The Indonesian government may start paying an unemployment benefit next year. (Antara Photo/Umarul Faruq)

Indonesia Will Make $734m Available for Its Unemployed Next Year

JULY 30, 2019

Jakarta. Indonesia plans to start paying a monthly allowance for its two million unemployed next year and provide training to teach them new skills. 

The Manpower Ministry has proposed a budget of Rp 10.3 trillion ($734 million) for the program. In the last election, President Joko "Jokowi" Widodo had heavily campaigned for the program under the moniker "Pre-employment Card." 

Fresh graduates or workers who recently get laid off can apply for the card from the ministry. The card can be used to access a monthly unemployment benefit and various training programs that the government and the business community will make available to them.

The plan stipulates the government will only provide the unemployment benefit for three months for each person. 

"A person is unemployed often because he or she lacks skills," Bambang Satrio Lelono, the director general of training and productivity coaching at the ministry, said on Monday.

The official was specifically referring to the skill gap that local and foreign companies alike always complain about when they try to recruit talents from Indonesia. 

Over half of Indonesian companies struggle to find candidates with the appropriate expertise in their industry.

A lack of bilingual candidates also often stumps foreign companies when they try to set up business here, RGF International Recruitment's "Talent in Asia" report showed last week. 

Bambang said for local talents to transition successfully to the workplace, they need to acquire a good range of skill sets. That is where the government can come in. 

"We are currently studying the plan, including issues that might arise from it. The president may need to issue a presidential regulation for the program," Bambang said, alluding to the fact that several ministries would have to be involved in the project. 

Manpower Minister M. Hanif Dhakiri said earlier last week the government may only have enough money to support and train two million unemployed Indonesians each year.

"[The unemployment benefit] will be distributed on a first come, first served basis. We need regional governments to map their unemployment profiles. We can then use the data to decide on a benefit quota for each region," Hanif said. 

According to the minister, the government will open up a selection process for the program recipients. But he did not elaborate on the requirements.

"Just think of it as a scholarship. You can take it if you want, but you can opt out as well. And just like a scholarship, there will be requirements," he said. 

Yusuf Rendy Manilet, a researcher from the Center of Reform on Economics, said the Pre-employment Card will help increase the supply of skilled labor in Indonesia. But it would be wasted if the government fails to attract more investment.

"Even if they have skills, where would they work?" Yusuf said. 

"According to our estimation, Indonesia's economic growth of five percent will only create two million new jobs every year, but there are nine million people entering the workforce each year," Yusuf said.

Yusuf said Indonesia needs a growth rate of at least seven percent so it can double the number of new jobs the economy creates each year. That would be enough to accommodate the number of new workers, after accounting for workforce replacement.   

A total of 6.82 million Indonesians were unemployed in February, down from 6.87 million a year ago, according to the latest data from the Central Statistics Agency.  

Eko Listyanto, the deputy director of the Institute for Development of Economics and Finance, said the government should conduct a pilot program first before going for the full-fledged version. 

"Until today, the government still does not have a comprehensive database that it can use to determine the recipients [of the unemployment benefit]," Eko said, noting that the statistics agency only has sampling data from its bi-annual National Labor Force Survey, instead of a yearly census.