Weighing Labor's Future Between Bonuses or Demographic Burden

There are still many labor problems, such as high youth unemployment, child labor, and low productivity.

KOMPAS/BAHANA PATRIA GUPTA

The Labor Day commemoration in front of the Jawa Timur Governor's office, Jalan Pahlawan, Surabaya, on Wednesday (May 1st, 2024). Thousands of workers participated, many of whom came from out of town. Previously, they gathered at Bundaran Waru, then departed together towards the Jawa Timur Governor's office.

JAKARTA, KOMPAS — The employment sector is still facing a number of problems that need to find solutions. If quality, productivity, welfare and various other labor problems are not immediately resolved, the dominance of the productive age population in Indonesia in the next few years will only be a demographic burden.

President of the Confederation of Indonesian Muslim Trade Unions (Sarbumusi) Irham Ali Saifuddin said that the employment sector still has to face a myriad of problems amidst the government's optimism in taking advantage of the demographic bonus whose peak can be enjoyed in 2032.

In that year, it is projected that 64 percent of Indonesia's total population will be in the productive age range. In order for the large portion of productive society to contribute optimally to the national economic growth leap, it requires a high-quality workforce that is indicated by high productivity.

The employment sector in Indonesia still has a lot of homework that needs to be completed, including increasing the capacity and skills of workers as well as shifting the world of work which is experiencing digital disruption.

However, looking at the current situation, Irham continued, our unemployment rate for young workers is among the highest in Asia. Referring to the National Labor Force Survey (Sakernas) in August 2023, there were 7.86 million unemployed people, of which 42.55 percent were in the age range of 15-24 years old.

Intersecting with that data, there is another problem in the form of a high number of child workers, which is projected to reach 293,000 children by 2025.

"Until 2045, there will be hundreds of thousands of generations who will not experience optimal growth because child laborers usually do not have access to education," he said during a discussion held by Sarbumusi in Jakarta on Wednesday (May 1, 2024).

Also read:Policies to Prevent a Wave of Layoffs are Considered Urgent

Apart from the problem of unemployment and the issue of child labor, the employment sector in Indonesia still has a lot of homework that needs to be completed, including increasing the capacity and skills of workers as well as shifting the world of work which is experiencing digital disruption. The employment sector in Indonesia is also affected by external conditions in the form of geopolitical tensions occurring in the Middle East, Eastern Europe and the South China Sea region.

"If a solution is not immediately found for these problems, it will backfire on the demographic bonus in Indonesia," said Irham.

From the perspective of worker productivity, Indonesia is relatively lower compared to several countries in the Southeast Asian region. Based on International Labour Organization (ILO) data, each worker in Indonesia contributes 12.96 US dollars per working hour to the gross domestic product (GDP) in 2021.

The productivity of workers in Indonesia is still below that of Singapore (USD 74.15/person/hour), Brunei Darussalam (USD 55.92/person/hour), Malaysia (USD 25.59/person/hour), and Thailand (USD 15.06/person/hour).

Increased productivity is closely related to the level of competence and quality of the workforce. The government has been focused on reforming the education system, particularly vocational education, in recent years to find a balance in the supply of workforce that meets the needs of the industry.

Contacted separately, Deputy of Digital Economic, Manpower, and SME Coordination Division, Ministry of Coordinating Economic Affairs, Rudy Salahuddin, ensures that in terms of regulation, the government will work to ensure that Indonesia's demographic bonus is supported by an increase in the quality of human resources and workforce productivity.

Through Presidential Regulation Number 68 of 2022 on Vocational Education and Training Revitalization, reforms are implemented by involving industries more in developing vocational education curricula, even to the point of merging or closing schools that are deemed unable to meet industrial needs.

"So, our workforce will still be prepared for the condition of 23 percent of jobs that will change in the next five years, where many jobs will disappear due to automation and digitalization, but many new jobs will also emerge," said Rudy.

KOMPAS/RONY ARIYANTO NUGROHO

Workers' fists during the 2024 Mayday Fiesta at the Madya Gelora Bung Karno Stadium, Jakarta, Wednesday (1/5/2024).

The legal umbrella concerning wages that is currently in effect, namely Government Regulation (PP) No. 51/2023 regarding amendments to PP No. 36/2021 regarding wages, will continue to change. This is because the government realizes that the minimum wage is essential for single workers and those who have worked for less than a year, but it is instead being misused by irresponsible employers to suppress production costs.

Also read: Industrialization is the Key to Increasing Labor Wages

"To be honest, if the industry has already established a wage scale structure for each level of competency and skill of their workforce, it should have been enough. However, the current condition is that the industry wants to have a standard that can be used with the lowest possible cost to reduce production expenses. That is why the minimum wage has become the effective wage," he said.

Regarding the issue of minimum wage in Indonesia, Senior Program Officer of the International Labor Organization (ILO), Lusiani Julia, explained in a discussion with Sarbumusi that the Indonesian government only began giving more attention to the implementation of the minimum wage policy in the late 1980s.

"This step is mainly due to pressure from the international community regarding issues of labor standard violations that occur in Indonesia," he said.

At that time, a United States trade organization (AFL-CIO) and several human rights activists objected to a US multinational company operating in Indonesia. The company was alleged to provide very low wages with below-standard working conditions.

"As a result, the Indonesian government at that time was forced to pay more attention to its minimum wage policy by increasing its minimum wage up to three times its nominal value or two times its real value," he said.

Deputy of Economics at the Ministry of National Development Planning/National Development Planning Agency (Bappenas), Amalia Adininggar Widyasanti, stated that there will be an automatic adjustment of wage increases in line with the increasing contribution of the industrial sector to the GDP.

The future workforce's capabilities will certainly shift towards tasks that cannot be replaced by machines and require human brain skills.

"It is certain that the industrial sector can contribute optimally to the national economy if the productivity and skills of the workforce are high," he said.

Taking a cue from South Korean companies whose industries are growing, according to him, 50 percent of their employees work in research and development (R&D) to ensure that innovation does not stop. Regular tasks such as transportation, packaging, and even soldering can be replaced with machines to increase efficiency.

"The future workforce's abilities will undoubtedly shift towards tasks that cannot be replaced by machines and require human brain skills. Of course, the amount of wages for workers will increase in line with their skills," said Amalia.