Recent Survey on Indonesia Employment: A Brief Analysis


This article is aimed to analyze briefly the recent trends of Indonesia’s working-age population and its components as viewed from the labour force perspective. The analysis covered the period 2008-2014 and focused at the national level of analysis. Sakernas– a regular national labour survey carried out by BPS-Statistics Indonesia since 1976– is used as the major data source. In order to have a better understanding of the measurements used in the analysis, the following paragraphs discuss briefly some conceptual issues concerning some basic labour statistics.

Labour Statistics: Global Standard

Sakernas adopts the global standards of labour statistics as stipulated in the resolutions of the International Conference of Labour Statisticians (ICLS). In this context, the 13th ICLS (1982) and the 19th ICLS (2013) are of special interest as they set out the global standards for basic[1] labour statistics such as employment and unemployment.

With regards to persons in employment, Sakernas defines it as all those who during the last week, were engaged in any activity to produce goods or provide services for pay or profit. This definition is fully in line with the global standard (ICLS-19, Par. 27). Sakernas defines persons in labour force as those in employment and in employment and this also complying the global standard (Par. 16).

What might worth noting here is that official statistics derived from by far has not yet taken into consideration those who engaged in productive activity not for employment but for “own use” and for “volunteer”. According to the 19th ICLS, these two categories are not part of employment[2].

By so doing, official employment statistics produced by BPS by far might be regarded as somewhat overestimate. Nonetheless, that is not an issue for this analysis as it focuses on the trends that require consistency in applying the concept throughout the compared period.

Demographic Dimension

One of the biggest challenges faced by Indonesia is a sheer number of the working-age population (WAP). This is not surprising as the country ranks the fourth biggest country after China, India, and the United States. To add the challenge, as Sakernas series data show, the WAP tends to increase in a pace that is faster than the growth rate of the total population. WAP data for the period 2008-2016 can be used to illustrate the increase. During the period total WAP increased from around 174.2 million in 2010 to 189.8 million in 2016. This is an annual increase of 1.86%[3]. This pace of increase is much faster than the increase in the total population during the same period that was 1.36%.

The comparison of the figures points to a phenomenon popularly known as the demographic bonus. That can be a bonus– and not a curse– if the younger generation is able to get a decent education and facility to improve their self-quality[4].

There is another aspect of the phenomenon just mentioned worth considering. Close observation at the trends in the WAP by age group provides a strong indication that the status of demographic bonus for Indonesia is at a somewhat later stage. The following points might be helpful in clarifying the concerned issue:

    • During the 2008-2018 period (August) the increase in the proportion for the younger-ages group (15-24) was very small and even almost flat; that was, only 0.35%.
    • The percentage was higher for the “prime-age” group (25-54) that was 1.43 %.
    • For “old-age” group (55+) the percentage was even much bigger; that was 3.7% (See Graph 1).

Graph 1: Working-age Population by Age Group, 2008-2012

Source: BPS, Sakernas, https://www.bps.go.id/.

The comparison of the increases confirms the above notion of the status of a “later stage” of demographic bonus of Indonesia. In addition, the relatively high increase for the old-age group suggests a clear indication of the route of Indonesia’s population toward the aging stage.

Trends in the Labour Force

As shown by Graph 2, the proportion of “out of the labour force” remained unchanged during the period 2008-2012; that was, 33% of the total WAP. This means the labour force also unchanged at 67% level during the same period.

In the same period, the compositions of the labour force had changed by three percentage points but with different direction: while the employment increased by three percentage points, the unemployment decreased by the same percentage points[5]. (See Graph 2.)

Graph 2: Change in the Structure of Working-age Population 2008-2012.

Source: BPS, Sakernas, https://www.bps.go.id/.

Graph 3 shows the increase in the labour force during the period 2008-2018. As shown by the graph, the pace of the increase is not as fast as the increase in the WAP. As also shown by the graph, the labour force was almost always bigger in February than in August and this is probably associated with the seasonal work in agriculture, a still important economic branch for Indonesia’s employment.

