05.0
15.0 -
BARAT BANGKA…
RIAU
SULAWESI SELATAN
MALUKUBENGKULU
RIAU
PAPUA
MALUKU UTARA LAMPUNG
MALUKU UTARA
SULAWESI UTARA
DKI JAKARTA
GORONTALO
SUMATERA UTARA
TIMURTENGGARA
DI YOGYAKARTA
JAWA BARAT
PAPUA BARAT
JAWA TIMUR
TIMUR
ACEH
BARAT
KALIMANTAN BARAT
SUMATERA BARAT
TENGGARA BARAT
TIMUR TENGAH
JAWA TENGAH
TIMUR
ACEH BANTEN
BARAT TENGAH
JAMBI
BALI
BARAT SELATAN
TENGAH SELATAN
NATIONAL
SULAWESI TENGGARA MALUKU

UTARA
10.0
5.0
KALIMANTAN KEPULAUAN
PAPUA SULAWESI
NUSA TENGGARA
KALIMANTAN
-
KALIMANTAN
JAWASULAWESI
BANGKA…
KALIMANTAN
KEPULAUAN
JAWASUMATERA
KALIMANTAN
RIAU
SULAWESI SELATAN
BENGKULU
KEPULAUAN RIAU
PAPUA
LAMPUNG
SULAWESI UTARA
DKI JAKARTA
GORONTALO
YOGYAKARTA
SUMATERA UTARA
BARAT
BARAT
TIMUR
BARAT
SULAWESI TENGAH
BANTEN
KALIMANTAN TENGAH
JAMBI
BALI
KALIMANTAN SELATAN
SUMATERA SELATAN
AVERAGE NATIONAL
KALIMANTAN UTARA
KEPULAUANAVERAGE
SULAWESI
NUSA TENGGARA
KALIMANTAN
SULAWESI
JAWA
SUMATERA
NUSA TENGGARA
DI NUSA
Source:ILO
Source: ILOstaff
staffcalculations
using 2016 2016
Sakernas
Compared to several neighbouring countries in Asia (Figure 32), LFPR of women in Indonesia
Compared to several neighbouring countries
Source: ILO staff in using
calculations Asia Sakernas
(Figure 2016
32), LFPR of women in Indonesia
falls somewhere in the middle, almost at par with Philippines, butbut
falls somewhere in the middle, almost at par with Philippines, muchlower
much lowerthan
thanCambodia
Cambodia and
and Viet
VietCompared
Nam. Nam.
Among
to Among
the
several the countries,
selected selected
neighbouring countries,
LFPRininAsia
countries LFPR in Pakistan
Pakistan
(Figureis32), is the
the LFPR
lowest lowest
of (24.6
women (24.6
percent) percent)
followed by
in Indonesia
India followed
(26.9 by India
percent). (26.9 percent).
falls somewhere in the middle, almost at par with Philippines, but much lower than Cambodia
and Viet Nam. Among the selected countries, LFPR in Pakistan is the lowest (24.6 percent)
Figure 32: Labour Force Participation Rate in selected countries in Asia
followed by India (26.9 percent).
100.0
Figure 32. Labour force participation rate in selected countries in Asia
90.0Figure 32: Labour Force Participation Rate in selected countries in Asia
80.0
100.0
70.0
90.0
60.0
80.0
50.0
70.0
40.0
60.0
30.0
50.0
20.0
40.0
10.0
30.00.0
20.0
10.0
0.0
LFPR (Male) LFPR (Female)
Source: ILO staff calculations using estimates from ILOSTAT database

LFPR (Male) LFPR (Female)

53
53
49
8.2 8.2Labour
Labour force and education
force and education
Thebreakdown
The breakdownof of LPFR
LPFR bybyeducational
educationalattainment
attainmentininIndonesia
Indonesiashows
showsthat thethe
that proportion
proportion of of
thosehave
those who whocompleted
have completed senior school,
senior school, diploma,diploma, and tertiary
and tertiary level education
level education increasedincreased
in the lastintwo
decades.
theConcurrently, the proportion
last two decades. of labour
Concurrently, force with
the proportion of primary and junior
labour force high level
with primary andeducation
junior
decreased.
high While
level this trend isdecreased.
education positive, there is still
While thisa significant proportion
trend is positive, (41ispercent)
there still a of the labour
significant
force in 2016 who had only completed primary school or never been to school.
proportion (41 percent) of the labour force in 2016 who had only completed primary school
or never been to school.
Figure 33. LabourFigure

force33:
byLabour Force by education
education
University/Diploma IV
Diploma III
Diploma I/II
Vocational High school
Senior High school
Junior High school
Primary School or less
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0
1996 2006 2016
Source:
Source: ILO staff ILO staff using
calculations calculations using Sakernas
Sakernas data 2006 & 2016)
data (1996,
Less than 10 percent or 11.6 million people in the labour force have a university degree.
Less than nearly
Overall, 10 percent or 11.6 million
15 percent people in
(18.5 million) of the
thelabour
labourforce
forcehave a university
have either notdegree. Overall,
completed
nearly elementary
15 percent school
(18.5 million) of the labour force
or never been to school. have either not completed elementary school or
never been to school.
Among
Amongthose
thosewho
whohave
haveaauniversity
universityeducation
education(bachelors
(bachelorsand
andabove)
above)only
onlyaaquarter
quarterarearefrom
fromthe
rural areas. At the
the rural masters
areas. At theand doctoral
masters andlevel the percentage
doctoral is even much
level the percentage lower:
is even only
much 10 percent
lower: only 10and
1 percent of labour
percent and 1force withofa labour
percent master force
and doctoral degree and
with a master respectively
doctoralare from respectively
degree rural areas. Onarethe
other hand, more than 63 percent of the labour force with primary education or less
from rural areas. On the other hand, more than 63 percent of the labour force with primaryare from rural
areas. The data clearly
education show
or less are the urban-rural
from divide
rural areas. Theindata
educational
clearly attainment.
show the urban-rural divide in
Ineducational attainment.
light of rapid technological changes and innovations in management practices, it appears that
Indonesian students value more academic disciplines with better prospects for future jobs. To understand
the general preferences
In light among students
of rapid technological by subject
changes matter, we look
and innovations at the findings
in management from anit ILO
practices, survey
appears
carriedthat
outIndonesian
in 2015. students
47
The survey targeted
value 367 university
more academic and 125
disciplines withstudents enrolled for
better prospects in technical,
future
vocational, education training (TVET). A larger proportion of Indonesian students
jobs. To understand the general preferences among students by subject matter, we look were studying
at
business, finance, and ICT compared with other countries in the ASEAN. The leading disciplines were
business, commerce and finance for women (33.1 percent) and information, communications54and
technology (ICT) for men (24.4 percent) (Figure 34, panel a). These results compare to 29.5 percent and
15.1 percent of ASEAN students who studied business, commerce and finance, and ICT, respectively.
47 ASEAN in transformation: How technology is changing enterprises and future work, 2015.
50
percent)
percent) (Figure
(Figure 34,
34, panel
panel a).
a). These
These results
results compare
compare to
to 29.5
29.5 percent
percent and
and 15.1
15.1 percent
percent of
of
ASEAN
ASEANstudents
studentswhowhostudied
studiedbusiness,
business,commerce
commerceandandfinance,
finance, and
andICT,
ICT,respectively.
respectively.

