1-4-2024 (JAKARTA) Sari Sartika Dewi, a 34-year-old divorcee, managed to pursue a law degree at a private university in Karawang, West Java, while working full-time at a factory. After successfully completing her studies in 2022, Sari hopes to find a job that matches her qualifications. However, Indonesia, despite being Southeast Asia’s largest economy, faces challenges in providing quality employment opportunities for its youth.
Sari currently earns a monthly salary of 5.2 million rupiah (approximately S$442) at a foreign shoemaker factory, which aligns with the region’s minimum wage and includes social security benefits. She considers her current job a stepping stone but finds it difficultto make a significant career leap due to the competitive job market. Sari is aware that thousands of people are also seeking jobs, making her hesitant to make a move.
In Indonesia, many young people face a similar predicament, often ending up in menial jobs after completing their education. It is not uncommon to see young individuals working as cleaners in shopping malls, train stations, and other public spaces.
While the unemployment rate for individuals aged 25 to 59 stands at 3.07 percent, below the national average of 5.3 percent, the situation is much worse for the younger generation. As of August 2023, the unemployment rate for youth aged 15 to 24 reached 19.4 percent.
Niki Andriyawan, a 24-year-old train cleaner who graduated from vocational school, acknowledges the tough competition for jobs and has resigned himself to his current position. Despite aspiring to work in a new environment, Niki finds it challenging to secure alternative employment. Even university graduates face difficulties in finding suitable jobs.
Indonesia’s youth unemployment rate, which stood at 13 percent in 2022, surpasses that of its neighboring countries such as the Philippines (6.3 percent), Vietnam (7.4 percent), and Thailand (4.5 percent). To transition to a high-income country, Indonesia faces the challenge of providing middle-class jobs, which contribute to upward mobility and offer better wages and benefits.
According to Dr. Maria Monica Wihardja, a former World Bank economist and visiting fellow at the ISEAS – Yusof Ishak Institute, middle-class jobs in Indonesia pay around 5.2 million rupiah per month. However, the country’s economic policies have not effectively created more quality jobs that can sustain a middle-class lifestyle.
Dr. Maria emphasizes the need for a comprehensive industrial policy that goes beyond traditional sectors and revitalizes labor-intensive manufacturing. She suggests investing in emerging industries and building an ecosystem that attracts both domestic and foreign direct investment.
Economists believe that Indonesia’s economic growth, coupled with industrialization efforts, is crucial to escaping the middle-income trap and achieving high-income status. Mr. Bhima Yudhistira, executive director of the Centre of Economic and Law Studies, and Dr. Mohammad Faisal, executive director of Core Indonesia, both stress the importance of industrialization in creating job opportunities and upgrading labor skills.
Indonesia’s manufacturing sector currently contributes 18 percent to the gross domestic product (GDP), and the goal is to increase this figure to 25 percent. Additionally, the country needs to achieve an annual growth rate of 7 to 8 percent to reach high-income status by 2045.
To unlock itself from the middle-income trap and foster higher-quality growth, Indonesia must diversify its sources of economic growth and implement institutional reforms. Dr. Maria suggests joining international organizations like the Organisation for Economic Cooperation and Development (OECD) to comply with international standards and governance.
In February, Indonesia began talks on becoming the first Southeast Asian member of the OECD, signaling its commitment to economic development and structural reform. Former trade minister Muhammad Lutfi highlights the importance of infrastructure development, attracting more direct investment, and improving the quality of human resources to escape the middle-income trap.
With a median age of 29.9 in 2023, Indonesia faces a deadline to take advantage of its demographic dividend before it ends between 2038 and 2040. Sari Sartika Dewi, like many others, desires a better job that matches her qualifications and enables her to achieve her long-term goals.
