Unemployment in Indonesia eased to 5.61 percent of the national workforce - or 7.03 million people in absolute terms - in August 2016, improving from 6.18 percent in the same period one year earlier. On Monday (07/11), Indonesia's central Statistics Agency (BPS) reported these latest data. BPS released the nation's unemployment data twice per year, covering the months August and February. BPS Chairman Suhariyanto attributed the decline in unemployment to three matters: (1) the rising number of female workers, (2) the expanding size of workers in the informal sector, and (3) the e-commerce boom.
Suhariyanto said former housewives, in particular, now start to work in Indonesia and therefore join the workforce. They join the small trading companies or import companies (in informal sectors). Meanwhile, Indonesia's seasonal workers in formal sectors - for example in agriculture and plantations - shifted to informal jobs, such as small retail traders and small food vendors.
Lastly, Indonesia's e-commerce industry also contributed to sliding unemployment in Southeast Asia's largest economy. About 1.53 million new employment opportunities were created in the country's trade and services sectors between August 2015 and August 2016 (the majority originating from Indonesia's rapidly developing e-commerce sector). It is interesting to note that the app-based online transportation services such (including Gojek, Grab and Uber) added some 500,000 new employees in the transportation sector.
Accelerating economic growth also contributes to lower unemployment. Although on a quarter-on-quarter basis, Indonesia's gross domestic product growth eased in Q3-2016, on an annual basis the nation's GDP continues to accelerate. This is important because it is estimated that for each 1 percent GDP growth 265,000 new jobs are generated.
Meanwhile, a study by global financial services firm JP Morgan and Singapore Management University says Indonesia lacks skilled workers due to a huge gap between academia and industry. For example, in information and communications technology (ICT) many graduates lack the skills that are required for this industry. Moreover, in order to attract more foreign investment the study advises the government to relax rules on the employment of skilled foreign workers in key growth industries. Lastly, the government needs to take more action to tap the full potential of its young and dynamic population (the demographic bonus). The unemployment rate among Indonesia’s youth stands at around 18 percent.
Indonesia's Unemployment Statistics:
(% of labor force)
Source: Statistics Indonesia (BPS)