Indonesia Inquiry

Labor Data on Indonesia (Annotated Bibliography)

May 13, 2016 Annotated Bibliographies Data Research Resources 0


Labor Data on Indonesia (Annotated Bibliography) 

Compiled by: Shannay Baradaran

Directed Individual Study, Spring 2016

Texas A&M University-Corpus Christi

DeCoster, Jozef. 2007. “Indonesia’s Textile and Clothing Industry: Management Briefing: Employment and Labour Costs in the Textile and Garment Industry.” Just-style (February): 16-21.

In the Indonesian textile and garment industry, large companies are defined as companies with 500 workers or more, medium companies employ 100-499 workers and small companies fewer than 100 workers. According to statistics, employment in the Indonesian textile and garment large-scale and medium-sized industry fell by nearly 8,000 workers in 2005. The technical skills of Indonesian textile and garment operators are often praised, but productivity remains low. In 2005, direct employment in the textile and clothing industry represented 15.8% of the total employment in Indonesia’s manufacturing industry and 1.94% of the country’s total workforce of 94.95 million. Labor costs in the Indonesian clothing sector represent 20%-25% of total production costs, compared with only 5% on average in the textile sector. Productivity in the garment industry, in terms of production per employee, traditionally lags far behind that in total manufacturing industry.

De Mello, Luiz. 2008. “Indonesia: Growth Performance and Policy Challenges.” OECD Economic Department Working Papers (September):1-45.            

Indonesia’s growth performance is improving, following a slow recovery from the 1997-98 financial crisis. Investment is picking up, despite considerable business-climate obstacles to entrepreneurship. Unemployment remains high, and labour informality is pervasive. Fiscal policy has been conducted responsibly and in an increasingly decentralised manner. Monetary policy is now carried out within a fully-fledged inflation-targeting framework. This paper argues that the main barriers to raising the economy’s growth potential are to be found on the supply side of the economy. Indonesia will need to improve the business environment and to make better use of labour inputs to put the economy on a higher growth trajectory. The country’s income gap relative to the OECD is sizeable, and several years of sustained growth will be needed to eliminate it. This Working Paper relates to the 2008 OECD Economic Assessment of Indonesia.

De Silva, Indunil, and Sudarno Sumarto. 2015. “Dynamics of Growth, Poverty and Human Capital: Evidence from Indonesia Sub-National Data.” Journal of Economic Development (June): 1-33.

The aim of this study is twofold. First, despite the vast empirical literature on testing the neoclassical model of economic growth using cross-country data, very few studies exist at the sub-national level. We attempt to fill this gap by utilizing panel data over the 2002-2012 period, a modified neoclassical growth equation, and a dynamic panel estimator to investigate the effect of both health and education capital on economic growth and poverty at the district level in Indonesia. Secondly, whilst most existing cross-country studies tend to concentrate only on education as a measure of human capital, we expand the analysis and probe the effects of health capital as well. As far as we are aware, no study has done a direct and comprehensive examination of the impacts of health on growth and poverty at the sub-national level. Thus this study is a premier at the sub-national level, and our findings will be particularly relevant in understanding the role of both health and education capital in accelerating growth and poverty reduction efforts.

Fitra Roman Cahaya, Stacey A. Porter, Greg Tower and Alistair Brown. 2012. “Indonesia’s Low Concern for Labor Issues.” Social Responsibility Journal (June): 114-132.

Purpose – This study aims to advance explanations of the communication level of labor disclosures of Indonesian listed companies. Design/methodology/approach – Year-ending 2007 Annual report disclosures of 223 Indonesia Stock Exchange (IDX) listed companies are analyzed. The labor practices and decent work disclosure component of the 2006 Global Reporting Initiative (GRI) guidelines are used as the benchmark disclosure index checklist. Findings – The results show a low level of voluntary disclosure (17.7 per cent). The highest level of communication is for issues related to skills management and lifelong learning programs for employees. Very few companies disclosed information about health and safety committee and agreements, and salary of men to women. Statistical analysis reveals that government ownership and international operations are positively significant predictors of “labour” communication. Isomorphic institutional theory partially explains the variability of these disclosures. Bigger companies also provide more labor practices and decent work disclosures. Research limitations/implications – The main implications of the findings are that Indonesian companies are not clearly communicating labor responsibility issues as a key precondition of corporate social responsibility (CSR). They may be obfuscating some information to protect their image and reputation. Originality/value – This paper provides insights into the disclosure practices of labor issues, a specific social disclosure theme which is rarely examined in prior literature, under the umbrella of institutional theory. The research also includes “goal factor” to be tested as one of the independent variables.

Hohberg, Maike, and Jann Lay. 2015. “The Impact of Minimum Wages on Informal and Formal Labor Market Outcomes: Evidence from Indonesia.” IZA Journal of Labor & Development (September): 1-25.

