Disaster at the Peak of Demographic Dividend
DEPOK, Saturday, 11/07/2020 – kompas.id published an interview with Turro S. Wongkaren, Head of the Demography Institute, FEB UI, in an article entitled Disaster at the Peak of Demographic Dividend. Below is the article that appeared in the Education and Culture column.
Disaster at the Peak of Demographic Dividend
The demographic dividend that is right before our eyes, in 2021, will be increasingly difficult to attain because of the pandemic. Although small, there is still a chance for Indonesia to become a rich country through joint efforts.
One of the prerequisites for attaining the demographic dividend is the availability of quality jobs. The Covid-19 pandemic that broke out a year before the peak of the demographic dividend has diminished hopes for attaining the dividend.
Indonesia Population Projection 2015-2045 expected the peak of Indonesia’s demographic dividend to occur in 2021-2022. By then, 100 productive citizens aged 15-64 will only support 45.4 unproductive citizens, namely children (<aged 15 years) and the elderly (> aged 65 years).
Indonesia started to experience demographic dividend in 2012, which is predicted to end in 2037. Demographic dividend occurs when 100 productive citizens support fewer than 50 unproductive citizens of a country. This means that 100 productive citzens only support fewer than 50 people.
This condition is a big potential for a country to become a rich country thanks to the small burden it bears. Demographic dividend only occurs once in the history of a nation. However, harnessing the dividend requires good human resources, quality employment, women’s participation in the labor market, and large public savings.
However, the Covid-19 pandemic that has affected Indonesia since March 2020 has made Indonesia’s dream of attaining the dividend even more difficult to realize. Before the pandemic, many population experts doubted Indonesia’s ability to tap into the dividend. The pandemic has made the threat of failure to harness the demographic dividend even more real.
The 2020 National Labor Force Survey (Sakernas) published in February 2020, a month before the first case of Covid-19 in Indonesia was announced, revealed that Indonesia has a workforce of 137.91 million. The number is twice the population of Thailand, more than four times the population of Malaysia and nearly 24 times the population of Singapore. Of the total, 131.03 million are employed and 6.88 million are unemployed.
Covid-19 changed all that. In June 2020, the Ministry of Manpower estimated that 1.7 million workers have lost their jobs. The number could increase from 2.92 to 5.23 million by the end of this year. Meanwhile, the Indonesian Chamber of Commerce and Industry (Kadin) said there were 6.4 million unemployed workers due to the coronavirus.
Meanwhile, the Center of Reform on Economics said in its projection that with an economic growth of 2.97% in the first quarter of 2020, the number of jobless people in Indonesia could increase by 6-9 million people in April-June (Kompas, 20 June 2020).
“The economy is expected to grow by minus 7 percent to minus 3 percent in the second quarter of 2020,” said Turro S Wongkaren, Head of the Demography Institute, Faculty of Economics and Business, Universitas Indonesia (LDUI), Thursday (9/7/2020). The minus growth will definitely increase the number of unemployed workers.
The figure did not include informal workers who outnumber formal workers. The impact of the coronavirus on informal workers is no less devastating. Moreover, many informal workers only earn enough to subsist on a daily basis.
Not to mention Indonesian migrant workers, both legal and illegal, who are forced to return home due to limited jobs in other countries that are also affected by the coronavirus. Their return home or temporary stay in border areas will put more burden on regional governments.
A study by the Population Research Center of the Indonesian Institute of Sciences, the Ministry of Manpower’s Research and Development Center, and LDUI on 24 April-2 May 2020 predicted an additional 25 million new unemployed workers as businesses stop operations and jobs become unavailable for casual workers within 2-3 months since the study. Unemployed workers comprise 10 million self-employed workers and 15 million casual workers or family workers.
A surge in unemployment as Indonesia is heading toward the peak of the demographic dividend is certainly a sad thing. The abundant supply of productive labor cannot be absorbed by the market nor can they work independently due to the Covid-19 pandemic that no one knows when it will end. Although the government has prepared for a new normal to deal with the economic and health impacts of the virus, this will not automatically revive the business world.
The high unemployment rate will automatically increase poverty. The number of poor people, which in September 2019 accounted for 9.22 percent of the population, is expected to increase to 10.86 percent this year. Poverty will hamper investment in human resources, block women’s entry to the labor market, and make people hold back on saving. In fact, existing savings are increasingly being eroded to cover living expenses during the pandemic.
“Indonesia’s opportunity to harness the benefit of the demographic dividend is diminishing. Even without Covid-19, Indonesia’s efforts to attain the demographic dividend will not be maximized,” said Sudibyo Alimoeso, Chairman of the Association of Indonesian Demographic Experts and Observers (IPADI), in a webinar on Saturday (13/6/2020).
