Youth Unemployment in Indonesia: A Demographic Bonus or Disaster?
High youth unemployment is one of the threats that is being faced by Indonesia. Indonesia has a young population as roughly half of the total population is below thirty years of age. This means that the country contains a potentially large workforce. But this demographic bonus can turn into a demographic disaster if this workforce cannot be absorbed by employment opportunities. The World Bank recently warned against Indonesia's high youth unemployment and misplaced focus on education spending.
The World Bank report "East Asia Pacific at Work: Employment, Enterprise and Well-Being" mentions that unemployment among the country’s youth aged 15 to 24 is at an unusually high level. However, this is not a new phenomenon. A characteristic of Indonesia has been that the unemployment rate is highest for people between the age of 15 and 24, far above the country's national average as freshly graduated students from universities, vocational schools and secondary schools have difficulty finding their place in the workforce.
According to the report, approximately 20 percent of Indonesia's young men and one third of the young women are unemployed nor go to school. The total number of young men aged 15 to 24 in Indonesia is estimated at 20.5 million, while the total number of young women aged 15 to 24 is 20.2 million.
Amid robust economic growth, unemployment rates in Indonesia have fallen sharply in recent years. In 2006, 10.3 percent of the nation's labor force was counted as unemployment. By 2014, this figure declined to 5.7 percent (equal to 7.2 million people). However, unemployment among junior high and high school graduates were highest, at 7.4 percent and 9.1 percent respectively.
The World Bank warned against this current condition as the high level of youth unemployment can lead to social unrest, thus impacting negatively on the country's future economic prospects and limit the productive potential of Indonesia as a whole.
Female youth unemployment is one or two percentage points higher than male youth unemployment. Although female unemployment has declined more rapidly than male unemployment, gender equality (as in most countries) is an issue in Indonesia. Despite considerable progress has been made in several key areas (education and health), women are still more likely to work in the informal sector (twice as much as the amount of men), or in poorly remunerated occupations and are paid less than men for similar work.
The report also questioned the Indonesian government's minimum wage policy (which has risen in recent years, much to the dislike of businesses). According to the report these minimum wage increases do more harm to women with fewer skills, young workers, and recent entrants to the labor market. The report does not question the existence of a minimum wage but the key is to have uniformity and predictability regarding the wage increases. Preferably, the minimum wage should be kept at a relatively low level to accommodate unskilled workers' employment prospects.
Despite allocating 20 percent of the country's state budget to education, the report claims that Indonesia has not invested enough in pre-primary and primary education to ensure people have the skills that will make them life-long learners.