Indonesia and unemployment

Indonesia and unemployment
Name
University
Abstract
An analysis of the challenges and trends facing the Indonesian labor market indicates a weak labor market afflicted with slow job growth rate with elevated levels of labor underutilization. Diverse groups of workers especially the youth, women and rural folks have a disparate labor market outcome indicating a problem of labor market segmentation (Top of Form
Yenilmez, & Kiliç, 2017). The government’s increase of investments in the education sector over the years has expanded the pool of educated and skilled workers even though these investments are yet to translate into a substantial gain in labor productivity. Under qualified workers still work in many positions with a lack of skilled labor still posing a major challenge. Access to re-skilled and up-skilled opportunities are still limited and without proper investment in the better quality of education and training, career mobility and access to quality jobs will continue to be limited. Nevertheless, regular wage employment has expanded while informal employment is on the decline even though many of the workers are employed on short-term contracts. Also, growth in minimum wages has outpaced average wage leading to a weak demand in labor market performance.
Keywords: Rate of unemployment, structural unemployment, jobless recovery, employment, labor force
Introduction
The regime of President Suharto ushered in the new economic development order that has led to a jobless recovery in the Indonesian economy leading to a decline in unemployment rate.

The biggest gainers in employment were the services and manufacturing sectors that saw large increases in the cost of the informal farming segment. In comparison to the 1980s when roughly 55% of the Indonesian population was concentrated in the agricultural sector, today, that figure has diminished to 40 % (Indonesia investments, 2018).

In the year 2017, the unemployment rate increased from 5.33% in the first quarter to 5.5% in the third quarter of the same year. From the years 1982 to 2017, the rate of unemployment has averaged 6.1% reaching an all-time high of 11.24% in the year 2005 and a record low of 2% in the fourth quarter of 1983 (Janoski, Luke, & Oliver, 2014). The main types of unemployment are structural unemployment and cyclical unemployment. Structural unemployment is where a person was dismissed from work due to a decline in the condition of the organization’s business leading to a reduction in its labor force.
Cyclical unemployment occurs due to a reduction of the workforce as a whole because of economic recession or slowdown. For over a decade, Indonesia has been successful in thrusting the rate of unemployment into a solid decline trend. Yet, 2.5 million join the labor market every year in Indonesia posing a great challenge to the government to its increase jobless recovery efforts. Youth joblessness is a big concern as Indonesia has roughly 225 million people making it the 4th most densely inhabited nation in the world. Half of the country’s inhabitants are aged 30 years and below meaning that Indonesia has a huge labor force (Indonesia investments, 2018).
Recommendation
The Indonesian government needs a sustainable solution for wage policies. The minimum wage that is near the average wage needs to be returned to its safety net function. Alternative avenues for wage negotiation need to be strengthened at enterprise and industry level with a culture of good faith bargaining coupled with strengthened labor market governance (Yenilmez, & Kiliç, 2017).
References
Top of Form
Indonesia investments. (2018). Indonesia-investmentscom. Retrieved 28 January, 2018, from https://www.indonesia-investments.com/finance/macroeconomic-indicators/unemployment/item255?
Janoski, T., Luke, D., & Oliver, C. (2014). The causes of structural unemployment: Four factors that keep people from the jobs they deserve. Cambridge, UK ; Malden, MA [U.S.] : Polity Press.
Yenilmez, F., & Kiliç, E. (2017). Handbook of research on unemployment and labor market sustainability in the era of globalization. Hershey: Business Science Reference