Fewer workers laid off in Q1, but risks loom

Rendi A. Witular, The Jakarta Post, Jakarta

Due primarily to a more conducive business environment and higher economic growth, the number of local workers losing their jobs in the formal sector declined sharply in the first quarter of this year, as compared to the same period last year.

However, while praising the current administration on the progress, experts warn that the full-year number could surpass last year's figure unless the government takes necessary steps to address prolonged problems faced by the business community.

Based on a report obtained by The Jakarta Post from the Ministry of Manpower and Transmigration, 22,647 workers lost their jobs in the January-March period, mostly due to company closures and downsizing.

It is 50 percent of the 44,350 workers laid off in the corresponding period last year.

"The decline is primarily attributable to a better economic condition and higher economic growth," said Musni Tambusai, director general of industrial relations at the Ministry of Manpower and Transmigration.

Based on the report, 85 percent of the laid-off workers, or 234 cases involving 19,287 workers, was due to a decision by companies to improve their operational efficiency to cope with the high-cost economy.

Twelve percent of the figure, or eight cases involving 2,616 workers, was due to bankruptcy, while only 3 percent of the figure, or 574 cases involving 744 workers, was for personal reasons.

Musni, however, warned that layoffs could be much higher for the full year with, for example, firms engaged in the forestry- base business experiencing a business downturn due to a lack of raw materials.

"The forestry and textile sectors account for the lion's share of last year's layoffs. However, during the first quarter, the forestry business was in the doldrums and is likely to account for most of the layoffs this year," said Musni.

He said the government should take immediate steps to address the problems faced by forestry businesses in order to prevent future massive layoffs similar to last year.

The layoff figures were collected by the Committee for the Settlement of Labor Disputes in the regions and in Jakarta. Prevailing regulations stipulate that any company's layoff plan should first be registered with the committee for approval.

The committee is under the auspices of the Ministry of Manpower and Transmigration.

Meanwhile, while acknowledging that the lower layoff figure may reflect improvement in the country's business climate, economist Sri Adiningsih of Gadjah Mada University said it would still worsen the problem of open unemployment in the country.

"Reducing unemployment is the government's most daunting task to address. We hope in the immediate future the government can just prevent existing firms from closing down or downsizing their businesses to prevent more layoffs," said Sri.

She suggested that the government boost the role of small and medium enterprises to help absorb the unemployed in the immediate future, while preparing for the construction of massive government infrastructure projects.

The projects are expected to absorb at least 500,000 workers this year alone. The figure is far from enough to help reduce this year's open unemployment, which is estimated to reach around 10.5 million.

The government estimates economic growth this year will reach 5.5 percent, higher than the 5.13 percent last year. A 1 percent growth in the economy is estimated to provide up to 400,000 new jobs.