Strengthen competitiveness and productivity through decent work, says new ILO Report

JAKARTA (ILO News): Trends in 2015 point to a further slowdown of the economy, however, labour market indicators show that employment has continued to expand in 2015 and that unemployment rate has remained low, at 5.8 per cent in February 2015. In order to maintain these trends, it will be key for Indonesia to put in place strategies to strengthen its competitiveness and productivity, says the ILO latest report launched in Jakarta on Thursday, 9 July 2015.

The realization of decent work is a goal that requires strong social partners and effective social dialogue between workers and employers."

Michiko Miyamoto, Officer-in-Charge of the ILO in Indonesia

The report, Labour and Social Trends in Indonesia 2014-2015: Strengthening competitiveness and productivity through decent work, reveals that there are challenges emerging, with one in three regular employees in Indonesia receives a “low wage” and compliance with minimum wages low. There are also indications of skills mismatch and need for more investment in education and training. However, steady growth in labour productivity is an asset and trends related to the expansion of wage employment have been positive.

"The realization of decent work is a goal that requires strong social partners and effective social dialogue between workers and employers,” said Michiko Miyamoto, Officer-in-Charge of the ILO in Indonesia. She further explains that, “With the slowing of economic growth, the Government, workers and employers need to work together to ensure that Indonesia can build prosperity through increasing productivity, improving wages and decreasing the incidence of low wages in order to promote decent work for all."

Published annually, the report highlights that the structural changes that are currently unfolding within the Indonesian economy are likely accelerate, entailing both shifts in demand for skills and a need for innovation to strengthen productivity and maintain growth. The report argues that to promote inclusive growth and prevent a further expansion in income inequality, it will be important that Indonesia starts to focus on strengthening labour market institutions, such as collective bargaining and labour inspection.

“Sound industrial dialogue will be a key ingredient to success for workers, employers and society at large”, said Robert Kyloh, Senior Specialist for Multi-Lateral Cooperation in ILO Geneva. He further explained that, “Indonesia has reached a stage in its economic and social development where labour market institutions need to play a more central role in fostering a fair distribution of income. In a large and very diverse democratic middle income country, such as Indonesia, the promotion of industry level collective bargaining should be a priority.”

The key message is that decent work plays an important role in strengthening the competitiveness and productivity of a nation. "A decade of sustained growth has seen wage employment expand and growth in minimum and average wages. However, many workers still receive low pay, highlighting the need for further efforts on wages and skills policies," said the author of the report, Emma Allen, economist for the ILO Jakarta Office. She added that “Labour productivity has been increasing and a greater focus on gains sharing is needed to promote equitable growth.”
For the main findings of the report, please refer to the attached ‘Key points: Labour and Social Trends report for Indonesia’.

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