How Important Are Labor Markets to the Welfare of Indonesia's Poor?
How Important Are Labor Markets to the Welfare of Indonesia's Poor?

Author: D. Andrew Mason

Publisher:

Published: 1999

Total Pages:

ISBN-13:

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October 1996 Because poverty mainly afflicts agricultural and self-employed households in Indonesia, the most direct ways that policy can help to reduce poverty are through improving the operation of product, land, and capital markets, particularly where the regulatory environment now works to reduce farm profitability or inhibit entry to productive enterprises by the poor. Labor market policy can play an important role by facilitating, not impeding, labor mobility across sectors. The majority of the poor in Indonesia come from agricultural and self-employed house--holds. About 70 percent of the remaining poor came from rural agricultural households in 1993, and more than 72 percent lived in households that derived the bulk of their income from self-employed enterprises. Moreover, the largest single contribution to poverty reduction between 1990 and 1993 came from within-sector welfare gains to self-employed farm households. Data show that the role of the labor market in reducing poverty has increased since the mid-1980s. Wage labor markets can be expected to play an increasingly important impact on the welfare of Indonesia's poor as the economy continues to undergo structural change, and as the workforce continues to move out of agriculture into manufacturing and services. Because poverty remains largely an agricultural and self-employed phenomenon, the most direct way for policy to contribute to reducing poverty is to focus on improving the operation of product, land, and capital markets - particularly where monopolies reduce farm profitability or viability (for example, cloves, oranges) or where excessive regulations raise costs or inhibit entry to productive enterprises by the poor. At the same time, labor market policy can play an important role in the Government of Indonesia's efforts to reduce poverty by helping to facilitate labor mobility across sectors - for example, from low productivity activities in agriculture to higher productivity activities in other sectors. But if they reduce labor mobility, labor market policies can be counterproductive to Indonesia's poverty reduction efforts. Recent empirical evidence suggests that increases in the minimum wage may have hurt employment growth, particularly among small firms. As such, using minimum wage policy to ensure high wages to a limited number of (mostly nonpoor) workers will almost certainly diminish the poverty reducing potential of the labor market. This paper - a joint product of the Poverty and Social Policy Department and the Country Operations Division, East Asia and Pacific, Country Department III - is part of a larger study of the labor market in Indonesia undertaken by East Asia and Pacific, Country Department III. It was presented at a joint Ministry of Manpower, Indonesia-World Bank workshop, Indonesian Workers in the 21st Century, Jakarta, April 2-4, 1996.

Indonesia
Indonesia

Author: Edimon Ginting

Publisher: Asian Development Bank

Published: 2018-02-01

Total Pages: 253

ISBN-13: 9292610791

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The book focuses on Indonesia's most pressing labor market challenges and associated policy options to achieve higher and more inclusive economic growth. The challenges consist of creating jobs for and the skills in a youthful and increasingly better educated workforce, and raising the productivity of less-educated workers to meet the demands of the digital age. The book deals with a range of interrelated topics---the changing supply and demand for labor in relation to the shift of workers out of agriculture; urbanization and the growth of megacities; raising the quality of schooling for new jobs in the digital economy; and labor market policies to improve both labor standards and productivity.

Skills for the Labor Market in Indonesia
Skills for the Labor Market in Indonesia

Author: Emanuela Di Gropello

Publisher: World Bank Publications

Published: 2011

Total Pages: 292

ISBN-13: 0821386158

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In Indonesia, the past two decades have been a time of great progress but also massive transformations and abrupt setbacks. In this context, this book reviews the main characteristics of - and trends in - demand for skills in Indonesia. It seeks to document the existence of a possible skills mismatch between employer demands and the available supply, the contribution of the education and training sector to this mismatch, and possible measures to improve the education and training system's responsiveness to what the labor market and the economy need. In today's job market in Indonesia, there appears to be a premium on theoretical and practical knowledge of the job. While skills do not appear to be yet among the most important constraints for the economy, the situation is different for larger more export-oriented manufacturing firms. Subjective assessments of difficulties of matching needs with available skills provide evidence that skills are becoming an issue overall in Indonesia. The widest gaps across professional profiles are for English and computer skills followed by thinking and behavioral skills. Theoretical and practical knowledge of the job are also considered to be weak. There are important gaps in creativity, computing and some technical skills for young workers. English remains the largest gap. Five general skill related priorities can be highlighted for Indonesia. First, the country needs to improve skill measurement to get a fuller understanding of skill needs and gaps. Second, it is urgent for Indonesia to address the still unsatisfactory quality and relevance of its formal education, including higher education. Third, the country needs to set-up multiple pathways for skill development. Fourth, the country needs to develop an integrated approach to tackle skill development for youth. Fifth, Indonesia should also tackle labor market constraints which affect the skill matching process.

