With the jobs market becoming increasingly flexible, the Manpower Ministry is exploring options to protect workers who are laid off or whose contracts are not renewed. Unemployment insurance is one of those options, according to Manpower Minister Hanif Dhakiri, another is training and certification for the jobless.

“Finding a permanent job may become more challenging in the future, with many contractual jobs up for grabs. So how should the country protect these workers? There must be a flexible security system to protect the more flexible labor market,” Hanif told The Jakarta Post in a recent interview. The two programs being studied are unemployment benefits or insurance for laid-off workers on the one hand and training and certification on the other, which together could provide a social safety net and facilities for workers to upgrade their skills while unemployed.

They could complement the social security programs managed by the Workers Social Security Agency (BPJS Ketenagakerjaan), which is currently in charge of four social security programs: work safety insurance, life insurance, pension funds and retirement benefits. “When you lose your job, you don’t need to be stressed out, because there’s a social security scheme for you. There will be unemployment benefits that may cover your [financial needs] for, say, three or six months as you browse for a new job. In the meantime, you can also upgrade your skills,” Hanif explained.

Some stakeholders have welcomed the idea, with University of Indonesia labor expert Aloysius Uwiyono saying social safety nets for laid-off workers could especially protect low-skilled workers that would be harmed by industrial automation, as they could upgrade their skills using the training and certification benefits.

“Workers would have more security as their employers automate their businesses,” Aloysius said, adding that government-backed unemployment insurance is a common form of social security in countries across the world.

Payaman Simanjuntak, a professor at Krisnadwipayana University who studies labor issues, said unemployment insurance, if properly run, could replace the high-cost severance pay requirement stipulated in the 2003 Labor Law, which had weakened Indonesia’s competitiveness vis-à-vis other countries.

“Severance pay is too high and puts a burden on businesspeople,” said Payaman, echoing investors’ and businesses’ concern over high severance pay and high wage requirements that have discouraged labor-intensive, smaller enterprises from investing in the country, unlike in neighboring countries like Vietnam, Bangladesh and Cambodia.

President Joko “Jokowi” Widodo has been quoted in interviews calling for a labor market reform to boost Indonesia’s competitiveness as he looks to boost investment and household spending to address sluggish economic growth, which at 5.05 percent in the second quarter was at its lowest level in two years. In 2009, Indonesia ranked 157th of 181 countries across the world and 23rd of 24 countries in the Asia Pacific in terms of regulatory flexibility for labor, classing the country among the most inflexible, according to a World Bank report.

The Labor Law requires severance pay amounting to around 30 months of salary for employees laid off after 20 years of working at a company, pushing many jobs into the informal sector as employers are concerned about laying off workers, according to a report released by the National Team for Accelerated Poverty Reduction
(TNP2K) in 2018. (awa)

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