16 September 2019 (closed)
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The month May is a memorable month for Indonesia in terms of historic significance. On 21 May 1998 former president Suharto - who ruled the country for more than three decades through his authoritarian New Order regime - resigned after having become politically isolated after Jakarta had turned into a bloody battlefield. This was one of the largest events in the political history of Indonesia, causing structural changes in the political system. Other key days in May are International Labor Day (1 May), National Education Day (2 May), and National Awakening Day (20 May).
Whereas National Education Day, National Awakening Day, and even the resignation of Suharto receive relatively limited attention in Indonesian press, International Labor Day gets a high degree of press coverage, zooming in on the thousands of Indonesian workers who take the streets to demonstrate in Jakarta's city center, usually demanding for higher wages. However, all these days have been key in transforming Indonesia to its current form and are more-or-less interrelated. In this article we focus on the link between International Labor Day and National Education Day¹.
There are currently 114.8 million workers in Indonesia, most of whom (57.7 percent) are active in the informal sector, implying they have no fixed wages and therefore this informal group is always at the risk of falling into poverty.
In recent years Indonesia's minimum wages have risen steeply and workers are always demanding for higher wages. However, research shows that Indonesia's rising minimum wages have two counteractive effects: on the one hand the life of formal workers becomes easier due to the higher wage (resulting in household's higher purchasing power); on the other hand higher formal sector minimum wages curtail job availability in this formal sector (it becomes harder for informal workers to join the formal workforce).
Furthermore, a problem exists because the Indonesian government determines the minimum wage based on the "Need for Decent Living Index", not on rising productivity of the workers. In the years 2010-2013 Indonesia's minimum wages grew by an average of 30 percent, significantly higher than minimum wage growth in countries such as Thailand (+14.2 percent), China (+8.4 percent), Vietnam (+6.7 percent), Cambodia (+5.2 percent), Malaysia (+3.3 percent), and the Philippines (+3.1 percent) over the same period. However, if Indonesia's minimum wage growth occurs without a rise in productivity it will only backfire as production costs rise steeply and can make foreign investors decide to ignore or leave Indonesia, in search of cheaper labor costs in countries like Vietnam or China.
There is a link between Indonesian workers' low productivity and National Education Day because low productivity is caused by the general low quality of Indonesia's human resources. This is primarily regarded the result of weak government efforts to boost education across the archipelago. Only 47 percent of the Indonesian workforce has graduated from primary school, implying they lack adequate skills and are basically only 'equipped' to work in the informal sector.
Although Indonesia's economy has been developing rapidly over the past 40 years, giving rise to industrialization (at the expensive of agriculture which saw its contribution share to the economy decline), the quality of the nation's workforce seems to develop at a much slower pace. According to the Human Capital Report 2015, released by the World Economic Forum (WEF), Indonesia only ranks 69th out of 124 countries in terms of human capital development - and alarmingly ranks well below most of its regional peers - implying the nation fails to develop and deploy its human capital potential.
¹ Indonesia celebrates National Education Day every year on the second day in May because this is the birthday of Ki Hadjar Dewantara (also known as Raden Mas Soewardi Soerjaningrat), a Javanese (from Yogyakarta) who lived between 1889-1959. Dewantara was a writer, columnist, politician and advocator of Indonesian independence from the Dutch colonial power. But he may be most remembered for his pioneering role in the development of education in the Indonesian colony.