EDUCATIONAL ACHIEVEMENT AND SECTORAL TRANSITION IN THE INDONESIAN LABOR FORCE

Abstract

This study examines the effects of educational achievement on structural transition in the Indonesian labor force during the process of recent economic development. The paper provides an overview of the educational policy in Indonesia. Then, it discusses the educational achievement of the Indonesian labor force between 1976 and 1989. The subsequent parts examines wages and the effects of this educational achievement on the structural composition of the labor force, labor supply, labor force participation, and unemployment. The final part summarizes the findings in this study and offers some labor and educational policy implications. The 1976 and 1989 SAKERNAS (Indonesian National Labor Force Survey) data are used in this study. The results show that first, between these years, there was a significant increase in the educational achievement of the Indonesian labor force. While still lagging behind, women's educational achievement grew more rapidly than men's. Second, between 1960 and the mid 1970s, the labor force share of agriculture dropped from 75% to 51%. Between 1976 and the early 1990s, the labor force share of agriculture remained dominant at around 51%. In a longer time perspective, the Indonesian labor force has begun to undergo a structural transition. Third, education increases the likelihood of full time work, even though women had lower hours worked. Fourth, for 1976 and 1989, labor force participation rates were lower for women than for men. Self employment remained dominant for men and women, a likely result of the continuing dominance of agriculture in the economy. Fifth, unemployment rates were high for men and women under 30 years of age in both years, while jobs seemed to be relatively stable for those older than 30. Female unemployment rate was higher than male unemployment rate in both years. Female senior high school graduates were especially affected as their unemployment rate was the highest among all levels of schooling for women in 1989.