The Absorption of Preemployment Incentives

KOMPAS/BAHANA PATRIA GUPTA

A man accesses the Prakerja.go.id site to register for the Pre-employment Card program at the Office of Manpower and Transmigration of East Java Province, Surabaya, East Java, April 13, 2020.

Amid the urgent need to prevent the economy from slipping further by accelerating budget spending and calling for a heightened sense of crisis, the bureaucracy is acting like a barrier.

In the case of the Preemployment Card program, the distribution of workers incentives has been constrained by a requirement that program participants must first complete their online training courses before the monthly assistance of Rp 600,000 is disbursed. Four months since the program was launched, only 20.35 percent of the workers incentive has been disbursed from the fixed budget (Kompas, 7/9/2020).

Consequently, the Preemployment Card will most likely fail in its aim to help prospective workers and workers affected by the health crisis by increasing their purchasing power and reinvigorating the economy in the remaining month of the third quarter.

Also read: Overhauling Pre-Employment Card Urgent

In fact, the government is relying on the Preemployment Card and other assistance intended for the lower middle class, like the direct cash aid for 13 million workers earning less than Rp 5 million per month and the recent 13th month salary for civil servants, as well as social assistance for the poor, to boost household consumption. This strategy aims to prevent the national economy from plunging into a recession in the third quarter and to reduce the rising poverty rate.

Our success in preventing a steep economic contraction, or recession, depends highly on the effectiveness of sustaining the purchasing power of households. Household consumption contributes 57 percent to gross domestic product (GDP) and middle- and upper-income households contribute 45 percent to overall household consumption in the nation.

Also read: Unemployment Expected to Increase Further

KOMPAS/TOTOK WIJAYANTO

Semi-permanent houses stand on a water channel in Cideng, Central Jakarta, Wednesday (5/8/2020). It is feared that the decline in the Indonesian economy in the second quarter of 2020, which grew negatively by 5.32 percent, will cause the poverty rate to rise further.

Prevent too steep an economic contraction is the only thing that can be done.

However, the various constraints on aid distribution, in addition to the low budget absorption of other programs in the National Economic Recovery (PEN) scheme, it seems the government is facing obstacles in achieving its goals of rapidly boosting consumption to avoid descending into a recession in the third quarter. Less than a month remains in the current quarter, while the programs’ impacts are expected to become noticeable only in the fourth quarter.

Prevent too steep an economic contraction is the only thing that can be done. Among the proposed changes for the Preemployment Card is to replace the workers incentive with cash aid as disposable income so as to promote greater household consumption. It has also been proposed that the realization of the Preemployment Card program be postponed until the economy recovers. Pushing the Preemployment Card program now is being seen as a waste, considering the current situation of the real sector, which is seeing a declining trend in workforce absorption as a result of the health crisis.

Also read: Potential Conflicts of Interest in Pre-Employment Card Program

Many program participants are also motivated more by their desire to obtain the post-training incentive rather than growing their skills. Training is no longer the primary focus. Moreover, the online training courses provided do not always correspond with the current demands of industry. If the program is forced at the present juncture, it must be reorganized, including by eliminating all aspects that are hampering the distribution of immediate benefits to the targeted groups.

The case with the Preemployment Card is not very different from the other PEN programs that have recorded equally low budget absorption: the bureaucracy is poorly prepared, the program is poorly designed and the data is incomplete. The Covid-19 crisis has made us aware of the importance of having a solid and consolidated social protection system.