Arya News - While the share of formal employment improved, analysts warned that many of these positions were short-term or contractual, offering little job security and potentially dampening worker morale and productivity.
JAKARTA – Indonesia’s job market showed renewed strain in August, with unemployment ticking higher as tens of thousands lost their jobs and young workers once again bore the brunt of the slowdown.
While the share of formal employment improved, analysts warned that many of these positions were short-term or contractual, offering little job security and potentially dampening worker morale and productivity.
Statistics Indonesia (BPS) revealed in its biannual employment survey published on Wednesday that the national unemployment rate inched up to 4.85 percent in August 2025, from 4.76 percent recorded six months earlier.
BPS official Edy Mahmud said in a press conference in Jakarta on Wednesday that the country had “nominally” reduced unemployment by 4,000 people compared with the same month last year. However, August’s 7.46 million jobless remains higher than February’s 7.28 million.
Edy explained that BPS classifies the unemployed into six categories, including fresh graduates and individuals who have secured a job but had not yet started working at the time of the survey.
The largest group of unemployed, nearly one in three jobless Indonesians, were categorized as long-term unemployed, referring to those who have been seeking work for more than a year, Edy said. Close behind were those with previous work experience who are currently unemployed, accounting for 30.53 percent.
A relatively small portion of the jobless population became unemployed due to layoffs, making up only 0.77 percent of the total, or around 58,000 people in absolute terms. The manufacturing industry was responsible for 22,800 layoffs, or almost 40 percent of the total, while the trade and mining sectors, the second- and third-largest contributors, accounted for just over 17,000 job losses combined.
Despite the layoffs, the manufacturing sector recorded a strong net gain of about 700,000 new hires between February and August, while the trade and agriculture sectors together shed nearly 1 million workers during the same period.
Read also: Indonesia struggles to create jobs for its youth
The latest edition of the World Bank’s East Asia and Pacific Economic Update, published in October, elaborated that Indonesia has experienced little productivity-enhancing structural transformation, as reflected in a manufacturing employment share that has remained virtually unchanged over the past three decades.
The report also noted that Indonesia’s youth unemployment rate of 17.3 percent was among the highest in Asia, just behind India’s 17.6 percent. In line with that finding, the BPS survey showed that the unemployment rate for Indonesians aged 15 to 24 stood at 16.9 percent in August, up from 16.1 percent in February.
The unemployment rate for that age group has remained persistently high, while the other two groups, those aged 25 to 59 and those over 60, have recorded unemployment rates of around 1 to 3 percent over at least the past five surveys.
Read also: Millions still without jobs despite drop in unemployment
Permata Bank chief economist Josua Pardede told The Jakarta Post on Thursday that many households are relying on non-full-time jobs, given the high youth unemployment rate and the rise in part-time workers, which reached 36.3 million people in August, an increase of 1.66 million from a year earlier.
The national statistics bureau’s definition of employment follows that of the International Labour Organization (ILO), which classifies as employed anyone who has worked for at least one hour for pay or profit during a one-week or seven-day period.
Based on this definition, BPS categorizes individuals who work at least 35 hours per week as full-time employees, while those working fewer hours are divided into two groups: part-time workers and the underemployed.
Some critics consider this definition out of touch, arguing that working for only one hour a week hardly qualifies as employment and fails to reflect the state of unemployment in Indonesia.
According to Josua, high school and vocational school graduates face the highest unemployment rates by education level, highlighting the need for “stronger entry-level skills and more targeted job placement.”
“An effective policy response should not only cushion workers affected by layoffs,” Josua said, “but also accelerate entry-level job placements, promote practical upskilling and support small businesses so they can absorb workers more consistently.”
The August survey also revealed a shift in the workforce between the formal and informal sectors. The formal sector employed 42.2 percent of the workforce in August, up from 40.6 percent in February and 42.05 percent in August last year. Josua noted, however, that the increase in formal employment was largely driven by part-time hiring, as full-time recruitment has stagnated.
The Center for Economic and Law Studies (Celios) economist Media Wahyudi highlighted a growing problem in Indonesia’s labor market, an issue he described as “wage theft,” in which companies “try to find ways, whether legal or illegal, to steal wages,” such as by not paying for overtime work.
Speaking to the Post on Thursday, Media said contract workers were the most vulnerable to unpaid overtime or working on national holidays without compensation. He argued that such practices are ultimately counterproductive for companies, as low wages and poor treatment reduce worker productivity and eventually hurt corporate profits.
“Sometimes we face a capitalist structure that is selfish and greedy,” he said. “Many companies focus solely on maximizing profits. But recent studies have shown that the more pressure workers face, and the lower their wages, the more losses those companies actually incur.”