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Demographic bonus: The more the merrier the wealthier?
Within the last two decades, the discourse on the demographic bonus in the country often leads to a rather optimistic scenario.
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his was the title of my presentation at the 16th Indonesian Regional Science Association (IRSA) international conference held virtually two weeks ago. In choosing the title, I was inspired by a classic Indonesian adage, banyak anak banyak rezeki (each child brings its own fortune), that runs counter to the Malthusian perspective.
My paper itself discusses the nexus of development and demography, which attempts to prove or disprove the seemingly propitious notion of the demographic dividend or bonus. Unfortunately, it appears that the demographic dividend is rarely realized because the quality of Indonesian human resources is still relatively low compared to that of peer countries, not to mention the adverse impact of the COVID-19 pandemic.
Before I started my session, I conducted a poll for the audience to choose between two opposing policy options. First, “quantity over quality", which aims to employ as many available workers as possible in light of the increasing productive-age segment and consequently spurs job creation. Second is the opposite, “quality over quantity”, which prioritizes the quality enhancement of human resources through education, health and other human development-related programs.
From 55 responses, the majority (46) opted for the latter. Yes, I did not provide a third option that was probably the ideal — prioritizing both employment creation and quality enhancement — simply to ensure that a clear priority is made.
Within the last two decades, the discourse on demographic bonus in the country often leads to a rather optimistic scenario that the working-age population, which now accounts for about 70 percent of the people in Indonesia, will be the key to the advancement of development indicators. Nevertheless, we have to acknowledge the impending global megatrends such as automation, climate change, cultural shifts and globalization into the equation.
It is predicted that these factors will shape the form and scale of future jobs. Until today, scholars have been in contention whether in the future jobs will still be available or diminished significantly, yet the most important subject is whether our workforce is competitive enough to face the challenge.
Two weeks before the IRSA conference, the World Bank launched a report titled “Pathways to Middle-Class Jobs in Indonesia”. One among several findings in the report is that only 13 million workers (15 percent) are able to lead a middle-class way of life. The limited availability of middle-class jobs is attributed to many factors, but the most striking one is that most workers in Indonesia are not equipped to hold middle-class jobs.
Getting a decent middle-class job requires one to have strong cognitive, interpersonal and digital skills, as well as knowledge in science, technology, engineering and mathematics (STEM), and business administration.
Two other important World Bank reports, titled “Indonesia's Occupational Employment Outlook 2020” (IOEO 2020) and “Indonesia's Occupational Tasks and Skills 2020" (IndoTaSk), were launched in May. Both reports indicate that prospective occupations are mostly characterized as jobs with lower added value, are small scale and inclined to informal sectors, like cleaners, salespeople, couriers, drivers, farmers and seasonal manual laborers.
In addition, skills that are needed to perform the tasks required by in-demand occupations revolve around basic and soft skills, such as speaking, reading comprehension, active listening and social skills. The level of demanded skills seems rudimentary but it actually entails massive effort to change because those sets of skills are mainly the result of one’s upbringing, parenting, values, ethics, norms and other types of tacit knowledge.
Unsurprisingly, the least demanded skills are those of high-skilled occupations, which require more complex problem-solving and resource management skills.
Problems pertaining to the quality of human resources are also reflected in the meager achievement in literacy and numeracy, proxied with PISA scores. The latest report shows that Indonesia ranked 73rd in mathematics, 74th in reading, 71st in science and 74th in overall subjects out of 79 countries. Lack of intelligence is somehow correlated with nutrition and caloric intake. Around 50 percent of the current workforce in Indonesia experienced stunting during their childhoods. This might explain lower productivity and lack of competitiveness.
Nowadays, the burgeoning gig economy and ubiquity of app-based services have created remarkable employment opportunities and significant contributions to the economy. However, in the medium- to long-term, this kind of business model has the proclivity to ensnare a sizeable portion of the labor force into a “skills trap” that unfortunately, will confine workers in low value-adding jobs in perpetuity. A ride-hailing motorcycle driver will undertake similar tasks all the time, having a slim chance to move to other jobs.
This situation depicts an enormous challenge to convert critical mass of the productive-age population (what we repeatedly called as “demographic dividend”) into a high-quality workforce. Therefore, against this backdrop, I can understand why participants in my session opted for policies oriented toward the improvement of human resources.
Regrettably, unlike other social policies, intervention on human capital will take considerable time before showing any impact. Now that we have a substantial proportion of productive-age citizens with substandard skills in the need of jobs, the only feasible option is devising programs that enable people to acquire better skills quickly or alternatively giving them chance to do “learning by working”.
Successful practices from other countries have been adopted yet still invite more innovation and creative approaches, like incentivizing employers to provide training and skills development. Within this context, more attention and resources need to be invested to the improvement of continuous vocational education that focuses on upskilling and reskilling the workforce.
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The writer is a senior planner at the National Development Planning Agency (Bappenas), with a PhD in development studies with reference to emerging economies at the Department of International Development, King’s College London. The views expressed are personal.
