SKILLS MAPPING REPORT – [The Case of Indonesia]

[IwanDarmawan, TaofikHidayat, ArdhianKurniawati, Muh. Ivandry – Board of Research, Development and Information, Ministry of Manpower and Transmigration, Indonesia]

Executive summary

The Indonesian economy has performed remarkably well during the past decade, emerging as a vibrant democracy, a strong economy and a serious player on the international stage. The economy rebounded strongly after the financial crisis that swept through Asia in 1997 and 1998, growing steadily at an average rate of 5.2 percent a year between 2000 and 2010. Projections indicate that Indonesia`s prominence in the global economy will continue to grow. Indonesia`s evolving economy will need new skills to support its growth. But, Indonesia facing challenges, both in Labour Surpluses and Labour Shortage. Indonesia has labour surpluses in Sales workers occupation level and Community, Social and Personal Services sector of industry. Weindicate this condition cause by fluidity of labour market and growing of creative economy sector. Meanwhile, Indonesia has labour shortage in service workers occupation level and Agriculture, Animal Husbandry, Forestry Workers, Fishermen and Hunters on main industry. This condition in line to the trends in employment by occupation, which shows growing of services workers and trends in employment by main industry, which shows growing of Financing, Insurance, Real Estate and Business Services employment, that reflect of services industry. Both in labour surpluses and labour shortages, Indonesia need to provide right policy to fill the gap and utilize this condition to enhance Indonesia economic performance.

  1. Introduction

The Indonesian economy has performed remarkably well during the past decade, emerging as a vibrant democracy, a strong economy and a serious player on the international stage. At the turn of the century, Indonesia was the 28th-largest economy in the world; by 2011, the economy had surged up the global GDP rankings to the 16th place, The economy has performed strongly over the past decade or more and is more diverse and stable than many observers from beyond its shores realise [1]

The economy rebounded strongly after the financial crisis that swept through Asia in 1997 and 1998, growing steadily at an average rate of 5.2 percent a year between 2000 and 2010.World Bank projections indicate that Indonesia`s prominence in the global economy will continue to grow.[2]

The service sector largely carried the Indonesian economy during the recovery years after the Asian Financial Crisis (AFC). It is now the largest of the major sectors – bigger than agriculture and manufacturing combined. It provided more jobs than any other sector from the middle of the 2000s. The value of output in services grew almost twice as fast, and employment increased more than twice the rate recorded in agriculture, manufacturing and mining in the 2000s (see exhibit 2). In just one decade, the share of services to GDP rose from 44 to over 50 percent, and the employment share rose by a similar magnitude, to slightly less than 50 percent of all employment in 2010. The slower growth in manufacturing output after the AFC in 1997‐98 has been a general phenomenon in Southeast Asia [3]. Nevertheless, even from a regional perspective, one important difference with several other Southeast Asian countries has been the slow recovery of industry in Indonesia after the AFC, relative to services. Services grew much faster than manufacturing in Indonesia in the 2000s, reversing the situation in the 1990s before the AFC. In contrast, industry continued to grow as fast as services in Thailand and Malaysia, even though both industries registered a much slower rate of growth than before the AFC. It is important to bear in mind that overall labour productivity was lower in services than in manufacturing or mining, a feature of the sector that remained as true in 2010 as it did in 1990[4] (Manning, 1992). The sector is characterized by contrasting modes of production: low productivity, traditional segments – the ubiquitous street sellers, for example – coexist with modern segments that register much higher value added per worker. In the transport sub‐sector, the marked contrast between double digit annual growth rates in deregulated air transport contrasts with very slow expansion of overregulated sea‐transport and only moderate growth in road transport. The latter two activities feature prominently in the connectivity agenda in the Master Plan (MP3EI) for Indonesia’s development 2011‐2025[5]. However, institutional and regulatory reforms are necessary for these sectors to play a more dynamic role in linking regions and population centres.

Over the past two decades, labour productivity improvements accounted for more than 60 percent of economic growth with the rest coming form more labour inputs due to an expanding working age populations. Indonesia`s young and expanding population from 173,90 million on 2012, could total 280 million in 2030 by projection. Unlike demographics trends in many economies that are aging-including some in Asia-We expect those in Indonesia to remain positive until 2025 and contribute an annual 2,4 percent to overall economic growth until 2030.[6]

Meanwhile, Indonesia`s evolving economy will need new skills to support growth. Research by the World Bank suggests that human capital is a major obstacle to the development of a vibrant Indonesian Manufacturing sector. The World Bank finds that 84 percent of employers in manufacturing sector difficulties in filling management positions and 69 percent report problems in sourcing other skilled worker[7]

This condition shows importance to matching skill between supply and demand of labour. We assume that if the skill will match between supply and demand of labour, it will decrease the unemployment rate and as a final constraint, it will increasing Indonesian economy. Skill mapping playing as important role as a first step to matching skill between supply and demand of labour.