Figure 34. FieldFigure
of study
Figure34. among
34. Field
Fieldof university
ofstudy
studyamong & TVET
amonguniversity
university students
&&TVET
TVETstudents
students
a)
a)Field
Fieldof
ofstudy
studyby
bygender
gender b)
b)Field
Fieldof
ofstudy
studyby
bytype
typeof
ofdegree
degree
Business,
Business,commerce,
commerce,finance
finance
Business,
Business,commerce,
commerce,finance
finance
Engineering
Engineering
Engineering
Engineering
ICT
ICT
ICT
ICT
Other
Other
Other
Other
Humanties,
Humanties,arts,
arts,education
education
Humanties,
Humanties,arts,
arts,education
education
Science,
Science,maths,
maths,statistics
statistics
Science,
Science,maths,
maths,statistics
statistics Health,
Health,medicine
medicine ASEAN
ASEAN
ASEAN
ASEAN
Health,
Health,medicine
medicine Social
Socialsciences
sciences Indonesia,
Indonesia,TVET
TVET
Indonesia,women
Indonesia, women
Social
Socialsciences
sciences Law
Law Indonesia,
Indonesia,university
university
Indonesia,men
Indonesia, men
Law
Law 0%
0% 10%
10% 20%
20% 30%
30% 40%
40% 50%
50%
0%
0% 10%
10% 20%
20% 30%
30% 40%
40% Source:
Source:ILO
ILO“ASEAN
“ASEANinintransformation”
transformation”Student
Student
Survey
Survey
Source: ILO “ASEAN (Bangkok,
(Bangkok,2016)
2016)
in transformation” Student Survey (Bangkok, 2016)
ItIt isisItworth
worth highlighting
highlighting
is worth here
here here
highlighting that
that only
only 24.4
that 24.4 percent
only percent of
of Indonesian
24.4 percent Indonesian women
womenwomen
of Indonesian studied
studiedstudied
science,
science,science,
technology,
technology,
technology, engineering andand
engineering
engineering mathematics
and (STEM)
mathematics
mathematics degrees,
(STEM)
(STEM) compared
degrees,
degrees, to 50 percent
compared
compared to
to 5050of Indonesian
percent
percent of men.
of
The gender differential
Indonesian
Indonesian men.
men. The in STEM
Thegender
gender uptake underlines
differential
differential in
in STEM potential
STEMuptake
uptake disadvantages
underlines
underlines potential
potential that Indonesian women
disadvantages
disadvantages
may
that
that face when entering
Indonesian
Indonesian women
women the jobface
may
may market,
face when
wheninentering
light of digitization
entering the
the job and automation.
job market,
market, in
in light
light of
of digitization
digitization and
and
automation.
automation.
Additionally, among university students, the most popular fields of study were business, commerce
and finance (21.8
Additionally,
Additionally, percent),
among
among engineering
university
university (16.3the
students,
students, percent)
the mostand
most socialfields
popular
popular sciences
fields of (15.3
of studypercent).
study were Among TVET
were business,
business,
students,
commerce 41.6
commerce and percent studied
and finance
finance (21.8business,
(21.8 percent),commerce
percent), engineeringand finance,
engineering (16.3 24
(16.3 percent)percent
percent) and studied
and social ICT
social sciencesand 8.8 percent
sciences (15.3
(15.3
were enrolled
percent).
percent). in courses
Among
Among TVET on health 41.6
TVET students,
students, and
41.6medicine.
percent
percent studied
studied business,
business, commerce
commerce andand finance,
finance, 24
24
Students
percent
percent wereICT
studied
studied also
ICT asked
and
and 8.8to
8.8 identify
percent
percent the enrolled
were
were sector in which
enrolled in theyon
incourses
courses wanted to and
onhealth
health work after graduation (Figure
andmedicine.
medicine.
35, panels a & b). The three most desired sectors among Indonesian women were construction (15.6
percent),
Students
Students manufacturing
were
werealso
alsoasked
asked(12.2
to percent)
toidentify andsector
identifythe
the ICT services
sector in
inwhich
which(10.9
theypercent)
they wanted(Figure
wanted to work35,
towork panel
after
after a). Interestingly,
graduation
graduation
while construction
(Figure
(Figure 35, panelsisaaone
35, panels && b).ofThe
b). thethree
The moremost
three desired
most sectors
desired
desired for female
sectors
sectors among
among students,
Indonesian
Indonesian there are relatively
women
women were fewer
were
women employed
construction
construction (15.6 in this sector.
(15.6 percent),
48
In 2016,
percent), manufacturing among
manufacturing (12.2 the 7.9
(12.2 percent)million
percent) and workers
and ICT in
ICT servicesconstruction
services (10.9 percent)165,148
only
(10.9 percent)
or(Figure
a little 35,
(Figure overpanel
35, 2 percent
panel a). were women.
a). Interestingly,
Interestingly, Almost
while
while 91 percent
construction
construction of workers
isis one
one of
of the
the morein construction
more desired
desired sectors werefor
sectors employed
for
asfemale
operators
female and labourers.
students,
students, there
thereare areAs a proportion
relatively
relatively fewerfrom
fewer women
women theemployed
total females
employed in in construction,
inthis
this sector4848..In
sector 55 percent
In2016,
2016, amongworked
among
as operators and labourers. However, a higher proportion of females (26.9 percent) were in clerical
and related occupations compared to men (1.3 percent).
47
47
ASEAN
ASEANin
intransformation:
transformation:How
Howtechnology
technologyisischanging
changingenterprises
enterprisesand
andfuture
futurework,
work,2015.
2015.
48
48 AmongAugust
Sakernas,
Sakernas, Indonesian
August 2016 men, the three most desired sectors were ICT (20.3 percent), education (11.6
2016
percent) and manufacturing (9.3 percent). Women disproportionately wanted to work in the construction
55
55
and manufacturing sectors compared to men (27.8 percent compared to 15.7 percent, respectively).
As mentioned, less than 25 percent women were enrolled in STEM degrees which shows a kind of
mismatch between the preferred employment sector and the area of study.
The three most preferred sectors of employment in ASEAN were ICT services (11.9 percent),
financial or insurance services (10.2 percent) and manufacturing (7.8 percent). Even though scientific and
technical research was not among the most preferred sectors, it is worth noting that about 2.2 percent
of Indonesian students wanted to work in this sector compared 5.1 percent of students across ASEAN.
Responses in Indonesia according to the type of degree varied significantly (Figure 35, panel
b). Among TVET students, the most desired sector of employment was construction (26.4 percent),
followed by manufacturing (18.4 percent) and ICT (10.4 percent). Among university students, the most
48 Sakernas, August 2016.
51
Responses in Indonesia according to the type of degree varied significantly (Figure 35, panel
b). Among TVET students, the most desired sector of employment was construction (26.4
b). Among TVET students, the most desired sector of employment was construction (26.4
percent), followed by manufacturing (18.4 percent) and ICT (10.4 percent). Among university
Indonesia percent),
Jobs Outlook 2017followed by manufacturing (18.4 percent) and ICT (10.4 percent). Among university
students, the most preferred sectors of employment were ICT (15.5 percent), financial or
students, the most preferred sectors of employment were ICT (15.5 percent), financial or
insurance
preferred sectors activities (9.5 percent)
of employment wereandICTmanufacturing
(15.5 percent),(8.7 percent).
financial It is worthactivities
or insurance highlighting
(9.5that
percent)
insurance activities (9.5 percent) and manufacturing (8.7 percent). It is worth highlighting that
7.6 percent of(8.7
and manufacturing university
percent).students
It is worth reported wanting
highlighting that to percent
7.6 work inofthe construction
university sector
students reported
7.6 percent of university students reported wanting to work in the construction sector
wanting comparedto worktoto in26.4
the percent of TVET
construction students
sector in Indonesia.
compared to 26.4 percent of TVET students in Indonesia.
compared 26.4 percent of TVET students in Indonesia.
Figure 35. Preferred

