Understanding the nexus between employment, living standards and poverty is a major challenge in Indonesia. Trends in poverty are heavily dependent on labour market opportunities and social spending in education and health. The question is how to create opportunities and spend money wisely - a subject of intense debate in Indonesia. The government has brought a renewed focus to poverty reduction since the end of the Asian financial crisis, especially under the current president, Susilo Bambang Yudhoyono. This book shows how Indonesia is travelling with regard to employment, social policy and poverty. It identifies promising new directions for strategies to alleviate poverty, some of which are already showing results.

Indonesia faces the twin challenge of maintaining high economic growth and making growth more inclusive. Most policymakers now agree that better jobs and greater productivity are fundamental for sustaining rapid and more inclusive growth. Improved productivity is essential to maintaining the country's competitiveness. Better jobs are critical for improving living standards and reducing poverty. This book focuses on Indonesia's most pressing labor market challenges and associated policy options. It provides a clear understanding of the labor market, demographic and labor force transitions, and the role of education and skills development to build the foundation for sustainable growth for the next generation.

The topics of unemployment, underemployment, wage trends and patterns, and the relationship between poverty and the labour market are of interest to all policy makers, researchers, academics and journalists concerned with economic development. This book traces the evolution of the Indonesian labour market between the early 1970s and late 2000s. This entails a (a) review of macroeconomic policies and their employment impact; (b) review of unemployment and underemployment trends; (c) review of wage trends and living standards; (d) relationship between poverty, inequality and the labour market; and (e) labour market regulations, employment and the business environment. The book comes up with a number of policy-relevant findings. Macroeconomic policies, particularly inflation targeting in the 2000-2007 period, have not been conducive to employment generation. The assumption that unemployment is an appropriate indicator of labour market performance and, more importantly, that it is closely aligned with poverty, is shown to be inaccurate. Sustained real wage growth in the twenty-year period before the 1997 financial crisis is contrasted with the lack of improvement since then, a period otherwise of respectable economic growth by international standards. The predicted adverse consequences of sweeping labour market regulations in 2000-2007 on properly measured employment, unemployment and labour costs did not materialize, mainly because of low compliance. It seems that a restrictive macroeconomic framework has been more constraining for employment growth than the perceived labour market rigidity during the post-crisis period. The book concludes with an evaluation of several ‘reactive’ and ‘proactive’ labour market policies. Though these are complementary, policy makers in Indonesia have probably put too much emphasis on reactive policies such minimum wage and severance pay, and not enough on proactive policies aimed at creating an adaptable and skilled workforce.

The Asian financial crisis in 1997-98 was a serious blow to a thirty-year period of rapid growth in East and Southeast Asia. This book uses the Indonesia Family Life Surveys (IFLS) from late 1997 and late 2000 to examine changes in living standards for Indonesians from just before the start of the crisis to three years after. Indonesian Living Standards Before and After the Financial Crisis, using the rich data in IFLS to provide a true-to-life look at living conditions in Indonesia, is an important reference for policymakers working on economic issues affecting Indonesia.

The book focuses on Indonesia's most pressing labor market challenges and associated policy options to achieve higher and more inclusive economic growth. The challenges consist of creating jobs for and the skills in a youthful and increasingly better educated workforce, and raising the productivity of less-educated workers to meet the demands of the digital age. The book deals with a range of interrelated topics---the changing supply and demand for labor in relation to the shift of workers out of agriculture; urbanization and the growth of megacities; raising the quality of schooling for new jobs in the digital economy; and labor market policies to improve both labor standards and productivity.

'Poverty and the Labour Market in Indonesia: Employment Trends across the Wealth Distribution', is among Indonesia's first papers on the relationship between poverty and the labour market. It provides a detailed analysis of employment indicators (labour force participation rates, hours worked, and type and sector of employment) for the period 2000-2012 across the entire wealth distribution, by location, gender and various sociodemographic characteristics.Despite high economic growth rates, the creation of millions of new jobs, and a strong decrease in poverty rates in recent years, many Indonesians continue to live in poverty even when employed. This paper finds that the poor are as likely as the nonpoor to work, both at the extensive (labour force participation) and at the intensive (number of days and number of hours) margins. The reason for being poor despite being employed is therefore largely driven by other factors.In terms of household structure, clear evidence exists that the working poor need to share their income with a larger household, including economically nonactive members such as young children and the elderly. The higher dependency ratio contributes to their being/becoming working poor. Significant gender differences exist in the Indonesian labour market. Men show higher labour force participation rates and are more likely to work more hours compared with women. However, no strong gender differences were observed when comparing the working poor with the nonpoor.The authors observed that the relative share of the rural working poor as a portion of all working poor has increased over time and that the majority of the working poor are employed in the agricultural sector. Furthermore, the working poor are predominantly and increasingly (in relative terms) concentrated in the informal sector of the economy. An important finding concerns the role of education in the likelihood of being poor or nonpoor. Results also suggest that only the attainment of higher secondary and tertiary education seems to increase the likelihood of being meaningfully protected against poverty.