The Root of Indonesia’s High Unemployment Rate

The unemployment rate has reached an alarming level since it has risen to double digits. Despite its fluctuating drops, the unemployment rate has remained high. According to National Statistics Bureau data, as of June 30, 2006, the unemployment rate stood at 10.6 percent, or 11.6 million of the 106 million-person workforce, a 2 percent increase on the 9.5 million of the end of 2005. Under-unemployment, or those working less than 35 hours a week, has exceeded 43 million.

The economic growth of almost 6 percent in 2005 could cover only the annual growth of 2.3 million new job seekers. The unemployment situation has been worsened by the an additional 5 million people becoming poor, raising the number of poor in Indonesia to 37 million in August this year.

Indonesia could be facing an unemployment boom along with all the possible social impacts in the coming years, unless its root problems are addressed and economic development is accelerated.

That’s Manpower and Transmigration Minister Erman Suparno, interviewed by Jakarta Post.

And what is the root problem? Skill mismatch, he said. “The industries have offered numerous job opportunities but they cannot be filled because of the absence people or lack of competence”.

Skill mismatch is obviously one of the reasons why Indonesia’s unemployment rate is high, but is it a major problem?

I don’t think so. Only a couple years ago, unemployment rate was about 5-6 percent. So, cyclical unemployment — unemployment due to slower economic growth — is still the real culprit.

4 Responses to The Root of Indonesia’s High Unemployment Rate

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