Figure 35.sectors
Preferredofsectors
Figure 35. Preferred employment
sectors by a)
of employment
of employment
by gender
by a) genderand
a) gender and b)b)qualification
qualification
and b) qualification
b) Ideal sector of employment by type of degree
a) Ideal sector of employment by gender b) Ideal sector of employment by type of degree
a) Ideal sector of employment by gender ICT services
ICT services ICT services
ICT services Financial or insurance services
Financial or insurance services Financial or insurance services
Financial or insurance services Manufacturing
Manufacturing Manufacturing
Manufacturing Education
Education Education
Education ASEAN Arts or entertainment ASEAN
Arts or entertainment ASEAN Arts or entertainment ASEAN
Arts or entertainment Indonesia, women Indonesia, TVET
Indonesia, women Retail Indonesia, TVET
Retail Retail Indonesia, university
Retail Indonesia, men
Indonesia, men Human health or social work Indonesia, university
Human health or social work Human health or social work
Human health or social work Construction
Construction Construction
Construction Hotels or restaurants
Hotels or restaurants Hotels or restaurants
Hotels or restaurants
Scientific or technical… Scientific or technical research
Scientific or technical… Scientific or technical research
0% 5% 10% 15% 20% 0% 5% 10% 15% 20% 25% 30%
0% 5% 10% 15% 20% 0% 5% 10% 15% 20% 25% 30%
Source: ILO ILO

Source: “ASEAN in transformation”
“ASEAN in transformation” Student Survey
Student Survey (Bangkok,
(Bangkok, 2016)2016)
Source: ILO “ASEAN in transformation” Student Survey (Bangkok, 2016)
56
56
8.3 Skills gap
In a knowledge and technology driven economy skills and competencies of the labour force will
play an even greater role in shaping future economic development. In our discussion so far we have
looked at the profile of the labour force including their education which we have used as a proxy for
skills. In this section, we extend our analysis to occupation and education to better understand the
supply of labour.
We begin by broadly grouping various occupations in terms of the skills sets required. The
occupations are divided into high skill including those in leadership roles, professionals, and technicians.
In mid-level occupations executive & administrative officials and business and sales services are grouped.
In low skill group all the elementary occupations are included. Those engaged in agriculture work are
grouped separately. Please note that disaggregating occupations by 3 or 4 digit code according to the
International Standard Classification of Occupations (ISCO) was not possible because the Sakernas
2016 microdata from BPS was already grouped at the 2 digit level.
A comparison between 2006 and 2016 shows that the proportion of high and mid-level skills
occupations has increased while those doing agriculture work decreased. However, the share of low-
skill occupations also increased. It appears that the supply of low skill jobs and available labour force
with low skills is still very high in the economy.
52
occupations has increased while those doing agriculture work decreased. However, the share
of low-skill occupations also increased. It appears that the supply of low skill jobs and available
labour force with low skills is still very high in the economy.

Figure 36. Occupations and36.skills,
Figure 2006 and
Occupations 20162006 and 2016
and skills,
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
High skill cccupations Mid-level skill Low skill occupations Agriculture work
occupations
2006 2016
Source:
Source:ILO
ILOstaff
staffcalculations
calculationsusing Sakernas
using datadata
Sakernas 20062006
and 2016
and 2016
Skills mismatch refers to various types of imbalances between skills available and skills needed
in the world of work (ILO, 2014). The most frequently types of skills mismatch include skill shortage57
(surplus), skill gap, over-education (under-education), over-qualification (under-qualification) and skills
obsolescence as described in Annex 1. Statistical sources such as the labour force survey normally does
not include direct measures for skills and competencies. The data from these surveys mainly includes
educational attainment. There are different approaches proposed in the literature for measuring skills
mismatch vis-à-vis education which all have merits and disadvantages.
Skills mismatch can lead to a non-optimal allocation and use of the available workforce. It bears
cost for workers, enterprises, and the society at large in terms of productivity, competitiveness and
economic growth. An immediate implication of over-education, for instance, is that workers are not
fully using their productive capacity. On the other hand, a firm is performing at a lower capacity if its
workers are not well educated and by extension do not have necessary skills required for the job.
In this section we analyze the incidence of over-education and under-education (skills mismatch)
in Indonesia over the past decade. As defined by ILO (2014), the concept of over-education (under-
education) means a person having more (less) education than required by the job. We will use the statistical
measure, which defines the overeducated as those with education level higher by some ad-hoc value
than the mean or mode of the sample within a given occupation. We use the mean as reference and
one standard deviation as the ad-hoc value. The 80th percentile of the distribution is an alternative cut-
off value. The data used is from the Indonesian labour force surveys (Sakernas) 2006, 2009 and 2016.
Table 8 presents the sample distribution in terms of average years of education49 and standard
deviation per occupation group in 2006 and 2016.
49 We created a proxy for the number of years of education from the Sakernas survey question on highest education completed.
53
Table 8. Average years of education (mean) of employed and standard deviation per
major occupation group
Occupation years of educa- Standard Sample years of educa- Standard Sample
tion of the em- deviation size tion of the em- deviation size
ployed (Mean) ployed (Mean)
Professionals, 14.1 2.2 26,998 14.8 2.2 6,174
technicians, and related
workers
Leadership and 13.0 3.1 4,682 13.5 3.2 1,109
management
Executive officials, 12.8 2.6 19,330 13.3 2.6 5,341
administrative staff and
related workers
Business and sales 8.2 3.8 80,722 9.2 3.6 13,973
workers
Service workers 8.5 3.9 22,284 8.8 3.7 3,723
Agriculture, Plantation, 5.6 3.4 245,128 6.5 3.2 31,418
Animal Husbandry,
Fishery, Forestry
Workers And Hunters
Transport production 7.8 3.5 112,170 8.4 3.3 21,339
operators and blue
collar workers
Others 12.0 1.6 2,725 11.5 2.5 1,342
Source: ILO staff calculations using Sakernas 2006 and 2016 (August Series)
Between 2006 and 2016 we observe an increase in the average number of years of education for
each occupational group. The highest standard deviation (3.7 years) is in the group of service workers
(indicating a relatively heterogeneous group) while the lowest deviation is observed within the group
of professionals, technicians and related workers (2.2 years).
Overall, in 2006, approximately one in ten employed person can be classified as undereducated.
On the other hand around 3 in 10 persons can be classified as overeducated. While under-education
has been increasing from 10 percent in 2006 to 17 percent in 2016, over-education has significantly
deceased, from 27 percent to 19.2 percent in 2016. The total mismatch, however, remained relatively
constant at around 37 percent of total employment.
54
While under-education has been increasing from 10 percent in 2006 to 17 percent in 2016,
over-education has significantly deceased, from 27 percent to 19.2 percent in 2016. The total
mismatch, however, remained relatively constant at around 37 percent of total employment.

