Unemployment Expected to Increase Further

KOMPAS/P RADITYA MAHENDRA YASA

Workers retired after cleaning the park in Semarang City, Central Java, Thursday (16/4//2020). The closure of various types of business premises due to the Covid-19 pandemic will increase the number of unemployed.

JAKARTA, KOMPAS — The unemployment rate is expected to exceed initial projections as more people lose jobs as a result of COVID-19. The effectiveness of the financial stimulus package and the national economic recovery program in the reduction of layoffs is under test as the industrial sector has to improve its efficiency to keep afloat.

Vice chairman of the Indonesian Chamber of Commerce and Industry (Kadin) Anton J. Supit said in Jakarta on Friday that it would be difficult to avoid more layoffs if the supply and demand remained sluggish.

"Employers will try their best to avoid layoffs, but it will be difficult to do so because they will have to improve their efficiency. With the current condition, technology plays an important role and automation is difficult to avoid," Anton said.

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Manpower Minister Ida Fauziyah said in a press conference at the Presidential Palace in Jakarta on Thursday (6/18) that the number of workers who had lost their jobs as a result of the pandemic had reached 1.7 million people. The government projects that the number of the unemployed people will increase by between 2.92 million and 5.23 million people this year.

However, the Indonesian Chamber of Commerce and Industry (Kadin) recorded larger unemployment figures. Kadin said that at least 6.4 million workers had lost their jobs because of COVID-19. The data was obtained from the seven sectors hit hardest by the pandemic: hotels, restaurants, the footwear industry, retail, pharmaceuticals, textiles and land transportation.

The textile industry has furloughed about 2.1 million workers, land transportation 1.4 million workers, restaurants 1 million workers, footwear factories 500,000 workers, the hospitality sector 430,000 workers, the retail sector 400,000 workers and the pharmaceutical sector 200,000 people. "The government has asked us to recapitulate data. We are still collecting it. In essence, the number of layoffs could be higher,” said Anton.

KOMPAS/HARRY SUSILO

Tohirin, 39, harvests hydroponically cultivated spinach at his home in Bekasi city, West Java, on Saturday (6/6/2020). Despite having lost his income after being laid off, Tohirin has tried to remain productive. He was laid off because the hotel where he worked had been affected by the COVID-19 pandemic. He hopes to get assistance from the preemployment card program, which prioritizes job seekers whose livelihoods were affected by the COVID-19 outbreak.

Indonesian Trade Union chair Mirah Sumirat believes the unemployment numbers will continue to grow. Moreover, he said, the data collected by the government did not reflect the real conditions on the ground because of the difficulty of data collection. "Informal workers are the most affected, but only a few were recorded," he said.

Studies conducted by a number of institutions have estimated there will be an unemployment explosion. The Indonesian Center for Reform on Economics (Core), for example, projects the number of unemployed people in the country will increase by 4.25 million under a light scenario. The number could increase to 6.68 million people under a moderate scenario and 9.35 million people under a severe scenario.

According to Core Indonesia executive director Mohammad Faisal, the severe scenario may occur as a result of worsening economic conditions. With economic growth of 2.97 percent in the first quarter of 2020, the number of the unemployed people in April-June 2020 is estimated to reach between 6 and 9 million people.

Not effective yet

According to Ida, in order to avoid further layoffs, the government has instated a number of programs, such as stimuli for businesses to be able to survive and retain their workers, income tax incentives for business entities and small and medium businesses and social safety net programs for workers.

Mitigation policies issued by the government have not answered the problem in the field, he added.

However, the programs have been deemed ineffective. Anton said to prevent more layoffs, business players in the real (industrial) sector needed more concrete financial support. Mitigation policies issued by the government have not answered the problem in the field, he added.

According to the executive director of the Institute for the Development of Economics and Finance (Indef), Enny Sri Hartati, the national economic recovery program must be able to cope with changes in the industrial and employment landscape.

Micro, small and medium enterprises (MSME) can more flexibly create jobs. Many layoff victims are expected to jump into the informal sector and form micro businesses. Assistance for the sector should be prioritized. However, Finance Ministry data shows that the disbursement of the financial incentives for MSMEs remains small, reaching only about 0.06 percent of the total Rp 123.4 trillion. "If stimulus funds focus on MSMEs from the start, the unemployment rate can be controlled. This should be a priority," Enny said. (AGE)