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Supporting self-employment to solve female labour force participation problem

Jakarta Post - March 6, 2024

Jakarta – Gender roles in Indonesia are unique. While women are expected to take on domestic responsibilities, they can also work and study as they please.

Unsurprisingly, statistics show the female labor participation rate in Indonesia as among one of the highest in the world.

According to data from the World Bank (2022), female labor force participation in Indonesia averaged 50.39 percent from 1990 to 2022, reaching a minimum of 45.94 percent in 2006 and a maximum of 53.91 percent in 2019. Last year, the figure stood at 54 percent.

For comparison, the 2022 global average in a survey of 176 countries was 50.83 percent. However, this percentage is considered lower than the regional average of 58.8 percent as well as almost all East Asian comparators, except for Malaysia and the Philippines, according to the same World Bank survey.

In the Indonesian household is a kind of dynamic where women play the role of a "hidden" financial manager. Although it is men who own property and bank accounts, it is women who manage the money, such as allocating expenses, savings and investing.

In investment, Indonesian women traditionally save their money in gold or property to hedge against inflation in the long term. This awareness of investment further reveals the entrepreneurial spirit of many Indonesian women.

During the COVID-19 pandemic in 2020-2022, the ensuing economic slowdown affected online home-based businesses of female entrepreneurs. Lost wages and layoffs among primarily male workers left women as the sole breadwinners in households.

Data from Tokopedia, one of the biggest e-commerce platforms in Indonesia, showed that during the pandemic, the number of women who started businesses on the platform was almost 1.5 times higher than men.

The statistics show that women made up 64.5 percent of owners of local micro, small and medium enterprises (MSMEs) as of 2021. A 2023 study by the Indonesia office of the United Nations Development Programme (UNDP Indonesia) shows that the MSME sector forms the backbone of the country's gross domestic product (GDP), contributing around 61 percent of GDP.

Although this phenomenon is deemed positive, there is a deeper problem in encouraging Indonesian women to become entrepreneurs. One reason why Indonesian women tend to become subsistence entrepreneurs is the traditional social roles that prevent women from entering the formal job market, lowering the female labor participation rate and pushing them into self-employment.

The barrier to entering formal employment is higher than opening a micro, small and medium enterprise (MSME), which is usually informal. Indonesian women are supported to work outside the home, but the conditions differ slightly once they get married and have children. Thus, to balance their role in the domestic sector while earning money, Indonesian women choose to run businesses that are easily managed from the home.

There are problems in Indonesian MSMEs owned by women, which typically become unstable and easily fail, because the MSME sector is dominated by informal micro and small businesses.

These micro and small enterprises are easy to start or join, and may serve as a short-term solution in difficult times. In the long run, however, they often suffer from low productivity and are unlikely to shift to a more profitable line of business.

Scaling up these informal micro and small enterprises might require a different strategy than that for medium and large enterprises. While the supporting policies for medium and large enterprises could involve capital, licensing and networking, micro and small enterprises need initiatives that go beyond this, and may include financial assistance, mentorship and skills development.

Compared to businesses owned by men, women-owned MSMEs face constraints imposed by women's dual responsibility as breadwinners on the one hand and homemakers on the other. This dual responsibility of women can be found in other countries, including those in Europe.

In Europe, this problem is overcome through policies and programs, such as family-friendly policies intended to increase the supply of childcare facilities and promote the use of parental leave by fathers to rebalance the burden of domestic chores between partners. In Indonesia, the solution focuses more on budget allocations for childcare services, but the allocation is still very small.

Recognizing and supporting the unique contributions of women entrepreneurs could lead to positive social and economic outcomes. This potential needs to be addressed and managed well for better economic and social development. It may result in the creation of jobs, a rise in economic output and the inclusion of women in economic development.

The promotion of women-owned businesses is not limited to a specific region or country. It is a global movement aimed at creating a more inclusive and gender-equal business environment that could solve the low rate of female labor participation.

Source: https://asianews.network/supporting-self-employment-to-solve-female-labour-force-participation-problem