Figure 37. Trend over-education and under-education in Indonesia
Figure 37. Trend over-education
between 2006 and and2016
under-education in Indonesia between 2006 and 2016
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2006 2009 2016
overeducation undereducation
Source: ILOSource:
staff calculations using Sakernas
ILO staff calculations 2006, 2009
using Sakernas dataand
20062016 (August Series)
and 2016
In Table 9 differences in skills mismatch by sex and geographical location are shown. The
In Table 9 differences in skills mismatch by sex and geographical location are shown. The general
general trend observed between 2006 and 2016 (decreasing over-education and increasing
trend observed between 2006 and 2016 (decreasing over-education and increasing under-education)
under-education) across different subgroups shows some interesting patterns. For instance,
across different subgroups shows some interesting patterns. For instance, employed male tend to be
employed male tend to be more overeducated than their female counterparts. The incidence
more overeducated than their female counterparts. The incidence of under-education is higher for
of under-education
workers is higher for
in urban areas compared toworkers in urban areas compared to rural areas.
rural areas.
Table 9. Over-education and under-education by sex and urban/rural

Male Female Urban Rural
Year
Over- Under Over- Under Over- Under Over- Under
education education education education education education education education
2016 23% 16% 14% 21% 24% 12% 14% 24%
59
2009 21% 11% 16% 18% 30% 12% 11% 15%
2006 30% 9% 21% 14% 36% 9% 21% 12%
Source: ILO staff calculations using Sakernas 2006, 2009 and 2016 (August Series)
Significant differences in incidence of undereducation between different age groups can be

observed, with older generations more subject to undereducation compared to the youth. This reflects
the improvement in educational attainment over time. In 2016, more than 40 percent of workers from
the age group 56 years and above can be categorized as undereducated. Among youth only 10 percent
of employed can be categorized as undereducated. A reverse trend is observed for overeducation. A
slight decrease can be observed over time, but still 25 percent of workers aged between 15 and 34
were overeducated in 2016.
55
observed over time, but still 25 percent of workers aged between 15 and 34 were
observed over
overeducated time, but still 25 percent of workers aged between 15 and 34 were
in 2016.
overeducated in 2016.
Figure 38. Incidence of undereducation and overeducation by age

Figure
Figure 38. Incidence of 38. Incidence of undereducation
undereducation and overeducation
and overeducation by age by age
2. Incidence of overeducation by age group
1. Incidence of undereducation by age group 2. Incidence of overeducation by age group
1. Incidence of undereducation by age group 40%
50% 40%
50%
40% 30%
40% 30%
30% 20%
30% 20%
20% 20%
10%
10%
10% 10%
0% 0% 0%
0%
15-24 years
15-24 25-34
years years
25-34 35-55
years years
35-55 years5656
years old
years old 15-24
15-24years
years 25-34 years 35-55
25-34 years 35-55years
years 56
56years
yearsold
old
old old oldold oldold and above
and above old
old old
old old
old andabove
and above
2006
2006 2009
2009 2016
2016 2006 2009
2009 2016
2016
Source: ILO staff calculations using Sakernas 2006, 2009 and 2016 (August Series)
Source:
Source: ILOILO staff
calculations usingSakernas
Sakernas2006,
2006,2009
2009 and
and 2016 (August
(AugustSeries)
Series)
Based on the analysis above, one can clearly see that educational qualification of workers is
not keeping pace with the increasing number of jobs requiring higher education. The proportion
of overeducated has decreased considerably over the years while there are more workers who are
undereducated for the occupations that they currently hold. In absence of other measures of skills
competencies, the results from this analysis should not been treated as conclusive, but as indicative.
The skills gap is worrying as it will affect Indonesia’s competitiveness in the world economy which is
becoming more and more knowledge-based and technologically intensive.
60
60
56
9

Conclusions
INDONESIAN economy has maintained a steady momentum amidst an uncertain global

