The Population in Indonesia : Amount Should (Not) Matter

The Population in Indonesia : Amount Should (Not) Matter
Agil Abiyoso Nugroho
0606081293
Keywords : human capital, unemployment and wages

Indonesia is a country which has many resources to develop the economic growth. The resources include natural resources, technology and human capital. If we emphasize human as a capital or resource to develop Indonesia economy, Indonesia has many opportunities to develop their development. But, Indonesia also face difficult challenges about the population. Unfortunately, the government in Indonesia has many problems with the population, because many of them is not well educated and become an unemployers. It will be depend to government policy to develop the abundant population into the capital which has important roles to develop this country by education.


Unemployment in Indonesia

The barriers of economic growth from labour and human capital view is unemployment. The unemployers only hamper the growth of economy because they do not anything and the funds which are supposed to be the capital is reallocated to them. For the distinctes example, we can see in Germany. In Germany the government subsidies the unemployers. The unemployers have a right to receive 60-67 % from their last nett wages until 24 months.[1] Today the amount of unemployers in Germany is less than 3.2 million people[2]. Can you imagine how much money that allocated to them?
Not like in Germany, in Indonesia the government doesn’t subsidy the unemployers. Because the government have own policy to contend this problem. If the government imitate the Germany Government methods, there will be very much money to allocate the funds to the unemployers because in Indonesia there are 9.43 million people[3] and the amount will be increase because the effects from Financial Global Crisis that started in US.
There are many types of unemployers, such as frictional unemployment, seasonal unemployment, structural unemployment and siclical unemployment. The government has many problems with unemployment, for example in agricultural sectors. The farmers only work on their field in harvest moon. Beside that, usually they don’t have a job and they become seasonal unemployment. Maybe if the government make a policy concerned to the farmers, the unemployment rate will be decreased. Because as we know, most of Indonesian people work as farmer.
In 2005 the government had made ten policies which belong to Rencana Kerja Pemerintah(RKP) to reduce the unemployment rates, but it is not totally succed., because the government exceedingly focus to macro indicators and foreign investors.[4] Maybe the government think that growth in macro sectors will impact to micro sectors, that’s why the government develop many programs and policies to increase the level of macro variables.

Wages Policies

If the supply of labour in Indonesia is so much, it will impact to the wages. More labours available to be hired by firms that means fewer the amount of wages that they will receive. In this situation, the government has a role to protect labour with minimum wage regulation (Upah Minimum Regional).
This policy is made by the (Dewan Perwakilan Rakyat) Indonesian legistilative assembly but the amount is decided by (DPD) Leadershi[ of Political Party at Regional Level. That’s why the amount is different in every provinces. The highest is in Papua, Rp 1.105.000.000 and the lowest is in Banten, Rp 537.000.000[5]. The distinctions of amount reflect the financial situations from every provinces.
Actually, labour as a factor that determine how the corporations operate the production activity to achieve and get the maximum profits should be regarded. Beside that, the higher wage can be the incentive to increase the productivity of the labours. But the fact, many corporations don’t obey this rules. The newest situation is there are many contras abou Surat Keputusan Bersama (SKB) 4 Menteri, which put in order about minimum wages regulation. In SKB 4 Menteri, the increase of wages should not over the increase of nasional economic growth. As we know, minimum wages regulation should protect the labours, but now it will ruin the labours.
Other ways to protect labours is by increase the amount of skilled labour. If the amount of skilled labour increase, it will also increase the standard of wages. The government can do that by give more education to the people, especially people in rural area. The government must distribution the education so everyone in this country can enjoy it. If the people get educated well, their quality will increase and they can do more job than before, so they will have more bargaining power to determine how much they will be paid. They also will have the “bigger” workfield, because they can do better and more. All the government needs to do is just give more education for more people. Because that’s the main problem in this country.

Develop Population into Human Capital

As we know in production function function, labour is one of many inputs to make an output beside wage and technology. In short run labour is fixed variable but in long run it is no longer fixed variable. That’s clarify how important of human capital in production or in economy.
In Indonesia, there are 114,8 million people which are belong to labor force[6]. Beside that, the population in Indonesia reach 225 million people [7]and it seems that the amount of people will increase. That’s means 51,2 % people are labor force. According to that, there are many people which can be allocated by many firms to build this nation. If Indonesia can allocate this resources well and increase the quality from Indonesian employers, it’s obvious that the development in Indonesia will increase and reach the whole nation and sectors.
This situation will attract many Multinational Corporations to invest their capital in our country. Because the human capital from Indonesia is well qualified, so they will hire more Indonesian people to handle their production activities. Because Indonesian employers have advantages, they know the situations in this country. So the MNCs don’t need to search qualify employers from other countries to work in Indonesia. The corporations which are operating abroad will hire Indoensia employers too, then they will get higher wages. And if Multinational Corporation have hired Indonesian people, the national corporations and institutes will follow this methods. They will reduce the amount of foreign employers who fill the important positions. That’s means Indonesian employers will be more competitive to compete with foreign employers to fill the important positions in corporations. It will shift the demand of Indonesia employers to a higher level, so more Indonesian employers get work and their wages will be increased too.
Other advantages that can happen if the employers in Indonesia have the higher quality level, they will be creative and innovative. That’s means many of them will be entrepreneurships. They will open new workfield and many employers will be joined to their production activities. Entrepreneurships will push the economic wheels to a higher level because they invest their capital to create and product, otherside they will hire many employers. Not like many government and other MNCs’ projects that just impact only big city and big firms, they will develop the micro sectors such as household production and their business activity can held everywhere, not only in big city but also in rural areas, maybe include farmers in non-harvest moon. So the economic growth will impact the micro-macro sectors. The consumption of raw materials and other inputs will increase that will affect the aggregate demand to increase. Then the Y (national output) will get a higher level that means the economic growth in Indonesia is really growth and develop the micro-macro sectors.

Conclusion

If the government give more attention to education and distribute education to whole nation, the amount of skilled labour will be increase and the effect from education will make many labours become more qualified and competitive. Beside that, if they get the right knowledge they can be entrepreneurships that stimulate the economic growth. Because entrepreneurship can develop the micro and macro sectors in this country. Finally, with education the abundant population will transform into human capital which can develop Indonesian Economy.









































Index

Ronald G. Ehrenberg and Robert S. Smith, Modern Labor Economics, New York, NY: Harper Collins. Fifth Edition. 1994.
www.tatsachen-ueber-deutschland.com
www.vibinews.com
www.inilah.com
www.sinarharapan.co.id
www.wikipedia/umr.com
www.vibiznews.com
www.kompas.com


[1] According to www.tatsachen-ueber-deutschland.com
[2] According to www.vibinews.com (July 2008)
[3] According to Badan Pusat Statistika report in www.inilah.com (May 2008)

[4] According to Rvrisond Baswir in www.sinarharapan.co.id (January 2007)

[5] www.wikipedia/umr.com
[6] According to www.vibiznews.com (February 2008)
[7] According to www.kompas.com (July 2008)