Family business
As we celebrate World Population Day on July 11, rising unemployment and limited quality employment need the atention of all parties concerned. If Indonesia fails to attain the demographic dividend, it could remain in the middle income group and may not be able to transition into a rich country.
Amid scarce employment opportunities, promoting micro, small and medium enterprises (MSMEs) is often seen as a solution. In the 1998 economic crisis, MSMEs were the savior of people’s economy. Even though prices were soaring, people’s purchasing power remained high because people were still able to conduct activities outside their homes.
Amalia Adininggar Widyasanti, special advisor to the Minister of National Development Planning for Economic Synergy and Financing, in a webinar on Thursday (9/7/2020) predicted that the impact of the health crisis on the economic and social sectors in 2020 will be even more severe than the 1998 and 2008 crises. “The unexpected nature of the crisis makes its social impact more pronounced than previous crises,” she said.
The Covid-19-triggered crisis is different. Relying on MSMEs or family businesses as a solution is still being debated because many MSMEs are also affected by the coronavirus. Social restrictions and social distancing as health protocols to prevent the spread of the virus have restrictred mobility so that many MSMEs are struggling just to survive.
This situation will limit the number and types of MSMEs that are able to continue to grow. Changes in the consumption behavior and family expenditure need to be taken seriously by business players. The products sold and the business capital also need to adapt to existing limitations and situations.
Even though it’s difficult, that doesn’t mean it can’t be done. In fact, a survey by the Consumer Science and Family Economics Division (IKEK) of the Department of Consumer and Family Sciences (IKK), Bogor Agricultural University (IPB), shows that 3.6 percent of respondents said their income had actually increased during the pandemic. This increase is achieved through entrepreneurship.
“They are able to seize opportunities by becoming entrepreneurs during the pandemic,” said Lilik Noor Yuliati, the Head of the IKEK Division, IKK Department, IPB, in a webinar on Thursday (18/6/2020).
Work-at-home entrepreneurs who conduct online business can be a solution to increasing family income. Online businesses have relatively small risks, especially if they only sell other people’s goods (resellers), have flexible working hours, low operating costs, relatively small capital, and can reach a wide market. However, online entrepreneurs need to have internet and social media skills.
A number of online business ideas to choose from in this new era of normal, Lilik went on to say, include selling frozen food, vegetables or ready-to-eat food; sanitary equipment, personal protection, and vitamins as well as herbal medicine in addition to online tutoring or competency training and online consultations.
KOMPAS/JASMINE EMITTING FRAGRANCE
A screen display of one of the online trading platforms that sells MSME products. Some people choose to shop online to avoid interacting with and meeting other people.
Family-based businessed can be developed simultaneously with the effort to promote a return to family movement, making families highly resilient and able to adapt to Covid-19. “Families that are resilient and productive will be the winners that benefit from the demographic dividend,” said Sudibyo.
Apart from the family economy, the spirit of mutual cooperation and social care needs to be continuously strengthened. According to Turro, the spirit of helping each other, either within the extended family or in the general public, can be the backbone of the government’s social safety net program. Mutual cooperation has become a great strength for Indonesia in facing the Covid-19 pandemic.
Serious efforts should be made to prepare a qualified workforce until the economy starts to pick up pace to ensure the availability of workers who have competencies according to industry needs. The spirit of the pre-employment card, which is actually prepared to face the demographic dividend, needs to be reversed so that it equips prospective workers with the competencies needed by the industry.
Although face-to-face technical training (hard skills) is still limited, training can be temporarily directed to improve the soft skills of prospective workers, such as the ability to communicate in good and correct Indonesian language, work ethics and English language skills. Until today, soft competence has remained a barrier to investment in Indonesia.
Training also needs to be directed to prepare Indonesian workers to enter the Industry 4.0 era. The work-from-home policy will further accelerate the application of Industry 4.0. Although various high-level information technology training programs, such as software engineering, artificial intelligence or data analysis are available, basic information technology training such as on the use of Excell is still needed because of the diversity in people’s knowledge.
Hasto Wardoyo, the Head of the National Population and Family Planning Agency, said in a webinar on Wednesday (10/6/2020) that besides the diversity in people’s knowledge, we should also pay attention to population diversity and demographic transitions in each region.
Currently, a number of provinces, such as Yogyakarta, East Java and Bali, have benefitted from the demographic dividend. However, there are still many provinces that are still in the early stages of demographic transition due to the large size of the young population, such as East Nusa Tenggara, Maluku and Central Sulawesi.
Therefore, each district/city has different policies to manage the population to face the national demographic dividend, depending on the condition of each region. “The disparity in population condition demands different attention and policies from local governments,” he said.
The right policy allows for optimal use of the potential of the existing population to support efforts to attain the demographic dividend. Despite the difficulty, any effort is needed so that the demographic devidend does not turn into a demographic disaster for Indonesia. (hjtp)
(lem)