climate which has seen a deceleration of growth both in developed and emerging markets. Although
emerging countries such as Indonesia are still growing at a reasonable rate, but the pace of growth is
not high enough to create sizable number of good and decent jobs. During the 80s and 90s Indonesia
went through a major structural transformation, economy diversified with growth and jobs in the
non-agriculture sectors such as manufacturing and services. The structural shifts in the economy were
accompanied by productivity gains across and within the sectors.
Prior to 1997 when the country was hit by the financial crisis, jobs in industrial sectors such as
manufacturing were created more rapidly. With the crisis though that changed and since then Indonesia
has not been able to regain its competitiveness and share in the manufacturing sector. The slack in
manufacturing jobs was taken over by jobs in trade and services. But, generally, jobs in services- apart
from business and professional services- are not as productive as manufacturing. As discussed, the share
of manufacturing employment in the last decade (2006-2016) has merely increased by 1.4 percentage
points. During this period around 3.7 million jobs were created in the manufacturing sector.
Agriculture still remains the major source of employment for Indonesian workers. However,
combined together services and trade employ more than 46 percent of the workers. The trend
characterized by the decline in the share of employment in agriculture with possibly further increase
in trade and services is likely to continue. It remains to be seen how Indonesia will be able to gain a
larger footprint in the manufacturing in the current global environment.
Overall, the quality of employment has improved, albeit slowly. The share of workers in vulnerable
employment decreased. In this period one can observe that workers in mid-level and high skills
occupations increased. There was an increase of jobs at the executive level, professionals and technicians.
In nominal terms wages have also increased. However, wages are not necessarily commensurate with
the GDP levels across the provinces. There are also significant wage differentials between men and
women. Women are paid less than men even when controlling for education and experience.
Like in several industrialized and emerging economies, the debate on technology and jobs is
receiving more and more attention in Indonesia. As discussed in this report, technology has always
played a catalytic role in stimulating economic growth and productivity. Often technological progress
has caused disruption in the job market, at least in the short-term. What makes the current technological
shift different is the pace at which changes are taking place. Also, the worry is that this is happening
when global demand is low and there is still plenty of slack in the job market. The technology drivers
57
such as artificial intelligence, internet-of-things, 3D printing etc. are rapidly converging and likely to
have a major impact on the production and consumption of goods and services.
Understandably, these changes are raising concerns about future job opportunities. In Indonesia,
from the limited data available, it appears that digitalization is happening faster in services and trade,
while technological upgrading in industry is not so widespread apart from the increase in use of industrial
robots. In the case of Indonesia, there is also the question of firm size. For smaller enterprises, uptake
of technology still entails significant investment and thus it is less costly for them to deploy more labour
rather than replace it with machines.
However, in some quarters there are concerns that Indonesian manufacturing sector is quite
susceptible to technology and automation. A rise in the purchase of industrial robots suggests more
and more firms in Indonesia are moving towards automation. The findings from the ILO ASEAN
enterprise survey show that more manufacturing firms are receptive to technological upgrading. Based
on various reports and employment data, there is not enough evidence to suggest that technology
is causing any significant disruptions in the manufacturing sector or many jobs are being lost owing
to technological upgrading in manufacturing sector. Even before the current wave of technological
changes, Indonesia was already beginning to lose its position in manufacturing.
Apart from the more obvious benefits for consumers, increasing digitalization is creating new jobs
in Indonesia. Technological advancement in e-commerce, on-demand services, and transportation has
meant that it is much easier for those seeking services and those who can provide these services to
interact in the digital marketplace. There are even claims that this is bringing down the unemployment
rate. While one can observe growth of ride- hailing services, and online platforms for buying and
selling, without full data, it is difficult to see the net effect on jobs. Moreover, the types of jobs or tasks
created in a growing gig economy do not necessarily provide job security to the workers. The jobs in
question do offer flexibility, but many workers may not be getting adequate remuneration and there is
no social safety or job security.
A growing number of Indonesians are getting connected to the digital space mainly through their
hand-held devices. A rapid increase of internet users and very active users of social media, Indonesia is
well positioned to benefit from the digital revolution that is unfolding. While there has been progress,
the ICT infrastructure is not very developed, especially outside Java. Still, a small portion of private
and public investment go for research & development. In technological readiness, Indonesia is placed
very low on the GCI. As evidenced from the ASEAN enterprise survey, Indonesia may be faring better
than the ASEAN 5 average, but it is still behind leaders in technological readiness such as Singapore
and Malaysia.
A clear and emerging trend from technological advancement is that more and more routine tasks
are being automated or taken over by machines. Studies have shown that jobs are becoming more
polarized. Although estimates vary, it appears that many jobs requiring routine tasks will be replaced
by machines. There seems to be consensus that in such an environment of change, skills development
and human capital will play an even greater role in the future economic development of Indonesia.
As we have seen, while educational attainment among Indonesia workers has improved over the years,
many in the labour market have low educational qualifications. Our analysis shows that there are clearly
skill gaps which need to be addressed otherwise Indonesia’s future development will be constrained.
58
10

Recommendations
IT is tempting to offer a whole range of measures for Indonesia to manage the economy and
the job market in light of technological advancements. However, considering the limitation of analysis,
the report takes a more prudent approach and highlights only a few priorities with a hope that further
analysis will be carried out which will take into account the existing policy landscape and the ongoing
business and regulatory reforms. Besides that the practicality of executing policy plans that are invariably
constrained by fiscal space should also be considered. The following recommendations are, therefore,
made as a general guidance for further shaping the existing economic and employment policies.
1. It is important to recognize that resisting technological change will be difficult, if not impossible in
a globalized world. It is crucial that technology is seen as means or a driver to achieve higher levels
of development. Historically, adoption of technology in the short-term has caused disruption in
the labour market. Public policy and programmes should, thus, focus on helping those who are
negatively affected or stand to lose from technology. Research has shown that active labour market
policies (ALMP) deliver results when carried out to help people to learn new skills and assisting
them with job searches. A set of ALMP could be prioritized to enable those who are at the risk
of losing their livelihoods owing to technological upgrading.
2. Indonesia needs to pursue a pro-employment industrial policy. The term industrial policy has
often generated polarizing views. Often times in this debate, people oppose too much government
involvement, especially the difficulty for the government to pick winners. While private sector is
not immune from making poor investment decisions, the presence of a market does create the
incentives which ensures that loses are minimized and a different course of action can be taken
as a response to market signals. There is, however, more consensus on the facilitative role that
government can play in shaping industrial development. Government can do it by creating a level
playing field, build infrastructure, incentivize private sector investment, and, if needed, provide
some support for infant industries. It is in this spirit, that government can tailor its support in the
revival of manufacturing as well as growth of new and creative industries.
3. There is strong case for continued public investment in skills development. Indonesia spends
20 percent of its budget on education. However, education outcomes are still low. Future
funding should be closely tied to short or medium term outcomes. In other words, the quality of
education should improve if Indonesians are to compete with other nations on an equal footing.
With the creation of a single economic market in ASEAN, it is urgent that education and skills
development programmes are revamped. Education should not be seen as merely getting an
academic qualification but as life-long learning which continues at the work place.
59
4. An equally strong case can be made for improving access to technology. As noted, while the
number of users is increasing there are still a lot of people who, owing to lack of infrastructure
and education, are not able to join the digital world. Connectivity will enable people to make use of
technology in a way that yields greater benefits for them. In this regard, there is a lot of potential
for small enterprises and young entrepreneurs to use technology and overcome obstacles that they
normally face. These could be in the form of expanding their market share using online portals
and also seek support services including finance and business management.
5. The current labour governance mechanisms may not be sufficient in light of the so called gig
economy. A social dialogue involving all the relevant parties should be initiated soon to develop
the labour governance architecture for those who fall outside the conventional employee-employer
relationship. Furthermore, the ongoing efforts to extend social security coverage should include
measures to address the specificities of work in non-standards forms of employment. A strategic
alliance, for instance, between social security and tax authority through the establishment of a
simplified and unified collection system can help reach more workers, especially in the informal
economy. The results of such a scheme being implemented in other countries are indeed promising.
Also group membership has the potential to encourage registration and help in the collection of
contributions from individual workers. As the classical “shared contribution” model by employers
and employees is not applicable to the growing number of workers involved in the “on demand”
forms of work, innovative financing options should be explored.
6. Indonesia needs to reassess the efficacy and relevance of its social transfer programmes. There
are a range of cash and in-kind social transfers targeting low-income and vulnerable people. In
addition to this, the state provides implicit support through subsidies to farmers, fuel, and electricity,
to name a few. With the use of electronic identity cards, the country is moving towards cash-
based payments. Globally, the idea of a universal basic income (UBI) is gaining more currency
as a measure to provide a social safety net for workers against job losses. A number of pilots are
being carried out in developed countries such as Finland and Canada. India is also considering to
pilot test UBI in addition to the rural employment guarantee scheme which has been running for
several years. There are, thus, lessons that Indonesia can draw not only from other countries where
new social transfer mechanisms are being tested, but also from its own suite of social protection
programmes.
60
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64
Annexes
Annex 1. Skills Mismatch & Measurement

