Indonesian Employment Is Not In Good Condition

Illustration – The government must immediately take strategic steps to deal with the wave of layoffs so that people's purchasing power is maintained. (Antara)

JAKARTA – A number of business sectors, especially in the technology and manufacturing business sectors, are still making adjustments to face the market situation which is not yet conducive. Especially related to the weakening of exports, soaring production, and operational costs, as well as changes in post-pandemic consumption patterns.

So from a business standpoint, efficiency is something that inevitably has to be done to maintain the company's financial flow.

That is why, Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira believes that labor conditions in Indonesia are not in good condition. The wave of mass layoffs (PHK) that occurred throughout 2022 is likely to continue in 2023.

"The indicators are clear, in August 2022 alone according to BPS data, there was a reduction in the number of workers in the textile industry from 1.13 million to 1.08 million workers. Likewise in the startup sector, there are at least 20 companies across the sector fintech, e-commerce, and agritech that have reported layoffs," he told VOI on 22 February 2023.

Until now, these companies have not fully recovered. Still on guard against uncertain times.

This, said Bhima, was a serious problem. The government must take anticipatory steps, especially to maintain the purchasing power of the lower middle class. If not, the Indonesian economy will be very vulnerable to external pressures.

A wave of layoffs hit labor-intensive industries due to a drastic decline in the value of exports. (Antara/Raisan Al Farisi)

The Ministry of Manpower stated that there were 12,935 workers who were affected by layoffs during January-November 2022. However, if you look at the BPJS Employment disbursement data, there were already 919 thousand people who disbursed JHT due to layoff claims in the same period.

"Absorb layoff victims in the digital sector to help accelerate the digitalization of SOEs. Reactivate the work training center and facilitate cooperation with business actors who are currently expanding," he said.

In addition, the government should continue the Wage Subsidy Assistance (BSU) to prevent employee efficiency from continuing in the textile, apparel, and footwear sectors.

"What must also be considered is that the central and regional budgets have a significant impact on job creation, especially since there are many infrastructure projects and SME stimulus plans planned. The key is accelerating budget absorption, as much as possible at the beginning of the year it has started to be absorbed," said Bhima.

Member of Commission IX DPR RI, Netty Prasetiyani Aher also reminded the government to immediately take concrete mitigation steps. Look for alternative export destinations and increase the domestic market. This is because, according to the Indonesian Employers' Association (Apindo), there has been a decrease in the aggregate demand for exports of labor-intensive products by up to 30-50 percent, especially demand from developed countries.

Optimize the APBN and APBD to stimulate purchases of domestic products so that demand increases. Also, maximize the use of MSME products for domestic needs so as to trigger an increase in the need for manpower.

"The state budget must be properly managed as an instrument that keeps the economy moving and growing so that the storm of layoffs can be minimized," he said as reported by VOI on 20 February.

Factor of Layoffs

Professor of Sociology of Economics, FISIP, Airlangga University, in his opinion entitled ‘PHK and Poverty Pressure Threatening Workers’ explained a number of factors that led to an increasingly massive wave of layoffs in Indonesia.

The first relates to work efficiency processes that are stimulated by the development and use of technology in the production process. In the era of increasingly competitive business competition, a number of companies inevitably have to make savings through the transfer of technology utilization, which ultimately impacts or forces employee efficiency.

"Compared to workers who are at risk of disrupting the smooth production process because they sometimes carry out demonstrations, the use of technology is not only considered more efficient, but also guarantees more certainty of production continuity," he wrote.

Second, because of market changes. As has happened with a number of startups. The company recruits workers in large numbers and at a fast pace. When the market faltered, they quickly cut employees.

Third, because of the development of types of businesses that rely more heavily on funding without knowing when they must be able to generate profits for business continuity. Companies that rely on capital injections, such as startups, have very fragile foundations when it comes to making a profit.

A number of start-up companies, such as JD.ID, has laid off its employees twice. However, conditions no longer allowed this to last until they finally decided to close their businesses completely on March 31, 2023. (Antara)

So, said Bagong, the phenomenon of employee layoffs in start-up businesses will continue to occur as long as they do not rely on their ability to penetrate the market.

Uncertain economic and global market conditions have resulted in the employment situation in Indonesia not being able to enter into a situation of uncertainty and darkness.

When the unemployment rate is high, it will be a factor that increases the risk of spreading poverty and contributing to inequality.

Based on data from the Central Statistics Agency (BPS), the number of unemployed people in Indonesia reached 8.4 million in August 2022, a portion of which is 5.86 percent of the total national workforce. Most of the unemployed come from the age group of 20-24 years, namely 2.54 million people. This number is equivalent to 30.12 percent of the total national unemployment.