Employment Targets and Projections: A Technical Workshop on Methodologies

Background

While Indonesia's economic growth in the last years has been robust, economic growth alone does not automatically produce quality employment. The objective of inclusive and sustainable job-rich growth in Indonesia is realized through the Government's commitment to "pro-jobs" and "pro-poor" within its development agenda. To support the realization of job rich growth, it is important that medium term development strategies plan for job creation. Establishing employment targets and monitoring progress towards achieving them, including through employment projection models, are an important elements of development policies.

Indonesia’s current Medium Term Development Plan 2010-14 includes one employment target: to reduce the open unemployment rate to 5-6% by the end of 2014. While the unemployment rate is an informative labour market indicator, in developing countries without effective unemployment insurance systems, many individuals simply cannot afford to be unemployed. Instead, they must eke out a living as best they can, often in the informal economy or in informal work arrangements. Unemployment rates alone are consequently often inadequate measures of development or labour market performance in developing countries. The workshop will thus discuss possible employment targets in the next Medium Term Development Plan 2015-2019.

Employment projection models are important analytical tools to monitor progress towards employment targets, including both the quantity and quality of employment. Such models also allow for assessment of the labour market impacts of economic or policy shocks. Furthermore, employment projections models can be used to project long-term sectoral and occupational employment, and thus can be used to address skills mismatch and inform educational and training reforms that may be required. For example:

1. In Australia employment projections are provided by industry, occupation and region for 5 years. Summarizing broadly, they use a historical trend model, based on autoregressive integrated moving averages (ARIMA) and exponential smoothing with damped trends (ESWDT), to project forward. The attached "Australia's Employment Outlook to 2017" document provides more information.
2. In Korea employment projections are disaggregated by industry / occupation and are provided for 10 years (currently 2011-20). They are derived through a) forecasting economic and value-added by industry, b) using the employment coefficients derived from an input-output model to project employment by industry, and then c) using industry-occupation matrices to project employment by industry. This output is then coupled with projections for labour force growth which are derived from a separate model. Employment projections in Korea are based on the methodology used in the United States, which was developed by the US Bureau of Labor Statistics. Employment projections in Canada use a similar methodology.
3. In the Philippines, the ILO has been working with the Department of Labour and Employment on a Philippines Employment Projection Model. This model has been developed in collaboration with Inforum (University of Maryland) and also uses input-output tables as the basis for projections.

It is important to consider different approaches to deriving employment projections in order to understand which methodology is most appropriate for the country and the planning context. The Indonesia Development Planning Agency (BAPPENAS) and the ILO will hold a technical workshop on employment targets and employment projection methodologies in order to discuss relevant employment targets and to understand, discuss and agree on methods for generating appropriate employment targets and projections in the context of medium term planning in Indonesia.

Objective

Government agencies and the social partners explore relevant employment targets that could be part of the next Medium Term Development Plan 2015-2019, and discuss and agree on methods for generating appropriate employment projections in the context of medium term planning.