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EDITORIAL: Productivity-driven growth
The problem, though, is that most of the new jobs are in low-productivity service subsectors such as retail trade, hotels and restaurants.
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Most of the new jobs are in low-productivity service subsectors such as retail trade, hotels and restaurants. (Shutterstock/File)
T
uesday’s conference on how Indonesia should improve productivity through quality jobs was a solid opportunity for gathering policy input amid the government’s preparation of a new medium-term economic development plan. The plan is being drawn up against the backdrop of a global economy and a world of work that are increasingly being reshaped by rapid changes in technology.
The conference was held in conjunction with the launch of the 264-page book published by the Asian Development Bank (ADB) titled Indonesia: Enhancing Productivity Through Quality Jobs.
The book examines the interaction between the economy and employment, set against rapid technological changes that tend to be disruptive and cause job losses — at least in the short term — as seen in the various sectors that have been affected by digital technology. It also proposes policy options to provide productive jobs to absorb the annual supply of 2.6 million new job seekers as the economy enters the Fourth Industrial Revolution, and to create a skilled workforce that is better able to meet the labor demand for a rapidly expanding digital economy.
Theoretically, as the world’s fourth most populous country, Indonesia’s economic growth should enjoy a strong tailwind from the so-called demographic bonus, as characterized by the projected increase in the workingage population from about 65 percent of total population in 2017 to 70 percent in 2031.
But we cannot fully harness the positive demographic trend and convert it into higher economic growth due to the wide deficit in skilled labor and physical infrastructure, along with the inconducive investment climate in manufacturing . But the government seemed ignorant of the plight of investors, especially during the 2010-2013 commodity boom that propelled the economy to an annual growth of 6 percent, compared to an average 5 percent in 2014-2017.
Official estimates show that while manufacturing employment has virtually stagnated at about 12 percent of total employment, employment in the service sector has grown by more than 7 percent a year. The problem, though, is that most of the new jobs are in low-productivity service subsectors such as retail trade, hotels and restaurants.
ADB economists strongly recommend a new wave of structural transformation to secure jobs in the face of technological changes, investing more in technical and vocational education to produce graduates with the appropriate skills demanded by the labor market.
Business panelists at the conference also noted that machines would replace many jobs that involved routine tasks. They even recommended massive reform in the school curriculum from primary to tertiary education, because in the long run, being productive and efficient is not enough to be competitive in the job market. To win in the global market, businesses also need workers who are innovative, creative and entrepreneurial.
But in such an environment of change, skills development and human capital will play an even greater role in future economic development, and implementing wellresourced, well-targeted vocational training could prove to be the better short-term investment in skill acquisition.
