Gabriel Kereh – Indonesian companies face the prospective problem of the inability to hire qualified employees due to a shortage in skilled labor and will need take action to meet the challenges of growth in the nation's economy, according to the Boston Consulting Group.

In its report released on Tuesday and titled "Growing Pains, Lasting Advantage: Tackling Indonesia's Talent Challenges," the consultancy group said that 88 percent of college-aged Indonesians were not enrolled in tertiary education institutions – which include universities, technical training centers or vocational schools – and the percentage is higher than in Brazil, Russia and China.

Moreover, almost 60 percent of graduates with jobs decide to switch employment within their first three years, and two-thirds of them switch more than once during that period, BCG said.

These problems, if not addressed properly, will directly affect the growth of companies, and thus affect Indonesia's economic growth, BCG found.

Dr. Bernd Waltermann and Dean Tong, managing directors based in Singapore and Jakarta for BCG, suggested companies take action about the situation to ensure the sustainability of their growth. "If these problems are not being addressed properly, it will hit them later real hard in the face," Tong said.

Even though Indonesia has a young and healthy population to support growth, the poor quality of education and labor force in the country might create employment problems in the future, according to BCG. United Nations data show that the median age of Indonesia's population will rise to 35.1 in 2030 from 27.8 in 2010 – compared to China, to 42.5 from 34.5, and to 39.1 from 36.9 in the United States.

With more than 240 million people in Indonesia, the unemployment rate is at a record low of 5.9 percent, as of February. Data from the Central Statistics Agency (BPS) show that as of August 2012 total number of people employed was 110.8 million, up from 99.9 million five years earlier.

The lack of quality education in the country can be illustrated by top companies' employment focus being limited to a few universities including University of Indonesia, Bandung Institute of Technology and Gadjah Mada University, while graduates from other lesser-known universities are not being considered.

Acute shortage in technical skills also exists. While Indonesian industries require 50,000 technical graduates each year, only 30,000 graduate every year, which is an indication that career development opportunity for graduates with technical skills seems to be more limited. A general education tends to promise more opportunity to attain better jobs, the report stated.

By 2020, top companies will not be able to fill half of the entry-level positions with qualified candidates, BCG warns. By 2025, the engineering shortage will rise to more than 70 percent.

Some companies have addressed this problem by introducing a "Specialists Track" program that could offer career opportunities for specialist-employees, just as promising as the ones for workers on the management track, BCG said.

Companies like Astra International, which has businesses ranging from automotive assembly and distribution to palm plantations, have established their own educational programs.

The general mindset of Indonesians is that they see their current job as a stepping stone to develop their career, and this is contributing to the shortage of potential employees. This mindset can result in employers' resistance to invest in human resource development, BCG said.

"Why would they invest in people's development if these people are going to move to other companies anyway? They would rather steal people that have already been developed by other companies instead," Tong said.

According to the report, only 20 percent of employees in Indonesia are satisfied with their jobs. Of the 11 main reasons for employees' dissatisfaction, the top three are unclear career prospects, lack of compensation and a poor system for performance recognition and evaluation. Indonesia has tried to address pay by lifting the minimum wage by an average 30 percent in many cities across the country.

BCG has five recommendations for companies to help develop and provide more satisfaction to their employees.

First, companies have to be committed to talent and leadership programs that are reflected in the actions of all layers of executives, including those at the very top.

Second, "A Champion From Start to Finish" recommendation teaches companies to respect all employees as the management of the company and that its programs are not just executed by the executives.

Third, there must be a road map that defines the planning and purposes of talent and leadership programs.

Fourth, a regular review of key employees could help monitor development. Lastly, clear goals and measurable progress are needed for rigorous monitoring.

"There are going to be differences between companies that make the effort to develop their people and those that are not," Tong said.