Pathways to Middle-Class Jobs in Indonesia
‘Our dream, our ambition is that by 2045, after one century of Indonesian independence, Indonesia should, Insya Allah (God willing), have escaped the middle-income trap,' President Joko Widodo declared in the opening lines of his inaugural add...
| Main Authors: | , |
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| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/891451624897518888/Pathways-to-Middle-Class-Jobs-in-Indonesia http://hdl.handle.net/10986/35848 |
| Summary: | ‘Our dream, our ambition is that by
2045, after one century of Indonesian independence,
Indonesia should, Insya Allah (God willing), have escaped
the middle-income trap,' President Joko Widodo declared
in the opening lines of his inaugural address in October
2019. Indonesia is on its way, with single digit poverty
rates and economic growth averaging 5 percent annually
between 1990 and 2018. However, nearly half (47 percent) of
Indonesians are stuck just below the middle-class threshold
and belong to an ‘aspiring middle class.’ They are neither
poor, nor highly vulnerable to becoming poor, but have not
reached a level or stability of consumption associated with
middle-class status. Indonesia’s jobs situation may be
preventing the country from making rapid progress toward
realizing its dream. Jobs have contributed to both growth
and poverty reduction. Indonesia created an average of 2
million new jobs each year in the past decade. These take
many forms, such as 40-hours-a-week Jakarta office jobs,
food stalls run by families, online motorcycle taxi drivers,
and subsistence farmers in Papua. In 2018, there were
approximately 124 million working youth and adults in
Indonesia, the employment rate had reached a two-decade
record high, with 67.2 percent of youth and adults in the
labor force, and the unemployment rate was at a two-decade
low of 5.3 percent. This report posits that Indonesia is
currently a story of growth in low-productivity jobs. Jobs
are being created, and they fuel the economy, but
productivity growth is insufficient to unlock the backlog of
people aspiring, but unable, to move up to the middle class.
This report explores the factors holding back productivity
growth and thus the creation of middle-class jobs, and
offers policy levers that could unlock the barriers. This
Overview presents a cross-sectoral narrative about the
current jobs situation and the policy framework that is
needed to spur the creation of middle-class jobs toward a
middle-class Indonesia. It draws from sector-specific
empirical analysis of the macroeconomy, and of firms and
workers; the empirical analysis is presented in a companion
technical report. The Overview is intended to give a broad
picture of the challenge of creating middle-class jobs,
identify potential policy priorities, and map out initial
actions to move a complex agenda. The preparation of the
report overlapped with the COVID-19 crisis. While it refers
to the economic crisis caused by the pandemic, it primarily
looks toward a post-COVID-19 period of rebuilding better. |
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