Promote decent work for all, ILO advises Indonesia on the eve of the ASEAN Economic Community

In its latest Labor and Social Trends report for Indonesia, the International Labor Organization (ILO) has asserted that the country must strengthen its labor institutions and invest in skills development if it is to benefit from regional economic integration.

Indonesia’s labor market continued to expand over the 2014–2015 period, with employment growing and unemployment remaining low. However, Indonesia’s highly fluid labor market means that structural changes occurring in the country’s economy as a result of the approaching ASEAN Economic Community will entail shifts in demand for skills and require innovation to strengthen productivity.

This shift in demand for skills is leading to positions being filled by under-qualified workers. The ILO suggests that Indonesia must develop a responsive education and training system to address this mismatch and promotes a quality apprenticeship system as the tool to do so. IZA World of Labor author Robert Lerman has written about the benefits for firms of investing in apprenticeships. He observes that education and training can keep youth unemployment low and enhance the quality of jobs that do not require higher education. He notes that “reallocating funding from school-based vocational programs to apprenticeship programs that emphasize work-based learning can lower the costs per worker and increase the quality and relevance of training.”

ILO research also indicates that compliance with labor regulations can increase reliability for enterprises. In his World of Labor paper, Gordon Betcherman says that appropriately designed regulations can modestly alleviate market failures and offer some protection to workers without imposing major costs on firms or the economy. He urges policymakers to base decisions about minimum wages, job security rules, and other regulations on empirical evidence to the furthest extent possible because of the political nature of rule-setting in the labor market.

One in three workers in Indonesia is on a low wage and although poverty rates have fallen, high inequality still exists. Gaps in existing social protection provisions (e.g. workers in the informal economy and home workers) emphasize the need to promote equitable growth through decent work. Lisa Cameron reports that women are more likely than men to work in the informal sector and to drop out of the labor force for a time, which undermines productivity. Many developing countries have introduced social protection programs to protect poor people from social and economic risks, but programs are generally less accessible to women than they are to men. She says that accommodating lower levels of literacy and women’s family care responsibilities, and providing services close to women’s homes, among other things, can help more women gain access to such programs.

The ILO report urges the government, workers, and employers to work together to promote decent work for all and ensure that Indonesia can build on its prosperity.

Key points of the ILO’s report can be found here. 

Related articles:
Do firms benefit from apprenticeship investments?, by Robert Lerman
Designing labor market regulations in developing countries, by Gordon Betcherman
Social protection programs for women in developing countries, by Lisa Cameron