Unemployment in Indonesia Affected by Slowing Economic Growth
Amid continued slowing economic growth unemployment in Indonesia increased in February 2015. On Tuesday (05/05), Statistics Indonesia announced that the country’s unemployment rate rose to 5.81 percent, up from 5.70 percent in February last year. However, compared to August 2014 - when unemployment was recorded at 5.94 percent - relative unemployment in Indonesia actually declined. Statistics Indonesia releases data on unemployment twice per year covering the unemployment rate in the months February and August.
Economic growth is important to create jobs and therefore slowing economic growth means that job generation is curbed. Earlier today, Statistics Indonesia announced that Indonesia’s Q1-2015 economic growth slowed to 4.71 percent (y/y), the weakest pace in five years, and far away from the +7 percent (y/y) GDP growth figure that is targeted by President Joko Widodo by the end of this term in 2019, or the 5.8 percent (y/y) growth target that was set in the 2015 State Budget.
Indonesian Economic Minister Sofyan Djalil said that besides slowing economic growth another problem is that investment in Indonesia tends to be capital-intensive rather than labour-intensive and therefore the country’s unemployment rate has difficulty to decline. The main reason why investors are not eager to engage in labour-intensive investment is because they are concerned about rapidly rising minimum wages in Indonesia. Over the past two years, these wages have increased significantly and cause financial troubles for businesses.
Recent data from the Indonesia Investment Coordinating Board (BKPM) show that direct investment in Indonesia during the first quarter of 2015 managed to absorb 315,229 workers. However, this is less than the 470,510 workers that were absorbed in the previous quarter, despite direct investment in Indonesia having increased 16.9 percent (y/y) to IDR 124.6 trillion (USD $9.6 billion).
In order to reverse the economic slowdown (that started in 2011), analysts say that Indonesia needs to implement more reforms, especially in an effort to boost infrastructure development. Currently, the country’s infrastructure projects are hindered by red tape, land acquisition troubles and lack of financial resources as the private sector is generally uninterested to invest in costly infrastructure projects that need a lot of patience before they see returns.
Indonesia's Unemployment Statistics 2010-2014:
| 2011 | 2012 | 2013 | 2014 | 2015¹ | |
| Labor Force | 119,399,375 | 120,320,000 | 120,170,000 | 121,870,000 | 128,300,000 |
| - Working | 111,281,744 | 113,010,000 | 112,760,000 | 114,630,000 | 120,850,000 |
| - Unemployed | 8,117,631 | 7,310,000 | 7,410,000 | 7,240,000 | 7,450,000 |
¹ data from February 2015
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
| Unemployment (% of total labor force) |
10.3 | 9.1 | 8.4 | 7.9 | 7.1 | 6.6 | 6.1 | 6.2 | 5.9 |
Source: Statistics Indonesia (BPS)
Indonesia's Unemployment Rate 2006-2014 (percentage of labour force):
