Four years on, employment crisis remains, experts say<\/p>\n
The following three articles on the employment crisis and
\nlabor unions were written by The Jakarta Post journalist Santi
\nW.E. Soekanto, as workers prepare to celebrate International
\nLabor Day on May 1.<\/p>\n
JAKARTA (JP): Does Indonesia need any more doomsayers when
\nevery day newspaper headlines scream about the country being on
\nthe brink of bankruptcy? Maybe not. May be people who offer words
\nof encouragement, who say that Indonesia has done some things
\nright despite having allowed its debt to swell to more than 100
\npercent of its GDP so that creditors have threatened to declare
\nit default, are what Indonesia needs.<\/p>\n
Mukda Sunkool, the officer-in-charge at the Jakarta office of
\nthe International Labor Organization (ILO), and her two
\nconsultants Shafiq Dhanani and Carmello C. Noriel agreed in a
\nrecent interview that the Indonesian government has launched a
\nseries of initiatives that blunted the edges of the crisis when
\nit peaked in 1998.<\/p>\n
\"Let me put it this way,\" Dhanani said, \"had the government
\nnot taken certain action, such as the launching of the social
\nsafety net, the poverty level would have been higher, the decline
\nin value of people's income would have been worse.\"<\/p>\n
The Operasi Pasar Khusus (government intervention in the form
\nof nationwide distribution of subsidized rice) and scholarship
\nprograms (where crisis-stricken families with school-age children
\nare given Rp 1,000 per month) are still in place, according to
\nDhanani.<\/p>\n
\"They are very useful because they protect the poor,\" he said.
\n\"If the two programs are canceled, as the labor intensive
\nprojects have been, then those who are currently just above the
\npoverty line will drop below it.\"<\/p>\n
But -- and here is the catch -- the government still needs to
\npay a lot more attention and do more because the critical
\nproblems actually remain the same, according to Sunkool.<\/p>\n
\"If we compare (the ILO assessment of the crisis in 1998) with
\nthe current situation, we find that major issues remain. Not much
\nhas changed since early 1998,\" she said. \"We still talk about
\nlack of insurance and employment, about the absence of
\ninfrastructure to help and protect workers.\"<\/p>\n
Dhanani concurred, saying that the situation is very much the
\nsame, as far as income and unemployment is concerned. \"It is
\nstill very serious. The situation during the crisis was bad, but
\nthe government took action to control inflation. Now the value of
\nwages are 80 percent of what they were before the crisis, so the
\nsituation is a little better than at the beginning of the crisis,
\nbut still far below that of before,\" he said.<\/p>\n
Dhanani presented statistics to support their opinion. The
\ntotal number of people who are openly unemployed -- namely those
\nnot working and actively looking for work -- has increased from
\nfour million to six million people, or from 4.7 percent to 6.1
\npercent of the total labor force between 1997 and 2000. This
\nrelatively low level of open unemployment, however, should not
\ncome as a surprise as many people cannot afford to remain
\nunemployed for long in Indonesia, in the absence of unemployment
\nbenefits usually available to displaced workers in developed
\ncountries.<\/p>\n
There are also other people not presently working but also not
\ncurrently looking for work, perhaps because they believe there
\nare no jobs available. Data on the extent of this hidden
\nunemployment is not available, thus it is much more difficult to
\nquantify.<\/p>\n
\"Nevertheless, total unemployment (both open and hidden or
\ndisguised) may be much larger than the official definition of
\nopen unemployment used by ILO and the Central Bureau of
\nStatistics, perhaps even twice as high,\" Dhanani said.<\/p>\n
Dhanani noted that the unemployment figure of some 38 million
\nused by the Ministry of Manpower is also misleading since this
\nwould mean almost half of the Indonesian labor force of some 95
\nmillion being out of work. \"This figure incorrectly includes
\nabout 32 million people who are not unemployed at all, but who
\nare working less than 35 hours per week.\"<\/p>\n
\"Total employment actually grew, even though unemployment has
\nalso risen,\" Dhanani pointed out. The paradoxical feature of the
\nIndonesian labor market is attributed to rising food prices and
\nfood shortages and the drastic decline in real incomes in 1998
\nthat forced many people who were outside the labor force before
\nthe crisis, to take up income-generating work, particularly in
\nthe agricultural sector, and to produce food for their families.<\/p>\n
\"Hence we saw many food plots cropping up even in urban areas,
\nmany which still exist along the railway tracks and roads,\" he
\nsaid.<\/p>\n
Compared with 1997, total employment has grown by 4.4 million
\nin 2000 for three reasons: because most displaced workers during
\nthe crisis have to work, because the labor force has grown
\nindependently, and because people outside the labor force, mainly
\nwomen, entered the labor market for the first time in 1998 to
\nsupplement rapidly declining family incomes.<\/p>\n
The crisis has reversed previous employment trends: employment
\nin manufacturing has stagnated while it has declined in the
\nconstruction and formal service sectors. On the other hand,
\nemployment in agriculture and trade, largely informal, has grown.
\nThe proportion of non-wage employment has grown from 64 percent
\nto 67 percent of total employment during 1997-2000.<\/p>\n
The impact on manufacturing employment was of special note,
\nDhanani pointed out. Total employment fell from 11 million to 10
\nmillion workers between 1997 and 1998 before coming back in 1999.
\nMost of these were engaged in household or cottage and small-
\nscale industries and they probably left manufacturing temporarily
\nto grow food, Dhanani said.<\/p>\n
\"The crisis had only a moderate impact on medium and large-
\nscale establishments,\" he said. \"However, even here, medium-scale
\nestablishments were far more affected than large-scale
\nestablishments, due to the collapse in the purchasing power of
\ntheir less well-off customers.\"<\/p>\n
The real impact of the crisis, however, can not be simply
\nproven in the figures of rising open unemployment simply because
\nmany are too poor and do not have sufficient savings to remain
\nunemployed for any length of time which has seen lower real
\nearnings of all workers and increased poverty.<\/p>\n
Real earnings of employees fell by 70 percent in the first
\nyear of the crisis, according to national labor force surveys,
\ndue to high inflation of 100 percent and nominal wage rises of
\njust 20 percent. While inflation came down by 5 percent to 10
\npercent per annum in 1999 and 2000, nominal wages continued to
\ngrow at 20 percent per annum.<\/p>\n
\"So, real wages began to rise slowly, but reached only 80
\npercent in 2000 compared with their pre-crisis level,\" Dhanani
\nsaid.<\/p>\n
Poverty incidence increased dramatically during the crisis. It
\nincreased from 18 percent in 1996 to 24 percent in 1999. But
\nstatistics of poverty are issued only every three years -- so
\nwhat happened in 1998 when the crisis was at its worst? Since on
\nthe one hand, poverty was undoubtedly lower in 1997 compared with
\n1996, and on the other, much higher in 1998 than in 1999 (when
\nfood inflation hit more than 100 percent), the crisis most
\nprobably doubled the rate of poverty incidence in Indonesia.
\n\"Probably as high as 37 percent in mid-1998,\" Dhanani said,
\nciting simulations of the statistics bureau.<\/p>\n
\"The severe economic hardships caused by the crisis across the
\ncountry and the fight over jobs and resources, may have
\nexacerbated ethnic mistrust, jealousy and latent conflicts and
\nprovoked them into open violence,\" Dhanani concluded.<\/p>",
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