In his last speech (16/08/2024), President Joko Widodo said that during his 10 years of leadership the unemployment rate had been reduced to its lowest point, from 5.7% to 4.8% in 2024.
While the President assured the public that Indonesia had reduced the unemployment rate, the Ministry of Manpower released data on workers laid off during the January-June 2024 period, reaching 32,064 people. The number of layoffs increased from the same period last year by 26,400 people (21.4%). Some provinces even experienced an increase in layoff cases of up to 1000%, such as in Jakarta and Bangka Belitung. In Jakarta, from January to June 2024, 7,469 people were laid off. This number increased by 6,786 people or 994% or almost 1,000% compared to the same period last year.
This contrast is even more apparent when the IMF says Indonesia’s unemployment rate is still the highest in the ASEAN region. In the IMF report entitled World Economic Outlook April 20224, Indonesia’s unemployment rate reached 5.2%. Despite a decline from the previous year (5.3%), Indonesia still has the highest unemployment rate in ASEAN, ahead of the Philippines (5.1%), Malaysia (3.52%), Vietnam (2.1%), and Singapore (1.9%).
Underemployment Dominated by Gen-Z
Based on the Central Statistics Agency (BPS) data release titled Labour Force by Age Group 2024, there is 149.3 million labor force in Indonesia, or equivalent to 80% of the total population in Indonesia. 39.65 million of them are Gen-Z people aged 15-26 years, and 4.95 million of them are not in employment, education, and training/NEET. Based on this data, Gen-Z accounts for around 68% of unemployment, meaning that two out of three young people under the age of 30 who are in their productive years are unemployed.
This situation is exacerbated by the fact that many of them are trapped in underemployment situations. Why is this so? Suppose the definition of unemployment is adjusted to the provisions of Law No.13 of 2003 on labor, which states that the minimum working hours in one day are 7 hours or 35 hours per week. In that case, 31% of Indonesians are categorized as unemployed. So far, the government seems to have mistakenly defined the unemployment group. A group of people who work at least one hour a week, whether paid or unpaid, are not considered unemployed.
This mistake proves that the government ignores the underemployment group and considers them part of the labor group. The government also seems to ignore the concept of decent work, where the number of hours worked and the quality of work, including wages and working conditions, all of which are the most important for workers.
The government’s neglect of the underemployment group and the lack of efforts to provide decent work have resulted in the majority of the labor force being absorbed into the informal sector or the low-value-added industrial sector. BPS noted that in 2023, of the total national labor force (146.62 million), 83.34 million people (60.12%) were absorbed into the informal sector. This fact is confirmed by the World Bank report (2023) entitled Indonesia Economic Prospects, which explains that during the 2019-2022 period, the prevalence of decent work with middle-class standards fell significantly, from 14% to 9%.
The government, as a policymaker, certainly cannot remain silent. As the largest group of contributors to Indonesia’s generation today, the government needs to act quickly and precisely by rolling out policies that really touch the root of the problem, not just focusing on statistical figures alone. When this issue is not prioritized, Indonesia risks facing a larger unemployment boom, accompanied by increased economic instability and social discontent.
Vocational Education is the Solution to Unemployment?
Some blame the high youth unemployment rate on the failure of education policies and skill mismatches that create a gap between education and the needs of the industrial world. Based on this problem, vocational education seems promising, given that its ideals are in line with efforts to alleviate unemployment and that it is considered capable of minimizing the risk of skill mismatch. But once again, hope sometimes contradicts reality.
Although the government continues to improve the quality of the workforce through vocational education programs as well as actively organizing job training programs, these programs are often out of sync with the real needs of the industry. Instead of reducing unemployment, vocational education has become the biggest contributor to unemployment. BPS recorded that 1.8 million vocational school graduates, 191 thousand diploma graduates, and 872 thousand undergraduate graduates are unemployed. The problem of skill mismatch is not resolved, instead it is even more difficult to overcome.
For this reason, there is a need for a new formulation to alleviate the problem of unemployment. Instead of relying on the miracle of vocational education or general training, the government can intensify project-based training programs that involve the workforce directly as parties involved in solving concrete problems in the industry. In addition, policies oriented towards developing the quality of human resources that have superior competitiveness in the industrial or labor market must be prioritized. Therefore, the government needs to build strategic partnerships between educational institutions (universities/vocational schools), research institutions, and industry to create a curriculum mapping that is more relevant to market and industry needs. The hope is that the labor force can have skills that match the demands of the industry.
Facing the increasingly worrying situation of unemployment, especially among the younger generation, the government as a policy regulator should not remain silent. The high unemployment and underemployment rates, as well as the low availability of decent jobs, should no longer be interpreted as meaningless statistics. The impasse in vocational education and vocational training programs in bridging the gap between the skills taught and the needs of the labor market is a condition that exacerbates the situation. Skill mismatch should also not be considered a single problem that seems to place the labor group as the sole sufferer.
Currently, the problem of unemployment seems to be the responsibility of the community. In fact, the problem of unemployment should be the priority responsibility of the state. Therefore, it is time for the government and all stakeholders to carry out comprehensive reforms in labor and education policies. The focus should shift from simply increasing the number of graduates to improving the quality and skills that are relevant to industry needs. Strategic partnerships between the government, educational institutions and industry must be strengthened to ensure that the education curriculum and training programs are in line with labor market demands.
In addition, the government needs to be more proactive in creating new jobs based on innovation and technology while encouraging the development of sectors that have great potential to absorb labor, including the creative economy sector, cutting-edge technology-based industries, and small and medium enterprises.
More than 8 million people are unemployed, stranded on the streets looking for work while yearning for policies that favor them. In the midst of life’s uncertainties, they continue to struggle, hoping for the miracle of a decent job for themselves so that they can live the dream of living a decent life for their wives, children, and loved ones.
