Proceed with Caution: National Internship Programme Risks Fuelling Substitution of Cheap Labour
Economists at the Center of Reform on Economics (CORE) Indonesia have warned that the national internship programme, MagangHub, carries a risk of encouraging companies to replace regular recruitment with cheap labour.
In the CORE Monthly Review, the economists note that because the government fully funds interns’ allowances and the programme is set to continue, firms could come to rely on this workforce on an ongoing basis.
“The allowance fully covered by the government also makes MagangHub a low-cost recruitment tool, which risks substituting regular workers or turning participants into cheap administrative staff,” the think tank said in its latest report, cited on Thursday (8 October 2026).
Nonetheless, the CORE Indonesia team acknowledges that the National Internship Programme, delivered through the MagangHub platform, can accelerate the school-to-work transition by providing six months of work experience to Diploma 3 (D3) and bachelor’s (S1) graduates within one year of graduating.
Participants receive an allowance equal to the minimum wage, fully funded by the government, along with work accident and death insurance and a competency certificate.
In 2026, the government has allocated Rp4.2 trillion for the second cohort, with a quota of 150,000 participants, up from 100,000 in the first cohort in 2025.
Although the programme can address the barrier of work experience requirements through on-the-job training, its quota of 150,000 represents only around 2.1% of the 7.22 million unemployed people recorded in May 2026.
The D3 and S1 requirements also mean the programme has yet to reach senior high school (SMA) and vocational high school (SMK) graduates, who make up more than half of the national unemployed (50.39%).
The economists therefore argue that MagangHub can only serve as a short-term buffer for the problems facing young labour market entrants, while its long-term effectiveness will depend on economic growth and the absorptive capacity of industry.
For this reason, CORE Indonesia believes several improvements are needed before the quota is expanded. These include shifting from measuring participant numbers to quality indicators, such as job retention beyond one year, the semi-unemployment rate among alumni, and the wage gap between alumni and the national average wage, through tracer studies integrated with BPJS Ketenagakerjaan data.
Further measures include standardising the curriculum and mentor quality, and limiting the ratio of interns to permanent staff to prevent the substitution of regular workers.
Finally, CORE recommends gradually introducing cost-sharing with large companies so the scheme does not place a permanent burden on the state budget (APBN), and expanding internship pathways for SMA and SMK graduates integrated with vocational education.