This paper studies the effects of minimum wages on informal and formal sector w ages and employment in Indonesia between 1997 and 2007. Applying fixed-effects methods, the estimates suggest that minimum wages have a significant positive effect on formal sector wages, while there are no spillover effects on informal workers. Regarding employment, we find no statistically significant negative effects of minimum wages on the probability of being formally employed. These findings suggest that employers use adjustment channels other than employment or that effects such as a demand stimulus on a local level outweigh the possible negative employment effects.

Kis-Katos, Krisztina, and Günther G. Schulze. 2011. “Child Labour in Indonesian Small Industries.” Journal of Development Studies (December): 1887-1908.      

We analyse the geographic incidence of child labour in small manufacturing firms in Indonesia at the village level. Our unique data set covers virtually all Indonesian villages and urban neighbourhoods; it allows us to distinguish between demand and supply side determinants of child labour. We show by correcting for sample selection that a number of counterintuitive results – child labour being unaffected by credit access and school proximity – are the result of an interplay between supply and demand side determinants. Credit access and school proximity reduce child labour supply, but simultaneously constitute positive location factors for firms thereby increasing the demand for child labourers. To effectively reduce child labour, growth oriented policies, such as enhancing school and credit facilities, should be complemented by policies specifically geared towards increasing school attendance.

Rama, Martin. 2001. “The Consequences of Doubling the Minimum Wage: The Case of Indonesia.” Industrial and Labor Relations Review (July): 864-881.

Indonesian minimum wages were tripled in nominal terms, and doubled in real terms, in the first half of the 1990s. The author analyzes data from the 1993 labor force survey to evaluate the effects of this hike on wage earnings and wage employment. The results suggest that the minimum wage hike had a modest impact on Indonesian labor market outcomes, increasing average wages by 5-15% and decreasing urban wage employment by 0-5%. The employment effects, however, varied substantially by firm size: small firms apparently experienced substantial decreases in employment, whereas some large firms actually saw their employment increase. Workers in those large firms, the author concludes, are the evident winners from the minimum wage hike.

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The following table demonstrates the earnings below the minimum wage in 1993. Nearly 15% of manufacturer and urban employers receive less than minimum wage. Female workers between the ages 15-24 receive either close to zero or as high as 40% in means of earnings (p. 872) By: Shannay Baradaran

Resosudarmo, Budy, and Yogi Vidyattama. 2006. “Regional Income Disparity in Indonesia: A Panel Data Analysis.” ASEAN Economic Bulletin (April): 31-44.

Regional income per capita disparity has become a crucial topic in Indonesia since the beginning of the 1990s. However, the main reasons for the existence of this income disparity remain a puzzle. This paper utilizes a panel data technique and the general specification growth model to estimate the provincial growth of income per capita in Indonesia for the 1993-2002 period to investigate the determinants of the country’s regional income disparity. The main findings are, first, despite the existence of regional income disparity, there is a conditional regional income per capita growth convergence; and second, saving of physical capital, trade openness and the contribution of the gas and oil sectors are the determinants of this provincial income per capita growth.

2012. “Indonesia Information Technology Report Q1 2012 Includes 5-year Forecasts to 2016.” Business Monitor International (January): 1-59.