(Some common definitions and indicators for measurement)
Skill shortage Demand (supply) for a particular type of skill exceeds the supply
(surplus) (demand) of people with that skill
Skill gap Type or level of skills is different from that required to adequately
perform the job
Vertical mismatch The level of education or qualification is less or more than required
Horizontal mismatch The type/field of education or skills is inappropriate for the job
Overeducation Workers have more (less) years of education than the job requires
(undereducation)
Overqualification Workers hold a higher (lower) qualification than the job requires
(underqualification)
Skills obsolescence Skills previously used in a job are no longer required and/or skills
have deteriorated over time
Source: ILO. 2013
Name Measurement Advantages Disadvantages
Normative Use a pre-determined Relatively easy to Assumes constant

mapping between the measure; objective mappings over all
job and the required jobs of a given
education level occupation
A thorough mapping
is costly to create and
update
Statistical The overeducated are Relatively easy to Assumes constant
those with education measure; objective mappings over all jobs
level higher by some No updating needed: of a given occupation
ad-hoc value than the always corresponds to Sensitive to cohort
mean or mode of the the sample effects
sample within a given
occupation Results depend on the
level of aggregation
of occupations
65
Name Measurement Advantages Disadvantages
Self-assessment The respondents are Always up-to date Subjective bias:

asked about their Corresponds to respondents may
perceptions of the requirements in the overstate job
extent their education individual firm requirements, inflate
or skills are used in their status, or
their job reproduce actual
hiring standards
Income-ratio Overeducation is a Reflects that An indirect measure ;

continuous variable one of the goals it can be influenced by
measured by of investment many other factors
comparing actual and in education is
potential income maximising income
Source: ILO. 2013
66
Annex 2. Labour Force Survey Comparison 2006 and 2016
(Selected Indicators)
Table 1: Working-age population (‘000s) by sex and age group
2006 2016 Change
Age Male Female Both Sexes Male Female Both Sexes Male Female Both Sexes
15-19 11,127.3 10,047.8 21,175.1 11,341.5 10,828.4 22,169.8 214.2 780.6 994.8
20-24 10,373.0 10,604.8 20,977.8 10,927.9 10,663.5 21,591.4 554.9 58.7 613.6
25-29 9,429.4 10,680.5 20,110.0 10,523.5 10,406.5 20,930.0 1,094.1 -274.1 820.0
30-34 9,031.3 9,832.7 18,864.0 10,216.0 10,283.5 20,499.5 1,184.7 450.8 1,635.5
35-39 8,441.9 8,645.7 17,087.6 9,939.1 10,019.7 19,958.8 1,497.2 1,374.0 2,871.2
40-44 7,698.7 7,444.3 15,143.0 9,368.7 9,286.3 18,655.0 1,670.0 1,842.0 3,512.0
45-49 6,632.7 6,208.9 12,841.6 8,384.9 8,334.0 16,718.8 1,752.1 2,125.0 3,877.2
50-54 5,315.8 4,755.6 10,071.4 7,099.4 7,149.7 14,249.1 1,783.6 2,394.2 4,177.8
55-59 4,022.4 3,497.0 7,519.4 5,769.5 5,761.0 11,530.5 1,747.1 2,263.9 4,011.0
60-64 3,151.5 3,172.1 6,323.6 4,284.2 4,190.8 8,475.0 1,132.7 1,018.7 2,151.4
65-69 2,266.6 2,191.6 4,458.3 2,805.1 2,982.2 5,787.2 538.4 790.5 1,329.0
70-74 1,542.5 1,667.2 3,209.7 1,827.1 2,156.0 3,983.0 284.6 488.8 773.4
75-79 773.7 861.9 1,635.5 1,034.2 1,362.3 2,396.5 260.5 500.4 760.9
80-84 425.4 488.0 913.4 528.5 736.9 1,265.4 103.1 248.8 352.0
85-89 149.5 157.5 307.0 208.0 353.4 561.4 58.5 195.9 254.4
90-94 32.0 62.3 94.3 78.1 139.7 217.8 46.2 77.4 123.5
95-95 28.2 51.5 79.8 36.6 70.8 107.4 8.4 19.2 27.6
Total 80,442.0 80,369.5 160,811.5 94,372.2 94,724.6 189,096.7 13,930.2 14,355.0 28,285.2
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68
Table 2: Working-age population (percent) by sex and age group
2006 2016 Change
Age Male Female Both Sexes Male Female Both Sexes Male Female Both Sexes
15-19 13.8 12.5 13.2 12.0 11.4 11.7 -1.8 -1.1 -1.4
20-24 12.9 13.2 13.0 11.6 11.3 11.4 -1.3 -1.9 -1.6
25-29 11.7 13.3 12.5 11.2 11.0 11.1 -0.6 -2.3 -1.4
30-34 11.2 12.2 11.7 10.8 10.9 10.8 -0.4 -1.4 -0.9
35-39 10.5 10.8 10.6 10.5 10.6 10.6 0.0 -0.2 -0.1
40-44 9.6 9.3 9.4 9.9 9.8 9.9 0.4 0.5 0.4
45-49 8.2 7.7 8.0 8.9 8.8 8.8 0.6 1.1 0.9
50-54 6.6 5.9 6.3 7.5 7.5 7.5 0.9 1.6 1.3
55-59 5.0 4.4 4.7 6.1 6.1 6.1 1.1 1.7 1.4
60-64 3.9 3.9 3.9 4.5 4.4 4.5 0.6 0.5 0.5
65-69 2.8 2.7 2.8 3.0 3.1 3.1 0.2 0.4 0.3
70-74 1.9 2.1 2.0 1.9 2.3 2.1 0.0 0.2 0.1
75-79 1.0 1.1 1.0 1.1 1.4 1.3 0.1 0.4 0.3
80-84 0.5 0.6 0.6 0.6 0.8 0.7 0.0 0.2 0.1
85-89 0.2 0.2 0.2 0.2 0.4 0.3 0.0 0.2 0.1
90-94 0.0 0.1 0.1 0.1 0.1 0.1 0.0 0.1 0.1
95-95 0.0 0.1 0.0 0.0 0.1 0.1 0.0 0.0 0.0
Table 3: Working-age population living in urban and rural areas by sex
2006 2016 Change
Urban Rural Total Urban Rural Total Urban Rural Total
Population (‘000s)
Male 35,130.7 45,311.3 80,442.0 51,372.0 43,000.2 94,372.2 16,241.2 -2,311.1 13,930.2
Female 35,590.0 44,779.5 80,369.5 51,577.0 43,147.6 94,724.6 15,987.0 -1,631.9 14,355.0
Both sexes 70,720.7 90,090.8 160,811.5 102,949.0 86,147.8 189,096.7 32,228.2 -3,943.0 28,285.2
Population distribution (%)
Male 43.7 56.3 100.0 54.4 45.6 100.0 10.8 -10.8 0.0
Female 44.3 55.7 100.0 54.4 45.6 100.0 10.2 -10.2 0.0
Both sexes 44.0 56.0 100.0 54.4 45.6 100.0 10.5 -10.5 0.0
69
70
Table 4: Employment and employment-to-population ratio, by sex and age group
2006 2016 Change

