ADB: Indonesia Needs to Boost Manufacturing to Absorb Formal Workforce

JAKARTA, KOMPAS.com — Indonesia’s labour market is still facing structural constraints in expanding formal job creation. This condition is seen as the main challenge in maintaining productivity growth and achieving long-term development goals. “The labour market is structurally constrained in expanding formal job creation,” writes the Asian Development Bank (ADB) in its Asian Development Outlook (ADO) April 2026 report, quoted on Monday (13/4/2026). One of the main indicators of this issue is the high level of informal employment that has persisted over the past decade. Data shows that economic growth has not fully translated into increased formal employment opportunities. “Informal employment remains high over the past decade, indicating that growth has not been translated into adequate formal job opportunities,” ADB writes in its report. Meanwhile, more formal sectors contribute only a small portion to total employment. This condition directly impacts the quality of economic growth. The ADB report emphasises that the dominance of the informal sector limits productivity improvements and weakens structural changes towards better job quality. In other words, although the workforce is absorbed, the quality of available jobs has not been able to significantly drive productivity increases. However, these sectors require higher levels of education and skills. “Demand for formal jobs is concentrated in a number of high-productivity sectors that require higher levels of skills and education,” ADB reveals in its report.