Only recently we celebrated our 70 year old freedom from oppressions. Since then, we have survived tumultuous conditions, be it political or economic crises. The worst is yet to come, though. It is predicted that the incoming “Demographic Dividend” may not be a bonus at all.[1] The reason being a lot of our productive age citizens are being too unoccupied. Not to mention, Indonesia’s economic climate has not been faring well recently, thus the increase of unemployment from 5.70% in 2014 to 5.81% last February.[2] The current constriction of the economy lessens labor to job field ratio. There is a 3 million increment in Indonesia’s workforce compared to February last year, but only one million were absorbed ever since.[3] If this is a recurring phenomenon, then the number will jump to extreme heights when the demographic bonus hit in the future.
The problem of unemployment in Indonesia apparently is a result of classic phenomenon: a shift in the demands of labor market and recession in major trading partner countries dragging us to fall in their footsteps. Workers demanded to tend agricultural sector of the country was cut up to around seven hundred thousand people compared to February last year.[4] The Central Bureau of Statistics reported that we faced around one percent decrease in our growth rate in the first quarter of this year compared to that of last year. Our major trading partners: China and Singapore also faced recession in their economies only to strengthen the blow.
There is nothing new with an increase in unemployment during economic storms. However, the same thing did not occur to United Kingdom during the aftermath of the 2008 recessions. In fact, unemployment hit record low during February 2008 mounting up to around 1.6 million people. What we need to know now is why the number did not explode like what would naturally happen.
What about those who still did not pursue creating microbusinesses? The government has issued the Jobseeker Allowance program where you will be given £57.90 per week if you undergo “job seeking training” formally known as Intensive Activity Program. Only unemployed 18-24 year old citizens can claim this benefit for their first three weeks of unemployment.
This is proof that the clichéd solution of “entrepreneurship” during unemployment actually works. This is especially suitable for Indonesia seeing how two thirds of our economy is actually informal.[6] The only thing we need to do, which is not very easy, is to formalize these sectors. Formalizing includes but not limited to setting up minimum wages and compulsory benefits for employees, taxing it, imposing the ownership of licenses and many other mechanisms. Yes, if we do these all at one point, informal sectors would rather stay informal forever since it will all seemed not very beneficial for their sides. It would be more acceptable if we do it progressively, step by step accompanied by more soft loans allowance as reward. Nevertheless, the most important thing to do is to encourage people to embrace self-employment and microbusinesses first in times of recessions
Another thing that we can copy is their treatment of unemployment. Indonesian government rarely issued special care for this particular issue, except probably sending those unemployed elsewhere to find work. Admittedly, we tried to tackle the root of unemployment: the kind of labor we have does not fit the kind demanded. We endorsed compulsory 9 years of education, free schooling and many more. However, it is time look at unemployment right in the eye and directly addresses unemployed people. Government-endorsed training could be copied in Indonesia to supplement our worker with skills demanded by the market as well as encouraging them to pursue more opportunities. After all, a nation is truly independent once its youths are.
By: Aurora Maria Sarah (Staff Kajian Kanopi 2015, Ilmu Ekonomi 2014)
[1] http://www.reuters.com/article/2015/06/21/us-indonesia-unemployment-idUSKBN0P101D20150621