  1. Data Collections Methods

2.1.Main data collections

  1. Sources

Indonesia develop current skill mapping of APECusing data survey and data record at the national level. The first is National Labour Force Survey (NLFS), a specific survey in the field of labour and published by National Statistic of Indonesia (NSI) every year. The labour concepts used in NFLS are the same as those recommended by the International Labour Organization, which divides the population into two components: a working age group and a nonworking age group. First is in turning classified into two categories according to their current activities; those in the labour force and those not in the labour force. Based on labour force, labour enter the labour market which is absorbed as working and not absorbed as unemployment. NLFS also have the personal and occupation characteristics of employment, as: sex, ages, education attainment, urban-rural, occupation and industry.

We use data record that is sourced from Ministry of Manpower and Transmigration (MOMT). Data record includes labour market information (job seeker, job offering, and placement) and training (training center, instructors, vocational) and productivity. For addition, we use Gross Domestic Product (GDP) indicator from NSI. With the person employed, GDP used for valuing the proxy of the remuneration of employment.

For developing quantitative projections of future employment, Indonesia uses data from the Indonesia National Labour Planning 2010-2014that developed by MOMT.

Table. Shortlist of Data Source used in this report

Collection name / Frequency with which data collection takes place / First year for which data are available / How often results are published / How data can be obtained / Main variables collected
National Labour Force Survey (NLFS) / 2 times yearly, at February and August / 2001 in this report / 3 month after survey conducted / Hardcopy,
Released officially National Statistic of Indonesia / Working age,
Labour force,
Working,
Unemployment,
Sex,
Education attainment,
Industry,
Job status,
Occupation
Information of Labour Market / yearly / 2008 / Data record / Job seeker,
Job offering,
Placement,
Sex,
Education attainment, Industry, Occupation
Training / Monthly / 2008 / Data record / Training Center,
Instructors,
Vocational
Labour Planning / Yearly / 2004 / Formulae / Working age,
Labour force,
Working,
Unemployment,
Sex,
Education attainment,
Industry,
Job status,
Occupation
GDP / Yearly / 2001 / Data record / National Output,
Production Sector,
Expenditure

2.2Method for identifying shortages and surpluses of labour and qualified workers

We determine shortages and surpluses of labour and qualified worker in two conditions. If demand of labour market is higher than supply, then labour market facing shortages. In contrary, if demand of labour market is lower than supply, then labour market facing labour surpluses. In this report, we present it in main industry, education attainment, and occupation sections.

The scope of monitoring programs

This section discuss about data used in developing current skill mapping, includes occupations or industries in which shortages and surpluses are monitored. In NLFS, the occupation covers Professional, Technical and Related Workers; Administrative and Managerial Workers; Clerical and Related Workers; Sales Workers; Services Workers; Agriculture, Animal Husbandry, Forestry Workers, Fishermen and Hunters; Production and Related Workers, Transport Equipment Operators and Labourers; and Others at 1 digit level. Meanwhile, the Main Industry includes Agriculture, Forestry, Hunting and Fishery; Mining and Quarrying; Manufacturing Industry; Electricity, Gas, and Water; Construction; Wholesale Trade, Retail Trade, Restaurant and Hotels; Transportation, Storage, and Communication; Financing, Insurance, Real Estate and Business Services; and Community, Social, and Personal Services, at 1 digit level.

Data used to monitor shortages and surpluses

  1. The Scope of Time Framework of Data Used

Current skill mapping of APEC is captured from the dataof national labour market over the last six years from 2009 to 2014 calendar years.

  1. The Scope of Variables

the list of variables in developing current skill mapping are as follow:

a)Estimated working age population;

b)Employment to population ratio;

a)Number of persons employed by mainindustry (at 1 digit level);

c)Number of persons employed byoccupationstatus (at 1 digit level);

d)Number of persons employed by highest level of educationalattainment;

e)Numberof persons in the labour force by highest level of educational attainment; and

f)Labour force participation rate by highest level of educational attainment.

There are some variables expected to be provided in developing skill mapping report, but they are not available in data source from NLFS which officially published. Therefore, we can not provide the data in this report. They are as following:

a)Unemployment rate by main industry of last employment;

b)Unemployment rate by main occupation of last employment;

c)Number of unemployed persons by level of highest educational attainment; and

d)Unemployment rate by level of highest educational attainment.

  1. Definition of Variables

The definition of variables used in this report are the same as those used by the NLFS, as following:

  1. Working age population: persons of 15 years old and over.
  2. Labour force: persons of 15 years old and over who: in the previous week, were working, temporarily absent from work but having jobs, and those who did not have work and were looking for work.
  3. Not in labour force: persons aged 15 years and over, but not classified in labour force, such as students, housekeepers, or others exclude personal activity.
  4. Working: an activity done by a person who worked for pay or assisted others in obtaining pay or profit for the duration at least one hour during the survey week. Include an unpaid worker who help an economically activity/ business.
  5. Unemployment, which consists of :

1)Person without work but looking for work.

2)Person without work who have established a new business/firm.

3)Person without work who were not looking for work, because they do not expect to find work.