The Indonesian IT market is forecast to grow at a compound annual growth rate (CAGR) of 18% over the 2011-2015 period, with a revival in business spending building on momentum from consumer spending. In 2010, computer sales grew strongly and a double-digit IT market growth scenario looks well supported again in 2011. Indonesia is forecast to be one of the best regional IT market growth prospects over BMI’s five-year forecast period. IT spending is forecast to increase to US$5.3bn in 2011, up from US$4.7bn in 2010. Some fundamental drivers, including rising computer penetration and growing affordability, should ensure that the market remains firmly in positive growth territory. Growing investment in datacentres and other ICT infrastructure will support more demand for outsourcing and cloud computing, with sector players such as Telekom Indonesia launching new services in 2011. By 2015, IT spending is projected to reach a value of US$10.1bn. With information and communication technology (ICT) penetration of around just 20% and development restricted to richer areas such as Java, the market has much growth potential. However, the country’s uneven development and digital divide are major barriers to faster growth in this potentially huge IT market. Industry Developments In 2010, Indonesia’s information society development received a boost when the government said that it would start to introduce e-passports. Indonesia will thus follow in the footsteps of other South East Asian countries such as Singapore, Malaysia and Thailand. The immigration department plans to distribute 10,000 e-passports in the first phase, with these being mainly available in immigration offices in Jakarta, Semarang and Surabaya. The government is also rolling out e-learning initiatives, which could cause education’s share of local IT spending to rise from its estimated level of around 4%. The ratio of PCs to students in public schools is around 1:3,200. The government wants to increase this to 1:20. As there are 53mn students in the Indonesian schools system, this would require at least 2.5mn computers. Competitive Landscape In August 2011, Chinese vendor Lenovo, the bestselling computer vendor in the Asian region, launched a campaign targeting young Indonesian consumers. Earlier in 2011, the vendor announced plans to achieve a double-digit Indonesia PC market share in its current fiscal year. According to company data, the company currently has a share of around 7.6%. The consumer campaign builds on moves last year to create a stronger logistics and service infrastructure in Indonesia. Cloud computing will be a key focus for vendors in 2011. In 2011, Microsoft announced that it planned to invest around US$2.5bn in Indonesia to develop cloud-computing systems. The company is partnering Indonesia Information Technology Report Q4 2011 © Business Monitor International Ltd Page 6 with Telekom Indonesia, and a number of other partners and has reported interest in its cloud services from several government agencies and large companies. In 2010, Telkom partnered with Microsoft to launch cloud computing services, including platform-as-a-service (PaaS), infrastructure-as-aservice (IaaS) and software-as-a-service (SaaS). Hardware BMI forecasts 2011 Indonesian computer hardware spending of US$3.8bn, up from US$3.2bn in 2010. The market is forecast to rise at a CAGR of 17% to a value of US$7.1bn by 2015. In 2010, consumer demand was reinforced by a revival in business IT hardware spending, which could account for about two-thirds of sales opportunities during the forecast period, with sales value doubling by 2015. Hardware accounts for more than 70% of Indonesian IT spending. The main drivers are growing affordability and more credit availability in a country where only about 20% of the population have access to a PC, compared with more than 40% in some other South East Asian countries such as Malaysia or Thailand. Software Indonesia’s software sales are forecast by BMI to reach US$589mn in 2011, up from an estimated US$535mn in 2010. During BMI’s five-year forecast period to 2015, the software sector CAGR is forecast at 22%. In 2011, migrations to Microsoft’s new Windows 7 operating system should remain a driver, although much will depend on consumer and business confidence. One market inhibitor is the continuing software piracy problem, which, according to the government’s own figures, loses Indonesian software companies more than US$100mn per year. Over the forecast period, enterprise resource planning (ERP) software should continue to be of most interest to small- and medium-sized enterprises (SMEs) as only around 20% of Indonesian SMEs are estimated to make use of IT. In addition to cost savings, businesses will look to boost efficiency and increase the flexibility of responses to customer needs. IT Services Indonesia’s IT services market is forecast to be worth US$866mn in 2011, recording double-digit growth from US$769mn in 2010, based on BMI estimates. IT services account for 17% of Indonesia’s hardwarecentric IT market sales. Hardware deployment services remain the largest Indonesian IT services category with a 20% market share. Improvements in Indonesia’s telecoms and ICT infrastructure are expected to drive long-term growth in the Indonesian IT services market. Commercial datacentres are being built, linked to growing rollout by public sector and commercial organisations of e-government or e-commerce services. However, most opportunities are in fundamental service areas such as system integration, support systems, training, professional services, outsourcing and internet services. Indonesia Information Technology Report Q4 2011 © Business Monitor International Ltd Page 7 E-Readiness Low telephone line density, high charges and low PC penetration are all significant obstacles to higher internet penetration. However, the situation is not all bad, with signs of faster growth in user numbers and recent surveys showing that, among a very small elite, there is fast adoption (by regional standards) of broadband and a willingness to pay for video conferencing, security and other additional features. The government is encouraging fixed wireless deployments, including WiMAX, to bring the internet to more remote areas. The government is also rolling out an internet-based National Education Network, which involves 1,000 network points in five clusters nationwide, designed to facilitate the use of the internet in schools. Despite some advances in e-education, constraints remain due to poor infrastructure and a lack of public awareness in a country where only 20mn people own fixed-line telephones.

2012. “Indonesia Mining Report – Q2 2012.” Indonesia Mining Report (April): 5-61.

We expect Indonesia’s mining industry value to reach US$147bn in real terms by 2015, almost double that of 2010. The country will remain a dominant player in the coal and tin mining industries given the country’s position as the largest global exporter in both commodities. Coal mining will continue to drive growth in the industry given the aggressive expansion and acquisition plans of the coal miners in the country. Indeed, we expect coal production to reach 816mnt by 2015, an annual average growth of 17.8% from 2010 levels. Nickel and bauxite mining will see growth in refining capacities given the impending 2014 export ban. Positive regulatory developments in recent years include the passage of the 2009 Mining Law, which streamlines and improves upon the 1967 Mining Law. However, key implementation guidelines with reference to benchmark pricing and asset divestment procedures have yet to be announced, which is a source of uncertainty for investors. We expect foreign investments into Indonesia to remain strong in the coming years. In the South East Asia region, Indonesia remains the top place for new mining projects, followed by the Philippines and Vietnam. A large number of these are green field and brown field exploration projects for coal and copper-gold prospects. Indonesia’s mining sector is dominated by Bumi Resources, which owns the country’s largest and fourth-largest coal miners, Kaltim Prima Coal (KPC) and Arutmin. State-owned PT Timah is the world’s largest integrated tin mining company. It is the tin-rich Bangka region’s biggest operator, followed by PT Koba Tin. Timah has a 25% share in Koba Tin, while the remaining stake is held by the Malaysian Smelting Corporation. PT Freeport Indonesia and PT Newmont Nusa Tenggara are essentially the only copper mining players in Indonesia, carrying out mining activities at the Grasberg and Batu Hijau mines.