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Indonesia Economy

Current conditions of Indonesia

Unemployment based on the
Unemployment types.

Fika Aulia Kusuma 1506710393


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Name : Fika Aulia Kusuma
NPM : 1506710393
Title of Paper : Current conditions of Indonesia Unemployment based on the Unemployment

Lecturer : Surjadi
Subject : Indonesia Economy
Date : March 28th, 2017
Signature :

Employment rate is the percentage of the labor force that is unemployed. Unemployment
rate is a key indicator of the economys health. Unemployment rate usually closely related to the
economys aggregate output (Case, Fair, & Oster, 2014). Unemployment occur whn people who
are in a working age dont have a job or are looking for a job.

However, people did not simply call as unemployed because they are not looking for job of
there is no job in the labor market. There are people who choose to leave their job and looking for
another jo. At time when they look for another job, they will be unemployed. There are also
people who fired by their employer because the company where they work having a bankruptcy or
lowering cost due to the economic recession. By the time they get fired. They are unemployed.
Student who just graduated or just finished their study from particular education will need some
times to find a job they are looking for, since fresh graduate tend to look for jobs that suits the at
first. By the time they look for a new job, they will be unemployed. Farmer who only work at the
particular seasons also can be counted as unemployed by the time that the seasons already end and
they dont have anything to do. Hence, many unemployment doesnt happen just because the labor
market is not available. It could happen because some factors that mostly unavoidable. Some
unemployment is unavoidable in free market economics (Lilien, 1982).

Types of Unemployment (Case, Fair, & Oster, 2014):

- Frictional unemployment, the portion of unemployment that is due to the normal turnover
in the labor market; used to denote short run job/ skill-matching problems
- Structural unemployment, the portion of unemployment that is due to changes in the
structure of the economy that result in significant loss of jobs in certain industries.
- Cyclical unemployment, is above frictional plus structural unemployment.
- Seasonal Unemployment,


Indonesia is a big country with large amount of citizen. Indonesia placed 4th as the country
with the highest population.

Penduduk Indonesia menurut Provinsi 1971, 1980, 1990, 1995, 2000 dan 2010

1971 1980 1990 1995 2000 2010

Aceh 2008595 2611271 3416156 3847583 3930905 4494410

Sumatera Utara 6621831 8360894 10256027 11114667 11649655 12982204
Sumatera Barat 2793196 3406816 4000207 4323170 4248931 4846909
Riau 1641545 2168535 3303976 3900534 4957627 5538367
Jambi 1006084 1445994 2020568 2369959 2413846 3092265
Sumatera Selatan 3440573 4629801 6313074 7207545 6899675 7450394
Bengkulu 519316 768064 1179122 1409117 1567432 1715518
Lampung 2777008 4624785 6017573 6657759 6741439 7608405
Kepulauan Bangka Belitung - - - - 900197 1223296
Kepulauan Riau - - - - - 1679163
DKI Jakarta 4579303 6503449 8259266 9112652 8389443 9607787
Jawa Barat 21623529 27453525 35384352 39206787 35729537 43053732
Jawa Tengah 21877136 25372889 28520643 29653266 31228940 32382657
DI Yogyakarta 2489360 2750813 2913054 2916779 3122268 3457491
Jawa Timur 25516999 29188852 32503991 33844002 34783640 37476757
Banten - - - - 8098780 10632166
Bali 2120322 2469930 2777811 2895649 3151162 3890757
Nusa Tenggara Barat 2203465 2724664 3369649 3645713 4009261 4500212
Nusa Tenggara Timur 2295287 2737166 3268644 3577472 3952279 4683827
Kalimantan Barat 2019936 2486068 3229153 3635730 4034198 4395983
Kalimantan Tengah 701936 954353 1396486 1627453 1857000 2212089
Kalimantan Selatan 1699105 2064649 2597572 2893477 2985240 3626616
Kalimantan Timur 733797 1218016 1876663 2314183 2455120 3553143
Sulawesi Utara 1718543 2115384 2478119 2649093 2012098 2270596
Sulawesi Tengah 913662 1289635 1711327 1938071 2218435 2635009
Sulawesi Selatan 5180576 6062212 6981646 7558368 8059627 8034776
Sulawesi Tenggara 714120 942302 1349619 1586917 1821284 2232586
Gorontalo - - - - 835044 1040164
Sulawesi Barat - - - - - 1158651
Maluku 1089565 1411006 1857790 2086516 1205539 1533506

