Labour market dimensions of poverty in Indonesia

This paper focuses on labour market issues relevant to poverty alleviation. Patterns of participation, unemployment and employment are examined among the poor compared with the non-poor in general, among urban and rural households, and among various socio-demographic groups. Using data from the 2002 National Socio-Economic Survey, the paper finds that low participation in the workforce and high unemployment, while important, are less closely related to poverty status than expected, especially among spouses of household heads. However, sector of employment and underemployment are closely associated with poverty, especially for those in informal jobs in urban areas; in rural areas, the poor are heavily concentrated in agriculture. Among the poor, young people and females are more likely to be underemployed and to work in agriculture than prime-age workers. The data suggest that labour market policies that tend to protect those in formal sector employment are unlikely to reduce poverty much, if at all. * This paper had its origins in a note prepared for the World Bank office in Jakarta on the labour dimensions of poverty in Indonesia.