Investing in competences and skills and reforming the labour market to create better jobs in Indonesia

Favourable demographics has boosted Indonesia’s economic growth in recent decades, but its contribution will wane over time. Skills and competences will therefore become increasingly important to raise living standards. Educational attainment has improved considerably, but the quality of education remains disappointing. At the same time, technological changes, new organisational business models and evolving worker preferences make upskilling and reskilling increasingly important. This warrants continuous investment in improving education and lifelong training, in terms of both quality and quantity, with an enhanced role for social partners. Tackling existing and rising skill shortages requires more participation from women, older adults, internal migrants, disadvantaged groups, and foreign workers. Expanding access to early childhood education would provide all children with better opportunities and bring significant benefits. Reducing informality is key to encouraging investment in skills. The COVID-19 crisis has highlighted workers’ insufficient protection against shocks, underlining the need for unemployment insurance. It is also an opportunity to boost digitalisation and innovate with smart practices. School closures are already penalising learning outcomes and will reduce future earnings.