Jobless youth raise risk of Indonesia's 'demographic bonus' turning into disaster

Policy-makers in Indonesia have been cheering over a “demographic bonus”, a condition where people of productive age (15-64) outnumber children and older people.

But this demographic bonus can turn into a disaster, if the government does not address the problem of unemployment among Indonesia’s young people.

Challenging times for young workers

Around half of Indonesia’s 250 million people are under 30. In addition, more than 50 million of the 128.3 million people of productive age have low education levels. Some 31.7 million only finished primary school and 20.4 million graduated from junior high school.

With poor qualifications, a lot of young Indonesians will find it difficult to enter the labour market and compete with job seekers at national and global levels.

Furthermore, these young people will have to find jobs at a time when the country’s economy is slowing. During Susilo Bambang Yudhoyono’s presidency (2004-2014), growth was relatively stable at 6%, and even reached 6.5% in 2011.

Recently Indonesia’s Central Statistics Agency (BPS) announced that the economy grew by 4.73% in the second quarter, an increase from the 6-year-low of 4.67% growth in the second quarter of 2015. But while the economy is very slightly picking up, unemployment is rising.

In recent years, various industries, including mining, consumer goods, manufacturing and textiles, have been cutting employment.

With no quick acceleration of economic growth expected in the near future, job seekers face tough times in the next few years.

Indonesia’s window of opportunity

The World Bank considers the period when Indonesia will have more people of productive age – between 2010 and 2030 – as the country’s window of opportunity. With fewer people as “burdens”, the children and elderly who could not work, the government would have the chance to direct the country’s resources to invest in education, health and sanitation. This would facilitate greater prosperity for the country, which in turn would contribute to stability in the Asia-Pacific region.

It’s now five years into Indonesia’s window of opportunity. The government has tried to increase the budget for education and health. But that’s not enough. Indonesia needs also to revitalise the nation’s family planning program to reduce the current 2.6 fertility rate to 2.1.

According to data from Indonesia’s Bureau of Statistics (BPS), Indonesia’s unemployment rate in August increased to 6.18%, representing 7.56 million people, from 5.81% in February.

But many analysts and researchers take these official data with a grain of salt. Many people in Indonesia who are counted as employed are actually in “vulnerable employment”. They are self-employed or workers without employment contracts. Some are unpaid workers too.

In 2013, 24.2% of the country’s total male workforce were in vulnerable employment. For women the percentage rises to 43.5% in 2013. Many that fall into the category of vulnerable employment work in the informal sector, as coolies in the market, motorcycle taxi drivers, domestic workers and other jobs without proper employment contracts.

Unemployment has broad social costs

Unemployment does not only deprive people of the “direct” benefit of employment, which is to have a legitimate and regular source of income. It also deprives them of the “indirect benefits” of employment.

Employment allows people to engage in meaningful activities. It provides them with a structured life and a feeling of being respected by the community and their wider social networks.

Such deprivation may generate depression, disillusionment and isolation. It could trigger or aggravate psychological and physical problems.

Studies have shown that there is a relationship between unemployment, boredom, disenchantment, violence and substance abuse. Unemployed young men aged between 15 and 24, particularly those who live in low-income neighbourhoods, are more likely to engage in violence and excessive use of alcohol or drugs.

Researchers have identified that the benefits of having a job can prevent people from being violent or consuming too much alcohol and drugs. Having a job protects young people from risk-taking behaviour that may have serious consequences for health and well-being.

Unemployment among young people in poor urban neighbourhoods is also closely related to involvement in various forms of offences, including vandalism, petty crimes or more serious crimes such as burglary and robbery.

Of course, the association of youth unemployment and crime is not causal. Not all unemployed young people will automatically engage in these activities. But unemployment evidently plays a pivotal role in exacerbating young people’s vulnerabilities to becoming involved in such activities.

Government at all levels should really start to create policies that can absorb youth into the workforce. The government needs to work on developing Indonesia’s real sector, the part of the economy that produces goods and services that can create more jobs for Indonesia’s young workforce.

Sudirman Nasir does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.