Employment in Indonesia - statistics & facts
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Indonesia has one of the largest populations in the world, ranking fourth after China, India, and the United States. The nation has a relatively young population, indicating a large share of working-age individuals. This demographic condition gives Indonesia some advantages, as a young workforce tends to adapt to new technology and learn new skills faster than an older one. Indonesia is entering a demographic bonus phase, which is expected to peak between 2024 and 2030, during which the country is projected to have one of the largest workforces in Asia.
In March 2023, the Indonesian government enacted the controversial Omnibus Law on Job Creation, following a previous regulation ratified in November 2020. Through the Omnibus Law, many restrictions on foreign investors were lifted, making it easier for foreign investment in Indonesia. However, the new law significantly reduces worker protections, including minimum wages and maternity benefits, and abolishes legal protections in permanent employment contracts. Despite the numerous issues surrounding the law and persisting disagreement from the Indonesian labor union, the government believes that by making Indonesia more open to foreign investors, this adjustment will create more employment opportunities.
From an agricultural nation to a manufacturing nation
Indonesia's large, relatively low-cost labor force of over 146 million people makes it a suitable market for labor-intensive industries. Most of Indonesia's workforce is employed in the agricultural sector, followed by wholesale and retail trade, and manufacturing. As the country’s economy has been highly dependent on agriculture, it is unsurprising that this sector has been the largest employer for decades. However, as the economy matures, Indonesia has transitioned beyond just producing agricultural products, positioning the manufacturing sector in a central position as the largest GDP contributor in the country. As of 2023, Indonesia’s manufacturing sector directly accounted for around 14 percent of the country’s total employment, and workers in manufacturing earn more than those in the agricultural sector.Omnibus Law in Indonesia: is it for better or worse?
Although Indonesia has experienced extensive economic development, there are several challenges limiting inclusive growth. A significant difference persists between the average monthly income of men and women across sectors and the nature of employment. Indonesian men generally earn higher wages than women, and women tend to have higher rates of informal employment. Disparities are also found between employment in urban and rural areas. Employment in Indonesian rural areas is more concentrated in the agricultural sector, which mostly provides informal employment with lower wages and limited insurance coverage. Consequently, many Indonesians migrate from rural to urban areas in search of better job opportunities. However, this migration often fails to improve their livelihoods, as many do not find well-paying jobs due to high competition and skill mismatches.In March 2023, the Indonesian government enacted the controversial Omnibus Law on Job Creation, following a previous regulation ratified in November 2020. Through the Omnibus Law, many restrictions on foreign investors were lifted, making it easier for foreign investment in Indonesia. However, the new law significantly reduces worker protections, including minimum wages and maternity benefits, and abolishes legal protections in permanent employment contracts. Despite the numerous issues surrounding the law and persisting disagreement from the Indonesian labor union, the government believes that by making Indonesia more open to foreign investors, this adjustment will create more employment opportunities.