Male Female Both Sexes Male Female Both Sexes Male Female Both Sexes
Employment (‘000s)
15-24 9,578.3 5,886.1 15,464.4 10,211.3 6,668.8 16,880.1 633.0 782.7 1,415.7
25-34 16,608.2 8,966.3 25,574.5 18,580.8 10,670.0 29,250.8 1,972.6 1,703.7 3,676.3
35-44 15,641.1 8,348.3 23,989.4 18,016.3 11,438.5 29,454.8 2,375.2 3,090.2 5,465.4
45-54 11,401.1 6,015.4 17,416.5 14,318.6 9,362.2 23,680.8 2,917.5 3,346.9 6,264.4
55-64 5,938.4 3,012.7 8,951.1 8,253.7 5,318.2 13,571.9 2,315.3 2,305.5 4,620.8
65-98 2,810.2 1,250.9 4,061.1 3,562.9 2,010.6 5,573.6 752.8 759.7 1,512.5
15-98 61,977.3 33,479.6 95,456.9 72,943.6 45,468.3 118,412.0 10,966.3 11,988.7 22,955.0
2006 2016 Change
Employment-to-population
ratio (%)
15-24 44.5 28.5 36.7 45.9 31.0 38.6 1.3 2.5 1.9
25-34 90.0 43.7 65.6 89.6 51.6 70.6 -0.4 7.9 5.0
35-44 96.9 51.9 74.4 93.3 59.2 76.3 -3.6 7.4 1.8
45-54 95.4 54.9 76.0 92.5 60.5 76.5 -2.9 5.6 0.5
55-64 82.8 45.2 64.7 82.1 53.4 67.8 -0.7 8.3 3.2
65-98 53.9 22.8 38.0 54.7 25.8 38.9 0.8 2.9 1.0
15-98 77.0 41.7 59.4 77.3 48.0 62.6 0.2 6.3 3.3
Table 5: Labour force and labour force participation rate, by sex and age group
2006 2016 Change
Labour force (‘000s)

15-19 4,466.6 3,232.2 7,698.8 3,729.4 2,490.2 6,219.6 -737.3 -741.9 -1,479.2
20-24 8,800.2 5,781.6 14,581.8 8,996.6 5,738.8 14,735.4 196.4 -42.8 153.6
25-29 9,040.2 5,307.4 14,347.5 9,878.9 5,641.3 15,520.2 838.8 333.9 1,172.7
30-34 8,880.8 4,850.3 13,731.0 9,791.0 5,598.2 15,389.2 910.2 747.9 1,658.1
35-39 8,339.5 4,570.1 12,909.6 9,462.2 5,898.3 15,360.5 1,122.6 1,328.3 2,450.9
40-44 7,610.4 4,206.8 11,817.2 8,953.0 5,783.1 14,736.1 1,342.5 1,576.4 2,918.9
45-49 6,514.7 3,578.9 10,093.7 7,950.7 5,103.4 13,054.1 1,435.9 1,524.5 2,960.4
50-54 5,105.8 2,624.5 7,730.3 6,587.1 4,399.2 10,986.4 1,481.3 1,774.7 3,256.0
55-59 3,647.2 1,816.5 5,463.7 5,103.9 3,375.4 8,479.3 1,456.7 1,558.9 3,015.6
60-64 2,464.3 1,339.5 3,803.7 3,301.7 2,005.4 5,307.1 837.5 665.9 1,503.4
65+ 2,880.2 1,331.4 4,211.6 3,600.8 2,055.3 5,656.0 720.6 723.9 1,444.4
Total 67,749.9 38,639.0 106,388.9 77,355.2 48,088.6 125,443.7 9,605.3 9,449.5 19,054.8
2006 2016 Change
Labour force participation rate (%)