Maluku Utara - - - - 785059 1038087
Papua Barat - - - - - 760422
Papua 923440 1173875 1648708 1942627 2220934 2833381
INDONESIA 119208229 147490298 179378946 194754808 206264595 237641326
Catatan : Termasuk Penghuni Tidak Tetap (Tuna Wisma, Pelaut, Rumah Perahu, dan Penduduk Ulang-alik/Ngelaju)
Sumber : Sensus Penduduk 1971, 1980, 1990, 2000 dan Survei Penduduk Antar Sensus (SUPAS) 1995

According to 2010 census conducted by Badan Pusat Statistik (BPS), Indonesias

Citizenship reach the amount of 237.641.326 citizen with 101 of sex ratio on 2015 (Badan Pusat
Statistik, 2015).

(Source : Badan Pusat Statistik)

Population growth In Indonesia


Population, Total

2012 248,037,853

2013 251,268,276

2014 254,454,778

2015 257,563,815

The percentage of annual population growth is increasing through the year. It is a big
amount of citizenship is quite big remembering that Indonesia still a developing country. This does
not correlate with the death rate that shows consistent rate every year. This big amount of
citizenship lead to several problems that could affect directly or indirectly to the macroeconomic
indicator of Indonesian Economy, such as unemployment. Unemployment in Indonesia is
surprisingly decreasing in the past following years. Based on the statistic data, on 2014 Indonesia
unemployment rate based on the percentage of the labor force is 5,9% decreasing from 6.2 % on
2013 and 6.1 % on 2012. This decreasing of unemployment rate could be because of the
improvement of start-ups company that recently developing in Indonesia that attract new
employees and open jobs opportunities. The level of working age is increasing through the past
few years while the population of non working citizen is increasing. This is a good sign for the
unemployment rate since the number of retirement that indicated from the population for more than
65 citizen is decreasing and the birth rate that indicated by the population of 0-14 ages citizen is
also decreasing (World Bank, 2015).

Population of working age

2012 66.585 %

2013 66.731 %

2014 66.909 %

2015 67.134 %

Population of 0-14 age

2012 28.39 %

2013 28.208 %

2014 27. 983 %

2015 27. 692 %

Population more than 65 age

2012 5.025 %

2013 5.062 %

2014 5.109 %

Population more than 65 age

2015 5. 174 %


Indonesia now shows a good improvement on Education. According to statistic Data,

Indonesia shows an increasing in the amount of higher level workers. Although there are many
workers with high level education, yet there are some working age people who are still looking for

(Source : Badan Pusat Statistik)

According to data above, SMK graduated workers who are unemployed showing a big
number while university graduated worker showing low number. Fresh University graduated
student who just finish their study need more time to find a job that suit them and match with their
skill. By the time they look for another job, they will be unemployed. People who choose to resign
for their current job because they think they are not suit with their job, will also need time to look
for another job. They are call Frictional Unemployment. Frictional Unemployment caused by time
it takes workers to search for a job (Case, Fair, & Oster, 2014). This frictional unemployment can
affect the labor market itself which is the change of composition of demand among the industries
of regions called as sectoral shift (Case, Fair, & Oster, 2014). Sectoral shift will not have impact on

the level of unemployment if labor allocation is affect the natural rate when it takes time for laid
off worker to be reemployed (Lilien, 1982). Many frictional unemployment in Indonesia are
consist of fresh graduated student who are tend to move from one job to another job. This
happened because fresh graduated student tends to look for a job that suit to their preferences and
their skill.

Frictional unemployment is occurring from the employee side. Sometimes unemployment

could also occur caused by organization side. Organization could not avoid if they are suffering
from bankruptcy. In order to overcome it, organizations need to lower the operational cost of
organization itself. One of the way to lower the cost is reducing the salary or reduce the amount of
employee that can lead to increasing of unemployment. This type of unemployment called
structural unemployment. Structural unemployment mostly happens not because the lack of skill
that that make the workers of the labor force could not find a job. It happen because there is
mismatches between the number of people who want to work and the number of jobs available in
the labor market (Mankiw, 2012). this issues have been the major problem of Indonesias
unemployment problem. The number of labor force is increasing every year while the job
opportunities is not enough to absorb the labor force available.

