'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.

Examines the impact of policies on growth, employment, and poverty reduction in Indonesia, reviewing the periods both before and after the 1997 financial crisis and drawing implications for today's policy-makers. Focusing on the sectors of agriculture, manufacturing, and construction and services, as well as assessing macroeconomic policies, this study addresses current challenges with respect to past and emerging trends, and advocates recognizing the country's strengths and fostering a skilled workforce that can adapt and respond to the imperatives of industrial transformation.

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.

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.

October 1996 Because poverty mainly afflicts agricultural and self-employed households in Indonesia, the most direct ways that policy can help to reduce poverty are through improving the operation of product, land, and capital markets, particularly where the regulatory environment now works to reduce farm profitability or inhibit entry to productive enterprises by the poor. Labor market policy can play an important role by facilitating, not impeding, labor mobility across sectors. The majority of the poor in Indonesia come from agricultural and self-employed house--holds. About 70 percent of the remaining poor came from rural agricultural households in 1993, and more than 72 percent lived in households that derived the bulk of their income from self-employed enterprises. Moreover, the largest single contribution to poverty reduction between 1990 and 1993 came from within-sector welfare gains to self-employed farm households. Data show that the role of the labor market in reducing poverty has increased since the mid-1980s. Wage labor markets can be expected to play an increasingly important impact on the welfare of Indonesia's poor as the economy continues to undergo structural change, and as the workforce continues to move out of agriculture into manufacturing and services. Because poverty remains largely an agricultural and self-employed phenomenon, the most direct way for policy to contribute to reducing poverty is to focus on improving the operation of product, land, and capital markets - particularly where monopolies reduce farm profitability or viability (for example, cloves, oranges) or where excessive regulations raise costs or inhibit entry to productive enterprises by the poor. At the same time, labor market policy can play an important role in the Government of Indonesia's efforts to reduce poverty by helping to facilitate labor mobility across sectors - for example, from low productivity activities in agriculture to higher productivity activities in other sectors. But if they reduce labor mobility, labor market policies can be counterproductive to Indonesia's poverty reduction efforts. Recent empirical evidence suggests that increases in the minimum wage may have hurt employment growth, particularly among small firms. As such, using minimum wage policy to ensure high wages to a limited number of (mostly nonpoor) workers will almost certainly diminish the poverty reducing potential of the labor market. This paper - a joint product of the Poverty and Social Policy Department and the Country Operations Division, East Asia and Pacific, Country Department III - is part of a larger study of the labor market in Indonesia undertaken by East Asia and Pacific, Country Department III. It was presented at a joint Ministry of Manpower, Indonesia-World Bank workshop, Indonesian Workers in the 21st Century, Jakarta, April 2-4, 1996.