Macroeconomics subject For undergraduate students (semester 2)

1. Government policy towards
labour market regulation in
Indonesia
Meeting 10

2. • 1. explain the relevance of government policy to labour conditions in
Indonesia
• 2. explain the role of government policy towards unemployment and
wages in Indonesia

3. Sectors
• The services sector became the key source of employment, creating
14.2 million jobs in the last decade.
• The industry sector, with its modest performance, contributed only
7.1 million new jobs, including 4.4 million jobs in manufacturing.
• The agriculture sector lost 900,000 jobs in the last decade.

4. What is needed to be done
• Indonesia needs to ensure that new entrants to the labour force are
equipped to support economic development.
• Labour market institutions need to provide an enabling environment
for supporting economic growth and job creation.
• Social protection and social security systems need to support the
productivity of the labour force and help to resolve issues related to
poverty and inequality.
• Integrated solutions are required across education, infrastructure,
economic sectors, and the social sectors, in order to promote
quality employment and support employment creation.

5. OVERVIEW OF LABOR MARKET TRENDS
• 1. Slow job growth, with many workers likely to be discouraged
• 2. Labour market performance fluctuates throughout the year
• 3. Outcomes are uneven across social group and regions
• 4. Slow job growth has been a persistent challenge for Indonesia
• 5. Employment outcomes in manufacturing have been modest
• 6. Linking economic and employment outcomes can support the
expansion of quality jobs.
• 7. Trends in the finance, real estate, insurance and business services
sector contrast with trends in the construction sector.
• 8. Productivity gains need to accelerate at a faster pace.
• 9. Employment patterns have changed over time.
• 10. By 2035 two thirds of the population will be living in urban areas.
• 11. Demographic shifts will also influence the labour market.

6. Key labour market indicators

7. Selected labour market indicators

8. Sector output growth

10. Population projections

11. Labour Migration trends 1
• According to the Ministry of Manpower and Transmigration in
2006 there were 2.7 million Indonesian citizens working legally
abroad, these workers constitute approximately 2.8 percent of the
Indonesian workforce.
• The majority of these labour migrants are women working in
the domestic or service sectors.
• They are concentrated in Southeast and East Asia and the Middle
East, in particular Malaysia, Singapore, Hong Kong SAR (Hong Kong
Special Administrative Region), Taiwan Province of China, Saudi
Arabia, Kuwait and the United Arab Emirates.

12. Labour Migration trends 2
• Labour migration in Asia is predominantly temporary in nature, with the
majority of labour migrants working on one or two year contracts.
• In addition, labour migration in Asia is dominated by lower skilled and
semi-skilled workers, mainly employed in construction, domestic work,
agriculture, manufacturing and the service sector.
• For most migrants the rationale for working abroad is to be able to earn a
higher income to support themselves and their dependants in their home
country.
• While working overseas, many labour migrants send money home to pay
for their families’ daily needs, children’s education or to service debts.
• In 2008, ASEAN countries received an estimated USD 36 billion in
remittances from migrant workers within and outside the region (World
Bank,2009b)

13. Labour Migration trends 3
• The Colombo Process
• The Abu Dhabi Dialogue
• ASEAN Declaration

14. The Feminization of Labour Migration
• Women play an increasing role in international labour migration and
currently constitute 49.6 percent of all labour migrants globally.
• In developing countries, where the majority of labour migrants are
temporary workers, the proportion of female labour migrants rose dramatically
from the 1970s onwards.
• The main destination countries for Asian female labour migrants were in East,
West and Southeast Asia and the Asia Pacific.
• In several countries, the number of female labour migrants has, in fact, reached
70 percent of the total number of labour migrants.
• In Indonesia, 69 percent of labour migrants in 2006 to 2007 were female. This
shift in migration patterns is often referred to as the feminization of labour
migration.
• The majority of female labour migrants are employed in domestic services.

15. Migration

16. Labour Migration from Indonesia