The Central Statistics Agency (BPS) reported a decrease of 921,000 in the number of unemployed people between August, 2006 and August, 2007, to about 10 million or slightly over 9 percent of the 110 million-person workforce.
Since new job seekers increased by 3.5 million in the period under review, that means more than 4.4 million new jobs were created in one year.
What an impressive achievement it seems, since both government and private economists have often acknowledged that the quality of Indonesia's economic growth has steadily declined in terms of employment creation, and the economy was estimated to grow by only 6.3 percent last year.
We should therefore be careful in reading the findings of the agency's manpower and employment survey, otherwise the conclusions could lead to the wrong policy decisions.
First of all, the decrease in unemployment cannot be directly related to economic growth because gross domestic product measures only value added generated in the formal sector while almost 70 percent of the workforce is employed in the informal sector.
Moreover, the agency's definition of being employed is quite loose since a person who works only one hour within a week is considered fully employed. The survey also revealed that only some 28 percent of the labor force is employed in the formal sector.
Judging from these manpower and employment statistics, one can easily see how serious our unemployment and underemployment problem is. Even though the unemployment rate is officially estimated at only 9 percent, the definition used to measure employment makes the survey's findings rather meaningless.
The fact that nearly 70 percent of the workforce are engaged in the informal sector and most of them work in agriculture and trading support reveals the poor quality of the jobs most people have been engaged in.
This again supports the estimate often cited by analysts that more than 30 million people are underemployed. This means that more than 27 percent of the labor force either does unproductive jobs or are virtually jobless. Anyway, what can a person produce if he or she works only one hour a week?
Project these grim figures onto the estimated 110 million people in Indonesia still living on less than two dollars a day and one can see how gloomy has been the outlook of the employment sector.
Hence, one should not be misled by the agency's reports. The employment situation is not as good as described by the Central Statistics Agency's report. The prospects of job opportunities remain grim, unless the government takes concerted measures to attack the massive unemployment and underemployment.
Only direct investment either by the government or the private sector will create productive jobs, and they key to solving the unemployment problem once and for all is thus stimulating investment.
The long-delayed amendment of the rigid labor regulations does discourage new investment in labor-intensive ventures. But blaming the rigid labor laws as the main reason behind the slow growth in job generation in the formal sector could misdirect policy decisions both in the informal and formal sector.
The key to spurring job growth in the formal sector will have to come from policies that promote investments to diversify production activities into new areas and facilitate restructuring of existing activities.
The government also seems ignorant of the blunt fact that even though the rural sector is where the majority of the workforce is engaged, it has suffered from the neglect of the policy makers. No wonder it has remained a sector characterized by the highest rate of underemployment and low productivity in the country.
Our unemployment will remain massive unless the government increases public investment in rural infrastructure and expands the provision of agricultural extension services.
It is the productivity of work in the rural sector that is the key to improving overall labor market outcomes because higher productivity on the farm will benefit the non-farm rural economy as well as the formal sector.