The Benefits of Growth for Indonesian Workers
The Benefits of Growth for Indonesian Workers

Author: Nisha Agrawal

Publisher:

Published: 1999

Total Pages:

ISBN-13:

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August 1996 Does improving the conditions of workers in Indonesia require government interventions? Indonesia's rapid, broadly based pattern of growth has led to a spectacular reduction in poverty in the past 25 years. The model of development Indonesia adopted -- market-led growth combined with investments in physical and social infrastructure -- has proved to be the one most successful in alleviating poverty and benefiting workers in developing countries. The government's development efforts focused on agriculture (especially rice), education, and transport infrastructure. It emphasized providing opportunities for productive employment and gradually improving the quality of labor through education and training. The rates at which wages, employment, and incomes grew were left largely to market forces. Indonesian workers have been major beneficiaries of growth, but although the rapid growth of labor-intensive manufacturing has led to more jobs and higher wages, workers employed in these industries have expressed growing dissatisfaction. They complain about problems of child labor, the denial of centrally mandated wages and benefits to workers, poor working conditions, and the abuse of young female workers, who make up the bulk of the workforce. The government has tried to improve workers' wages and working conditions by centrally mandating higher labor standards, relying principally on minimum wages as a tool for doing so. Since 1989, minimum wages have tripled nominally and doubled in real terms. Enforcement has improved and, despite low compliance, at those higher levels minimum wages are beginning to bite. Indonesians are debating whether they need these labor-intensive industries and whether it is a mistake to base Indonesia's growth on cheap labor, because industries that exploit cheap labor could move to other countries. They argue that if labor is more expensive, manufacturers have no choice but to substitute some capital for labor, and to develop more sophisticated industries. However, Indonesia still has an abundant supply of labor and if labor-intensive industries are rejected, the capacity of the economy to absorb plentiful workers will be reduced. The main alternatives are to push up wages now (and risk the premature death of labor intensive industries) or to let wages be determined by market forces (in which case wages will rise slowly for the time being but industry's capacity to absorb labor will be higher) but strengthen institutions that could improve working conditions, such as labor unions. Agrawal recommends maintaining flexible labor markets and allowing market forces to set the pace of change, while strengthening labor unions. This paper -- a product of the Indonesia Policy and Operations Division, East Asia and Pacific, Country Department III -- is part of a larger effort in the department to develop a comprehensive labor market strategy for Indonesia. It was presented at a joint Ministry of Manpower-World Bank workshop, Indonesian Workers in the 21st Century, in Jakarta, April 2-4, 1996.

The Indonesian Labour Market
The Indonesian Labour Market

Author: Shafiq Dhanani

Publisher: Routledge

Published: 2009-09-10

Total Pages: 341

ISBN-13: 1134404980

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The topics of unemployment, underemployment, wage trends and patterns, and the relationship between poverty and the labour market are of interest to all policy makers, researchers, academics and journalists concerned with economic development. This book traces the evolution of the Indonesian labour market between the early 1970s and late 2000s. This entails a (a) review of macroeconomic policies and their employment impact; (b) review of unemployment and underemployment trends; (c) review of wage trends and living standards; (d) relationship between poverty, inequality and the labour market; and (e) labour market regulations, employment and the business environment. The book comes up with a number of policy-relevant findings. Macroeconomic policies, particularly inflation targeting in the 2000-2007 period, have not been conducive to employment generation. The assumption that unemployment is an appropriate indicator of labour market performance and, more importantly, that it is closely aligned with poverty, is shown to be inaccurate. Sustained real wage growth in the twenty-year period before the 1997 financial crisis is contrasted with the lack of improvement since then, a period otherwise of respectable economic growth by international standards. The predicted adverse consequences of sweeping labour market regulations in 2000-2007 on properly measured employment, unemployment and labour costs did not materialize, mainly because of low compliance. It seems that a restrictive macroeconomic framework has been more constraining for employment growth than the perceived labour market rigidity during the post-crisis period. The book concludes with an evaluation of several ‘reactive’ and ‘proactive’ labour market policies. Though these are complementary, policy makers in Indonesia have probably put too much emphasis on reactive policies such minimum wage and severance pay, and not enough on proactive policies aimed at creating an adaptable and skilled workforce.