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Jobs Drivers of Change
Owais Parray
ILO, Jakarta
National Dialogue: Future of WorkApril 17, 2017
Outline
1. Drivers of economic growth & employment
2. New wave of creative destruction/ fourth industrial revolution
3. Impact in developed and developing countries
4. Looking at Indonesia
5. Way forward
Why are we talking about Future of Work?
Technology is engine of sustained economic growth
Output = Capital + Labour
Economic diversification from subsistence agriculture to industry was key
Sector Breakdown GDP (2000 & 2015)
0
10
20
30
40
50
60
70
80
Agriculture 2000 Manufacture 2000 Services 2000 Manufacture 2015 Services 2015 Agriculture 2015
Source: World Bank Dbase accessed 6 April 2017
Employment share by sectors (2005 & 2015)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2005 (Nov) 2015 (Aug)
Sumber: Sakernas, Aug Series 2005-2015
A large service sector in the economy and concurrent deindustrialization
Gig economy
In Indonesia proportion of workers having second job has increased
0.0
5.0
10.0
15.0
20.0
25.0
2016 2006 1996
15-24 25-34 35-44 45-54 55-64 65-98 15-98
More and more routine jobs are being replaced by automation
Product fragmentation
Share of national income for labour is declining
Impact of technology varies from developed to developing countries
Developing Countries
Some distance from technology frontier so adopting technology can complement labour, but it could possibly lead to diminishing income
Developed Countries
Already more technologically advanced so any further improvement can potentially lead to job losses
Absorption of technology in Indonesia
• Recently there is more rapid technology uptake in trade & services (banking, logistics, transport etc.)
• Less so in manufacturing and agriculture
Polarization of the labour market
-14% -12% -10% -8% -6% -4% -2% 0%
Developed Countries
Developing Countries
Decline of “routine/ mid-level” jobs
Source: WDR 2016
Broad classification of occupations
Managers
Professionals
Technicians and associate professionals
Clerical support workers
Service and sales workers
Skilled agricultural, forestry and fishery
Craft and related trades workers
Plant and machine operators, and assemblers
Elementary occupations
Unemployment by education (%)
Sumber: Sakernas 1986-2016
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1986 1996 2006 2016No schooling ≤ Elementary School Junior High
Senior High Senior High (Vocational) Diploma
University Average Unemp Rate
Trend in share of employment in Indonesia
Are “routine/ mid-level” jobs growing slowly?
Source: Sakernas, 2006 & 2016
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
High skill cccupations Mid-level skill occupations Low skill occupations Agriculture work
Chart Title
2006 2016
Impact of technology in Indonesia
Technology will reduce jobs
Source: ILO, 2015. ASEAN in transformation Survey
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Women employed
Total workers employed
Exports
Labour cost per worker
High-skill workers emp.
Profits
Domestic sales
Labour productivity
Increase No impact Reduce Don’t know
Unemployment rate has continued its downward trend, but that along does not capture the state of the labour market
Source: Sakernas, Augustus Series 2005-2016
-
2.00
4.00
6.00
8.00
10.00
12.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Unemployment Provinces (%)
Sumber: Sakernas, Aug 2016
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
BA
LI
KEP
ULA
UA
N B
AN
GK
A B
ELIT
UN
G
DI Y
OG
YA
KA
RTA
SULA
WES
I TEN
GG
AR
A
GO
RO
NTA
LO
NU
SA T
ENG
GA
RA
TIM
UR
SULA
WES
I TEN
GA
H
BEN
GK
ULU
SULA
WES
I BA
RA
T
PA
PU
A
NU
SA T
ENG
GA
RA
BA
RA
T
JAM
BI
MA
LUK
U U
TAR
A
JAW
A T
IMU
R
KA
LIM
AN
TAN
BA
RA
T
SUM
ATE
RA
SEL
ATA
N
LAM
PU
NG
JAW
A T
ENG
AH
SULA
WES
I SEL
ATA
N
KA
LIM
AN
TAN
TEN
GA
H
SUM
ATE
RA
BA
RA
T
KA
LIM
AN
TAN
UTA
RA
KA
LIM
AN
TAN
SEL
ATA
N
Ave
rage
Nat
ion
al
SUM
ATE
RA
UTA
RA
DK
I JA
KA
RTA
SULA
WES
I UTA
RA
MA
LUK
U
RIA
U
PA
PU
A B
AR
AT
AC
EH
KEP
ULA
UA
N R
IAU
KA
LIM
AN
TAN
TIM
UR
JAW
A B
AR
AT
BA
NTE
N
Employment in manufacturing by provinces (2016)
Sumber: Sakernas, Aug 2016
0.0
5.0
10.0
15.0
20.0
25.0B
AN
TEN
JAW
A B
AR
AT
JAW
A T
ENG
AH
KEP
ULA
UA
N R
IAU
BA
LI
JAW
A T
IMU
R
DI Y
OG
YA
KA
RTA
KA
LIM
AN
TAN
UTA
RA
DK
I JA
KA
RTA
NU
SA T
ENG
GA
RA
BA
RA
T
MA
LUK
U U
TAR
A
SUM
ATE
RA
BA
RA
T
LAM
PU
NG
MA
LUK
U
KEP
ULA
UA
N B
AN
GK
A B
ELIT
UN
G
SULA
WES
I BA
RA
T
SULA
WES
I SEL
ATA
N
SUM
ATE
RA
UTA
RA
RIA
U
GO
RO
NTA
LO
SULA
WES
I TEN
GG
AR
A
NU
SA T
ENG
GA
RA
TIM
UR
KA
LIM
AN
TAN
SEL
ATA
N
KA
LIM
AN
TAN
TIM
UR
SULA
WES
I TEN
GA
H
AC
EH
SULA
WES
I UTA
RA
KA
LIM
AN
TAN
BA
RA
T
SUM
ATE
RA
SEL
ATA
N
BEN
GK
ULU
KA
LIM
AN
TAN
TEN
GA
H
JAM
BI
PA
PU
A B
AR
AT
PA
PU
A
Labour force by education attainment is showing positive trend
Sumber: Sakernas, Aug Series 1996, 2006 & 2016
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0
Primary School or less
Junior High school
Senior High school
Vocational High school
Diploma I/II
Diploma III
University/Diploma IV
1996 2006 2016
Rethink work and structural transformation
• Traditionally manufacturing was the stepping stone for economic development
• Deindustrialization is a worrying trend, especially developing countries without a mature manufacturing
• Redefine work. Wasn’t technology supposed to give us more leisure time
• Surplus from automization use to create more jobs; care, entertainment.
Technology is creating opportunities
• New technologies can be transformative
• Creating new opportunities and reducing costs even in low-income countries
• Made individuals more autonomous and access to learning
Technological advances can be disruptive
• Impact in developing and developing countries different
• Jobs loses- squeezing the mid-skills level occupations
Steering the economy
• An evidence-based approach should guide how policy-makers guide the economy
• Regular collection and analysis of labour & economic data
• Job matching platforms- there should be good feedback loop
Public investment in education & training
• Positive externalities… and greater spillover effect
• Lifelong learning to keep up with the changes in the labour market
• Soft skills becoming very import
Expanding social safety net
• Disruptions will invariably mean there are losers
• Revisit social protection to ensure that vulnerable are not left behind
• Universal basic income??