4)Person who have made arrangements to start work on a date subsequent to the reference period (future starts).

Looking for work is a person which during the survey that is looking for work, such as:

  • Those who never work and looking for a work.
  • Those who had work, but resigned or dismissed from her/his work because of some reasons and trying for looking a work.
  • Those who work or have a job, but still trying to looking for another job because of some reasons.

This activity is not limited to a week during survey period, but for those who have been trying to looking for a job who sent the application for more than a week before the survey is considered for looking for a job as long as still expecting a job last week. For those who are working and still trying to looking for work is not categorized as unemployment.

Person who established a new business/firm is he/she who established a new business/firm in obtaining profit at his/her own risk with or without paid or unpaid worker. Meaning if they do a real as their effort such as: collecting capitals, preparing equipments, looking for business location, applying for business permission letter, that had been done or being done by someone.

This activity does not include persons who just have plans to do, intend, or following a course/training to prepare a business/firm. In this case commonly for those who want to be worker or employer on their own account assisted by temporary worker/unpaid worker or employer assisted by permanent worker/paid worker.

Explanation:

This effort is not only during previous weeks, but could have been done some time ago but still trying to establish the new business/firm in the previous week.

  1. Unemployment Rate is percentage of unemployment to the number of labour force.
  2. Educational attainment: the highest educational level completed by a person, verified with the receipt of a diploma or a letter of completion/certificate.
  3. Industry: refers to the activity of the place of work/company/office in which a person is employed, classified according to the Indonesian Standard Industrial Classification (KBLI) 2009.
  4. Occupation: refer to the type of work carried out by a particular respondent, classified according to the KBJI 2002 which referred to ISCO 88.

2.3Method for projecting future employment

Methodology used to develop the projections

This report using the data from the Indonesia National Labour Planning 2010-2014(INLP) published by MoMT and the future trend of employment constructed with this following data:

  1. Total number of persons employed by main industry (at 1 digit level);
  2. Number of persons employed by main occupation (at 1 digit level);and
  3. Total number of persons employed by skill level or educational attainment.

INLP conducted the Econometric Models which is each sector/industry has a simultaneous equation. The result of parameter estimation use for estimating theemployment model.

Time period covered by projections

The report use the projection of the future trend of employment until 2014.

Industries and occupations covered by the projections

The projection covers Industries of Agriculture, Forestry, Hunting and Fishery; Mining and Quarrying; Manufacturing Industry; Electricity, Gas, and Water; Construction; Wholesale Trade, Retail Trade, Restaurant and Hotels; Transportation, Storage, and Communication; Financing, Insurance, Real Estate and Business Services; and Community, Social, and Personal Services, at 1 digit level.

Meanwhile, the occupations included by the projection are Professional, Technical and Related Workers; Administrative and Managerial Workers; Clerical and Related Workers; Sales Workers; Services Workers; Agriculture, Animal Husbandry, Forestry Workers, Fishermen and Hunters; Production and Related Workers, Transport Equipment Operators and Labourers; andOthers at 1 digit level.

Coverage of future demand for qualified workers

The projections of future demand for qualified workers include future demand for workers with different levels of educational attainment and/or skillsas Primary School; Junior High School Senior; High School, General and Vocational; Diploma I/II/III Academy, and University.

3.Current labour market conditions

3.1Recent trends in educational attainment of the population

In 2009-2012 period, the number of labour force was about 113.8 million, 116.5 million, 117.4 million, and 110.8 million, respectively. On Average, the number of labour force from 2009 until 2014 is decreasing (0.834%). Referring to our educational level system, labour force is dominated by employment that attain on Primary School level. In 2012, they reach about 48,6% of labour force in labour market, and the rest are from higher level.

However, the trend exhibits labour force with lower education decreases up to 1,27% over that period and they attain university level increase about 9,28%. It shows an opportunity to develop the productivity and increasing the quality of life by increasing the quality of labour force.

3.2Recent trends in employment by occupation

The number of employed by occupation grow from 104.9 million at 2009 to 110.8 million at 2012. On Average the number of employed by occupation from 2009 until 2014 is increasing (1.86%). Based on occupation, we can describe each level. Average on Professional, Technical and Related Workers level is increasing about 6,75%. Average Administrative and Managerial Workers level is decreasing about 12,27%. Average on Clerical and Related Workers level is increasing about 14,87%. Average on Sales Workers level is increasing about 8,98%. Average on Services Workers level is increasing about 23,89%. Average on Agriculture, Animal Husbandry, Forestry Workers, Fishermen and Hunters level is increasing about 2,87%. Average on Production and Related Workers, Transport Equipment Operators and Labourers level is decreasing about 5,58%.%. Average on Others level is decreasing about 5,88%.

Therefore, we have twomain points, first we encounter the shortcoming of managerial level that implicate diffficultiesin Indonesia economyand caused by lack of leadership.Second point is labour market tend to labour differentiation by expertise and services.It indicated by increasing the employment opportunities on Profesional and Sales and Services worker occupation level.

3.3Recent trends in employment by industry