New govt faces ‘jobless growth’ Tauvik Muhamad  ;   The program officer with the International Labor Organization (ILO) Jakarta

JAKARTA POST, 30 April 2014

                                                

                                                                                         

                                                             

Despite the headlines on labor and employment, these issues have not been discussed significantly by legislative and president candidates during this year’s election races. Given the reported trends of the shifting of most foreign and domestic investment from labor to more capital intensive sectors, any presidential candidate should be particularly aware of higher unemployment and underemployment. The situation is similar at the global level, confirming a “jobless growth” phenomenon where the creation of jobs cannot catch up with the growing labor force, particularly among the youth. It is crucial for the future administration to seriously prepare a labor-related affirmative and mainstream policy and program, by identifying cause and effect for the underlying issues, and come up with a clear labor and employment agenda accepted by all players concerned, including employers and workers. Business people say shifting resources from labor-based to capital-intensive sectors would solve the problem of workers’ continuous demand for a higher minimum wage and better protection and welfare. Among others they demand a reduction to outsourcing and better social protection. Naturally workers insist that investment relying on cheap labor would adversely impact productivity. They also argue that Indonesian worker productivity has been higher compared to workers from neighboring countries, but with less income. In this line of argument, the policy to sustain cheap labor to foster economic growth would increase the country’s exposure to the “middle income trap”, as has befallen a number of other countries. Therefore, the new administration must articulate a “pro-job and inclusive growth” agenda by preparing more coherent and integrated policies and programs to create jobs and improve worker welfare. This is urgent given the statistics of declining job creation amid a widening income gap. The situation will worsen when the country becomes integrated within the ASEAN labor market by 2015. The competing arguments between workers and employer reflect the battle between those advocating the role of government in governing the market through regulation, and proponents of the market as a self-regulating entity, although this would require a precondition of the rule of law to ensure business sustainability. The challenge is how to balance policies securing worker protection and fostering enterprise development, in addressing worker insecurity and vulnerability, given today’s policies lack coherence and sustainability, along with the absence of dialogue among stakeholders. Amid wider income inequality the next government has to develop a policy to address inequality and vulnerability among the regions, to prevent a workers’ “race to the bottom”, by establishing a minimum safety net for all citizens to access minimum protection for health, income and pension. The agenda should also provide incentives for business to grow, by reallocating a mis-targeted fuel subsidy. Our new universal coverage for health would significantly reduce workers’ vulnerability. However, with increased workers’ awareness about their rights to health insurance, for example, we need more doctors and hospitals, among other things. It is crucial to provide better access for informal workers to not only social services, but also to employment services. Informal workers would have better access to the labor market with improvement in their skills and protection, eventually enabling them to join a contribution-based social security and taxation system as a source for financing better employment and social services. Continually upgrading workers from the informal to the formal economy would reduce their vulnerability and create higher quality jobs. Furthermore, protecting migrant workers by imposing portability of social security, covering health and work injury schemes, would go a long way in protecting our migrant workers who have a big share in the current employment. Our current demographic dividend of youth is an important reason to prepare a more active labor market policy, providing new entrants with better access to training and thus better jobs targeting young people. This would create momentum for the government to prepare a comprehensive and sustainable pension program that is set to be finalized by July 2015. Regarding pensions, the challenge now is to agree on the level of contribution and its design and benefit between government, worker and employer representatives to ensure adequate protection, but also sustainability of the program. Increasing contributions would be necessary to ensure sustainability, although extra effort is needed to agree on actuarial-based calculations for the pension design and benefit, based on other nations’ best practices and a genuine dialogue among the parties involved. Last but not least, the dialogue between workers and employers today is not taking place at the tripartite consultative body, but through political street activities. Strengthening a dialogue between workers and employers through bipartite and tripartite dialogues is necessary to accommodate employer and worker voices and concerns. This is crucial as workers have not been well-represented in legislative bodies and as employers are scattered across political parties. Strengthening tripartite talks to complement the bipartite discussion would ensure balanced labor policy and regulations to both foster business and to protect workers’ rights. ●