Jobless in a growing economy

Indonesia's economy expanded by a modest 5.04 percent in the third quarter of 2025, adding 1.9 million new jobs over the past year. The government quickly celebrated the achievement, hailing it as proof that economic growth is reaching the people. Yet behind the upbeat headlines lies a deeper question: is this growth truly generating quality employment, or merely fueling the quiet expansion of the informal economy?

While the headline figures suggest resilience, many of the new jobs may not come with stable contracts, decent pay, or social protection. The shift toward informal and gig-based work has sparked concern over the quality and sustainability of Indonesia's growth. If more workers are forced to find livelihoods outside the formal system, the encouraging numbers may mask a more fragile reality. The economic pie may be getting bigger, but the slices remain uneven.

According to Statistics Indonesia (BPS), economic expansion has indeed supported job creation, generating 1.9 million new jobs since August 2024. The number of unemployed people fell slightly by around 4,000 to 7.46 million, bringing the open unemployment rate down from 4.91 percent to 4.85 percent. Yet, beneath this modest improvement lies a structural shift in the workforce that tells a more sobering story.

A closer look at the data reveals that 89 million people, or 57.8 percent of total workers, are employed in the informal sector, without job security or access to social protection. Although this marks an improvement from 59.11 percent last year, the dominance of informal work remains a concern. The World Bank has repeatedly warned that Indonesia's labor market is overly reliant on informal employment, a condition that hampers productivity and weakens long-term resilience.

Even more troubling, among those categorized as employed, 47.89 million people work fewer than 35 hours a week. Of these, 11.6 million are actively seeking new jobs, reflecting widespread underemployment and partial joblessness. Such figures underscore the precarious nature of the informal sector, where work is often unstable and income uncertain.

Unlike their formal counterparts, informal workers typically lack access to social security, stable employment, and legal protection, largely due to low awareness and limited administrative capacity. Many are left vulnerable once their productive years end. Meanwhile, rising operational costs have prompted some companies to shift full-time staff to contract or non-permanent arrangements to cut expenses, further blurring the line between formal and informal employment.

The structure of the formal sector also offers little comfort. The share of workers in manufacturing has stagnated for nearly three decades, hovering around 13 to 14 percent of total employment, while the largest portion of the workforce remains in agriculture. Rather than advancing into higher-value industries, much of the workforce has migrated toward informal activities such as trade, construction, and small-scale agriculture—sectors that generate limited productivity gains.

This imbalance between formal and informal employment is also linked to recurring waves of layoffs, pushing many workers to seek livelihoods outside the formal sector. Data from the Manpower Ministry shows that between January and August 2025, 44,306 workers were laid off, following 77,965 layoffs last year. Despite the government's celebration of robust growth, the trend shows little sign of slowing.

Paradoxically, Indonesia's economy looks strong on paper, yet many citizens still struggle to find secure, well-paying jobs. BPS data shows that household consumption, the backbone of the economy, contributing 53.14 percent of GDP, grew by 4.89 percent, slightly lower than 4.91 percent in the same period last year. Despite weakening household spending, overall GDP growth has remained above 5 percent, suggesting potential distortions in other components of the economy that merit closer examination.

To ensure that growth translates into broader prosperity, the government needs to focus on strengthening domestic job absorption. That includes reviving local market-oriented industries and reinvigorating export-driven sectors such as textiles, which have lost competitiveness amid global headwinds.

Indonesia's economy may be expanding, but the benefits are not yet reaching where they matter most—in people's daily lives. Many still struggle to find decent and secure employment, as the promise of prosperity risks fading into statistics. Growth without real opportunities is merely noise on paper. The government must look beyond headline figures and prioritize what truly builds resilience: fair wages, stable work and industries that value people as much as output. Until the labor market reflects the strength of the economy, Indonesia's growth will remain an illusion—impressive in charts but hollow in reality.