Natural rate of unemployment rate occurs as a normal rate of unemployment at the normal
functioning economy (Case, Fair, & Oster, 2014). Cyclical Unemployment also described as the
fluctuation of the natural rate of unemployment rate (Lilien, 1982). Natural rate of unemployment
regularly explained as the sum of the frictional unemployment and structural unemployment. This
theory of natural rate unemployment could relate to another types of unemployment which us
Cyclical unemployment. Sometimes cyclical unemployment is above the frictional and structural
unemployment itself. Cyclical unemployment could happen because there is an economic recession
in a particular country. Indonesia have already suffered from economic recession during 1997-
1998, that caused the price of goods are expensive and many organizations are suffering lost. in the
past 12 years, Indonesia has experienced two big economic crises, namely the Asian financial crisis
started by mid. 1997 and reached its peak in 1998, and the global economic crisis in 2008 and 2009
(Tambunan, 2010). This economic recession also caused some people lose their business and jobs.

Indonesia is famous as agricultural and marine country. Indonesia is rich for their natural
resources especially for spices and seafood. Hence, many Indonesia citizens are depending on the
agricultural and marine sector as their daily job. Most of Indonesia citizen who live in the suburb
area is working as a farmer and fisher. However, working as farmers and fishers is different than
working in an office. Farmers and fishers mostly work based on the seasons. Especially farmer
who plant particular seeds that only grow in a particular times a year or period. After the seasons
end, the farmer will be unemployed. Fishers also work through the season. Fishers are working
according to the weather of the seasons. Fishers could not go fishing if it is raining seasons.
Unemployment will occur once they season come and they will not have jobs until the seasons
change again. According to data above, it may suggest that Indonesia is experiencing jobless
growth, it is important to note that employment outcomes have continued to fluctuate between
February and August substantially, pointing to both seasonal and other factors playing a role in
labor market churning (International Labor Organization, 2015). From the table below, we could
see Indonesia suffer the increasing of unemployment rate in agricultural, Forestry, Hunting and
Fishery on February since it is the raining season which prevent the seasonal workers to work


Unemployment rate as one of the macroeconomic indicator is playing important role in the
Indonesias economic health. Imagine our GDP is really high, even higher than Singapore, but our
GDP per capita is not as higher as them. Unemployment directly and indirectly can affect the
economic health of Indonesia by reducing government income through tax and increasing the
social cost made by government.

Unemployment is unavoidable yet can be reduced by several ways. Pursuing people to open a new
business will open e anew job opportunity for other people. In the recent years, many Indonesian
people start to open a new business that allow workers who are seeking for job to have a job. For
example, is GO-JEK. GO-JEK has open some really big job opportunities for people who dont
have any education background yet have skill.

Indonesias percentage of annual population growth is decreasing through the past few years
following the decreasing of unemployment rate. The decreasing of population growth could
happen because government has push the KB (Keluarga Berencana) program in the past few years.
However, the population of working age is still increasing over the past years. This condition could
also happen because many female citizen are entering the labor force that is different from the past
years that many female citizen choose to stay at home a a housewives.

Frictional unemployment happens because these days there are so many people who change their
job many times. People like this tend to search for new environment or new experience and search
for comfortable work environment for them. This frictional unemployment could be overcome by
building a good work environment for the worker to avoid turnover. Structural unemployment tend
to be unavoidable because this happened from company side. Company sometimes have no choices
other than firing employees in order to lowering the operational cost. Solutions for the structural
unemployment is reallocated the labor force to another region or another sector so the labor force
would no be weighted on one region or sector. Cyclical unemployment is also avoidable because
sometimes it happened because of the economic recession which are also unavoidable. In order to
overcome the cyclical unemployment, we need too increase the purchasing power of the people
which is another homework for the government to increase the social welfare. For the seasonal
unemployment it is good for the workers, especially farmers and fishers, to look for another
alternative. Farmers could plant another seeds that match the seasons. Government could also
provide training skill to create new skill for the workers to fill their leisure time during the seasons.

Works Cited
UNICEF. (n.d.). Economic Indicators. Retrieved from UNICEF:

Case, K. E., Fair, R. C., & Oster, S. M. (2014). Principle of Economics. Harlow, Essex, England:

Badan Pusat Statistik. (2015). Rasio Jenis Kelamin menurut Provinsi. Retrieved from Badan Pusat

Mankiw, G. N. (2012). Macroeconomics. New York City, New York, United States of America:
Worth Publishers.

Lilien, D. M. (1982, Aug). Sectoral Shift and Cyclical Unemployment. JSTOR.

Tambunan, T. T. (2010, August). The Indonesian Experiences with Two Big Economic Crisis.
Scientific Research.

World Bank. (2015). Population Of Indonesia. Retrieved from World Bank:

International Labor Organization. (2015, November). Indonesia : Labor and Social Update Nov
2015. Asia Pacific Decent Work.