Graph 3: Trends in the Working Age Population and Labour Force (000)

2008-2018

Source: BPS, Sakernas, https://www.bps.go.id/

Trend LFPR and EPR

Statistics of employment can be measured by two indicators of the labour force participation rate (LFPR) and the employment-population ratio (EPR). These two indicators are comparable as each of them using the same numerator or “the population at risk” that is the WAP[6]. Nonetheless, each of them is to serve its own function. While the first indicator reflects the supply side of the labour market, the second reflects its demand side; i.e., measuring how much the labour supply absorbed by the economy.

Graph 4 exhibits the comparison between the LFPR and the EPR during the period 2008-2018: the LFPR is always higher than the EPR for the obvious reason: the numerator of the LFPR includes unemployment element that is not included in EPR.

Graph 4: Trends in the Labour Participation Rate and Employment-Population Ratio

 2008-2018.

Source: BPS, Sakernas, https://www.bps.go.id/

The graph shows the LFPR was around two-thirds of the WAP and tends to be higher in February than in August for the reason as previously mentioned. The graph also shows that the LFPR tends to fluctuate over the observed periods with slightly different direction: the trend slightly increasing in February and increasing in August.

Like LFPR, EPR is higher in February than in August. Unlike LFPR, EPR tends to increase over the compared periods. This suggests the consistency in the increase of employment regardless of the month of observation (February of August).

Trends in Unemployment

During the period 2008-2018 the unemployment rate in Indonesia was relatively low (one-digit) and tends to decline. As shown by Graph 5, during the period the unemployment rate declined from around 8.4-8.5% in 2008 to 5.1-5.3% in 2018. Comparison between levels in February and August shows that during 2008-2013 the unemployment rate tends to be higher in February (than in August), and starting 2013 the reverse was in place; i.e., tends to be higher in August (than in February).

Graph 5: Trends in the unemployment rate (%), 2008-2018

Source: BPS, Sakernas, https://www.bps.go.id/

The relatively low and decreasing rates in unemployment as just discussed do in fact obscure a high unemployment rate among the educated persons: on the average, the educated persons have 2.6 bigger risks of being unemployed than the uneducated. (See this for detail.)

Concluding Remarks.

Conventional wisdom suggests that the age-structure of Indonesia’s population in the 2020s will be entering the phase of demographic bonus. Quite contrary to this wisdom, a series of Sakernas data do indicate the phase has been entered since the 2010s and even in its later phase. The evidence of this is that the pace of increase in the working-age population than in the total population and this especially striking for the older-age group (55 or older).

The LFPR remained constant during the period 2008-2018 at the two-thirds of the total WAP. However, these changes could be misleading as the trends in its components went through in a different direction; that was, the increase in the employment and the decreasing in unemployment.

The unemployment rate during the period 2008-2018 was at relatively low (one-digit) and its trend decreasing continuously. However, this obscures the high level of unemployment rate among the youth. This issue– together with other issues like the forced labour and “modern slavery”– is probably one among the undesirable modern paradoxes. Who knows?

[For pdf version click this.]

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[1] Statistics on such issues as SDG indicators and child labor are not regarded as basic statistics and hence not covered in the analysis.

[2] Starting 2016 the Sakernas questionnaire is refined by additional questions that can provide data on these two categories. This refinement can also provide much richer data on all forms of work that have been identified by the 19th ICLS.

[3] https://www.bps.go.id/statictable/2009/02/20/1268/laju-pertumbuhan-penduduk-menurut-provinsi.html.

[4] https://feb.ugm.ac.id/en/news/2625-demographic-bonus-threat-or-opportunity

[5] Expressed in a different way, during the period, the total employment increased by 21.5 million or 21.0% while the total unemployment decreased by 2.4 million or 25.5%.

[6] LFPR = labour fore/WAP and EPR = employment/WAP. The complement of the second reflects the magnitude of the unemployed over the WAP.

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