Beware the Economic Impact on Gen X, Millennials

It will be more difficult for Indonesia to benefit fully from its demographic bonus. Taking advantage of the demographic bonus is not something automatic, but requires hard work to benefit from it.

KOMPAS/BAHANA PATRIA GUPTA

Airline crew, generally millennials, after taking care of a Health Clearance letter at the Covid-19 Command Post at Terminal 1 Juanda Airport, Sidoarjo, East Java, Friday (8/5/2020). In 2020-2024, Indonesia is entering the peak of the demographic bonus, with the largest population of productive age (15-64 years).

JAKARTA, KOMPAS — Members of Generation X (40-55 years) and millennials (24-39) comprise 68 percent of the economically productive population. This population segment should be productive, but many people in this demographic have instead lost their jobs as an impact of the Covid-19 pandemic, with some even becoming unemployed.

Ateng Hartono, the social statistics deputy at Statistics Indonesia (BPS), said in Jakarta on Thursday (16/12) that unemployment among millennials and Gen Xers showed an upward trend during the pandemic. Speaking at the "Indonesian Demographic Outlook 2022" webinar, he said that open unemployment among millennials had been 4.74 percent and 2.01 percent among Gen Xers in February 2020, the month before the country’s first Covid-19 cases were announced.

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In August 2020, six months after the first Covid-19 cases were detected, unemployment had risen to 7.16 percent among millennials and to 3.68 percent among Gen Xers. However, in August 2021, unemployment had declined to 6.70 percent among millennials and to 2.95 percent among Gen Xers.

Most of the unemployed were educated people. Around 16 percent of unemployed millennials were university graduates, 3.32 percent had associate degrees, 24.06 percent were senior high school graduates, and 17.02 percent were vocational school graduates.

Meanwhile, among unemployed Gen Xers, as much as 38.2 percent had a senior high school education, 4.42 percent were university graduates, 1.69 percent had associate degrees, 21.77 percent were senior high school graduates, and 10.36 percent were vocational school graduates.

The rise in the number of unemployed people will automatically result in an increased number of poor people. This trend has been seen since the beginning of the pandemic. The poverty rate had dropped to 9.2 percent in September 2019, the lowest since Indonesian independence, but then increased to 9.8 percent in the first month of the pandemic, or March 2020. Meanwhile, the poverty rate had increased to 10.2 percent in September 2020.

"Although this is taking place not just in Indonesia, the pandemic has reversed the poverty reduction achievements that Indonesia has made over the years," said World Bank senior economist Ririn Salwa Purnamasari.

The various government measures intended to contain the impacts of the pandemic have yielded few results. The poverty rate eventually rose to 10.1 percent in March 2021.

"There is a slight improvement in poverty alleviation, although it is not significant," Ririn added.

Stability

The large productive age population, the high number of unemployed people, especially the educated unemployed, and the high poverty rate could also have a negative impact on sociopolitical stability and security.

Turro S. Wongkaren, who heads the Demographic Institute at the University of Indonesia business school, pointed out that Indonesia’s present-day dependency ratio, which compares the nonproductive population and the productive population, was similar to that seen in Gulf countries during the Arab Spring of 2010-2012.

KOMPAS/RADITYA HELABUMI

A number of workers completed a pedestrian path revitalization project in Kebayoran Baru, South Jakarta, Thursday (19/8/2021). Employment can contribute to reducing unemployment which has risen during the Covid-19 pandemic. Through labor-intensive projects, it will also help low-income communities, or poor people affected by the pandemic, in accelerating efforts to recover the national economy.

The region had a large supply of young workers, but they were unable to find decent jobs. This triggered socioeconomic turmoil that in turn caused turmoil in politics and security.

Therefore, the low dependency ratio of 44.3 percent at the peak of the demographic dividend should be balanced with good population management in various sectors to encourage economic growth.

It is projected that Indonesia's demographic bonus will peak in 2021-2022. Long before the arrival of this golden era, it was projected that Indonesia would face difficulty in taking advantage of its demographic dividend. This only worsened when Indonesia was hit by the pandemic at the peak of its demographic bonus.

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Under such conditions, it will be more difficult for Indonesia to benefit fully from its demographic bonus, which is projected to end in 2037. "Taking advantage of the demographic bonus is not something automatic, but requires hard work to benefit from it," said the population and social security director Muhammad Cholifihani from the National Development Planning Ministry.

In order to benefit fully from the demographic bonus, the World Bank’s Ririn said that the government needed to accelerate pandemic recovery in an inclusive manner, even though the impacts of the pandemic differed for each household. The government should prioritize people with low education, including the bottom 40 percent of the economy, and those who had difficulty in recovering quickly, she said. In addition to the economy, health and education services must also be restored, she added.

This article was translated by Hendarsyah Tarmizi.