Indonesia faces challenge of boosting labour productivity

Despite being in a demographic golden period, Indonesia continues to struggle with low labor productivity, prompting calls for clear and sustainable reforms.

According to data from Indonesia’s Statistics Agency (BPS), the country now sees 70.1% of the population of working age and the labor force reaching 152.1 million people last year. The rare period offers strong potential for accelerated economic growth.

However, this demographic potential is being undermined by persistently low labor productivity. In 2023, average labour output stood at just $15.12, far behind Malaysia’s $29.67 and South Korea’s $48.57.

While Indonesia’s GDP has grown at an average rate of 5% annually since 2015, labor productivity has only risen by 2.5% per year.

The nation is also grappling with several structural barriers that hamper productivity growth. Only 13.5% of the workforce holds higher education qualifications.

Additionally, the country faces an imbalanced employment structure, weak innovation capacity, and governance-related challenges.

Experts said to capitalize on the full benefits of its demographic window, a long-term, sustainable strategy is essential.