15-19 40.1 32.2 36.4 32.9 23.0 28.1 -7.3 -9.2 -8.3
20-24 84.8 54.5 69.5 82.3 53.8 68.2 -2.5 -0.7 -1.3
25-29 95.9 49.7 71.3 93.9 54.2 74.2 -2.0 4.5 2.8
30-34 98.3 49.3 72.8 95.8 54.4 75.1 -2.5 5.1 2.3
35-39 98.8 52.9 75.5 95.2 58.9 77.0 -3.6 6.0 1.4
40-44 98.9 56.5 78.0 95.6 62.3 79.0 -3.3 5.8 1.0
45-49 98.2 57.6 78.6 94.8 61.2 78.1 -3.4 3.6 -0.5
50-54 96.1 55.2 76.8 92.8 61.5 77.1 -3.3 6.3 0.3
55-59 90.7 51.9 72.7 88.5 58.6 73.5 -2.2 6.6 0.9
60-64 78.2 42.2 60.2 77.1 47.9 62.6 -1.1 5.6 2.5
71
65+ 55.2 24.3 39.4 55.2 26.3 39.5 0.0 2.1 0.1
Total 84.2 48.1 66.2 82.0 50.8 66.3 -2.3 2.7 0.2
Table 6: Employment by occupation and sex
72
2006 2016 Change
Employment by occupational
category (‘000s)
Professionals/Technicians 1,912.7 1,977.5 3,890.2 3,647.6 4,666.8 8,314.3 1,734.9 2,689.3 4,424.1
Leadership & Management 306.3 85.1 391.4 1,163.8 238.4 1,402.2 857.5 153.3 1,010.8
Executive officials & 2,977.4 1,607.5 4,584.9 4,488.5 3,538.6 8,027.0 1,511.1 1,931.1 3,442.1
Administrative
Business & Sales 8,778.2 8,117.0 16,895.2 10,108.5 11,102.6 21,211.1 1,330.3 2,985.7 4,315.9
Services 2,835.9 2,690.0 5,525.9 2,307.1 3,672.7 5,979.7 -528.9 982.7 453.8
Agriculture & Plantation 26,084.7 13,692.3 39,777.0 23,443.4 13,596.8 37,040.2 -2,641.2 -95.5 -2,736.7
Transport & Other Blue Collar 18,609.4 5,292.9 23,902.3 25,800.1 8,582.8 34,382.9 7,190.7 3,289.9 10,480.6
Workers
Others 472.7 17.4 490.1 1,984.7 69.7 2,054.4 1,512.0 52.3 1,564.3
Total 61,977.3 33,479.6 95,456.9 72,943.6 45,468.3 118,412.0 10,966.3 11,988.7 22,955.0
2006 2016 Change
Occupation employment
shares (%)
Professionals/Technicians 3.1 5.9 4.1 5.0 10.3 7.0 1.9 4.4 2.9
Leadership & Management 0.5 0.3 0.4 1.6 0.5 1.2 1.1 0.3 0.8
Executive officials & 4.8 4.8 4.8 6.2 7.8 6.8 1.3 3.0 2.0
Administrative
Business & Sales 14.2 24.2 17.7 13.9 24.4 17.9 -0.3 0.2 0.2
Services 4.6 8.0 5.8 3.2 8.1 5.0 -1.4 0.0 -0.7
Agriculture & Plantation 42.1 40.9 41.7 32.1 29.9 31.3 -9.9 -11.0 -10.4
Transport & Other Blue 30.0 15.8 25.0 35.4 18.9 29.0 5.3 3.1 4.0
Collar Workers
Others 0.8 0.1 0.5 2.7 0.2 1.7 2.0 0.1 1.2
Total 100.0 100.0 100.0 100.0 100.0 100.0 0.0 0.0 0.0
Table 7: Employment by hours of work per week and sex
2006 2016 Change
Employment by hours of
work (‘000s)
<25 8,122.2 9,066.8 17,188.9 9,463.5 11,269.0 20,732.5 1,341.3 2,202.3 3,543.6
25-34 8,378.8 5,973.8 14,352.6 7,304.9 6,415.1 13,719.9 -1,073.9 441.3 -632.7
35-39 7,027.6 3,973.9 11,001.4 6,335.9 4,864.2 11,200.1 -691.6 890.3 198.7
40-48 20,335.9 7,562.8 27,898.7 25,405.2 11,746.6 37,151.8 5,069.3 4,183.8 9,253.0
49-59 11,040.4 3,395.9 14,436.3 14,010.4 5,530.7 19,541.1 2,970.0 2,134.7 5,104.8
>=60 7,072.5 3,506.4 10,579.0 10,423.8 5,642.8 16,066.6 3,351.3 2,136.3 5,487.6
Total 61,977.3 33,479.6 95,456.9 72,943.6 45,468.3 118,412.0 10,966.3 11,988.7 22,955.0
Employment shares by hours

of work (%)
<25 13.1 27.1 18.0 13.0 24.8 17.5 -0.1 -2.3 -0.5
25-34 13.5 17.8 15.0 10.0 14.1 11.6 -3.5 -3.7 -3.4
35-39 11.3 11.9 11.5 8.7 10.7 9.5 -2.7 -1.2 -2.1
40-48 32.8 22.6 29.2 34.8 25.8 31.4 2.0 3.2 2.1
49-59 17.8 10.1 15.1 19.2 12.2 16.5 1.4 2.0 1.4
>=60 11.4 10.5 11.1 14.3 12.4 13.6 2.9 1.9 2.5
73
74
Table 8: Unemployment and unemployment rate, by sex and age group
2006 2016 Change
Unemployment (‘000s)
15-24 3,688.5 3,127.7 6,816.2 2,514.6 1,560.3 4,074.9 -1,173.9 -1,567.4 -2,741.3
25-34 1,312.7 1,191.4 2,504.1 1,089.2 569.4 1,658.6 -223.6 -621.9 -845.5
35-44 308.9 428.5 737.3 398.8 242.9 641.7 90.0 -185.6 -95.6
45-54 219.4 188.1 407.5 219.2 140.4 359.6 -0.2 -47.7 -47.9
55-64 173.0 143.3 316.3 151.9 62.6 214.5 -21.1 -80.7 -101.8
65-98 70.0 80.5 150.5 37.8 44.7 82.5 -32.2 -35.8 -68.0
15-98 5,772.6 5,159.4 10,932.0 4,411.5 2,620.2 7,031.8 -1,361.1 -2,539.2 -3,900.2
Unemployment rate (%)
15-24 27.8 34.7 30.6 19.8 19.0 19.4 -8.0 -15.7 -11.1
25-34 7.3 11.7 8.9 5.5 5.1 5.4 -1.8 -6.7 -3.6
35-44 1.9 4.9 3.0 2.2 2.1 2.1 0.2 -2.8 -0.8
45-54 1.9 3.0 2.3 1.5 1.5 1.5 -0.4 -1.6 -0.8
55-64 2.8 4.5 3.4 1.8 1.2 1.6 -1.0 -3.4 -1.9
65-98 2.4 6.0 3.6 1.0 2.2 1.5 -1.4 -3.9 -2.1
15-98 8.5 13.4 10.3 5.7 5.4 5.6 -2.8 -7.9 -4.7
Table 9: Wages/earnings by occupation and sex
2006 2016 Change
Professionals/Technicians 1,596,180.5 1,163,712.1 1,370,581.4 3,851,960.1 2,716,048.1 3,196,003.0 2,255,779.6 1,552,336.1 1,825,421.6
Leadership & Management 3,289,185.7 2,228,809.9 3,039,831.7 5,832,398.6 5,873,268.2 5,840,429.8 2,543,212.9 3,644,458.2 2,800,598.1
Executive officials & 1,396,443.9 1,233,329.8 1,339,324.2 3,458,960.6 2,901,954.0 3,220,473.5 2,062,516.8 1,668,624.2 1,881,149.4
Administrative
Business & Sales 813,066.3 622,961.0 734,545.4 2,474,997.8 1,682,050.1 2,154,162.1 1,661,931.5 1,059,089.1 1,419,616.6
Services 772,814.6 390,366.2 590,772.6 2,243,347.0 1,208,173.3 1,562,348.2 1,470,532.4 817,807.1 971,575.6
Agriculture & Plantation 193,210.1 82,641.9 159,972.8 1,362,464.9 770,115.4 1,190,476.9 1,169,254.8 687,473.4 1,030,504.1
Transport & Other Blue 630,559.2 527,612.0 610,625.3 2,079,495.5 1,614,163.6 1,989,191.0 1,448,936.3 1,086,551.6 1,378,565.7
Collar Workers
Others 1,792,143.0 1,319,885.7 1,775,423.3 3,228,467.6 2,892,819.4 3,217,101.8 1,436,324.6 1,572,933.8 1,441,678.6
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