Youth Unemployment, Poor Education May Lead to Demographic Disaster: World Bank
Job seekers looking for a vacancy during a job fair in this file photo. (JG Photo/Dhana Kencana
Jakarta. The World Bank warned Indonesia against high unemployment among its youth and misplaced focus on education spending, which could turn the nation's demographic dividend into a demographic disaster.
While the country's unemployment level is declining, the World Bank's latest report, titled East Asia Pacific at Work: Employment, Enterprise and Well-Being, showed that unemployment and idleness among the country's youth aged 15 to 24 "rates at unusually high levels."
About a fifth of the country's young men and about a third of young women do not have jobs nor go to school — a proportion similar to the conflict-ridden West Bank and Gaza — the report showed. The World Bank used data from 2010, which recorded about 20.5 million men and more than 20.2 million women in the age group of between 15 to 24.
The most recent data from the Central Statistics Agency (BPS) showed that unemployment rates in Indonesia had fallen to 5.7 percent in February from 5.8 percent last year. That is equal to 7.7 million people. Unemployment among junior high and high school graduates was the highest, at 7.4 percent and 9.1 percent respectively.
The Washington-based lender warned that high level of inactivity among the youth could lead to violence and the erosion of social cohesion.
"Even where violence is not yet a concern, high rates of disengagement among the youth can have a lasting, "scarring" impact on their future economic prospects and ultimately limit the productive potential of a country as a whole," the World Bank said in its report.
The report blamed rising minimum wages in Indonesia that do more harm to women with fewer skills, young workers, and recent entrants to the labor market.
"A minimum wage is a sound policy, that's not the question here," said Truman G. Packard, the lead author of the report. "The key I think is to have a uniformity and predictability."
Packard suggested that the minimum wage should be at a relatively low level that can accommodate unskilled workers' employment prospects and that its changes are frequent, small, and predictable for the employers to be able to adjust with the companies' costs.
Packard added that Indonesia has not investing enough in pre-primary and primary education to ensure people have the skills that will make them life-long learners, despite having set aside 20 percent of the state budget to education every year.
"These are the levels of education where people learn to work in teams, confidence, leadership, persistence, and those are the skills that are as valuable if not more valuable than specific technical skills," Packard said. "In any survey of firms will show [those] are the skills that employers are missing in the market."
Indonesia ranked 120 on the World Bank's ease of doing business indicator.
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