Employment, Labour Markets, and Economic Recovery in Indonesia: Issues and Options
Iyanatul Islam
Abstract
This paper argues that the notion of labour market flexibility represents an inadequate framework for understanding the challenges faced by a democratic Indonesia in the post-crisis period. Such challenges entail the need to nourish employment-intensive recovery, developing a credible and cordial industrial relations system and empowering workers to cope with the problems of vulnerability and risk that are inherent in any globally-oriented market economy. The uncritical embrace of labour market flexibility in the pre-crisis period overlooked some inherent problems, such as the failure to develop a coherent industrial relations system. Although labour market flexibility helped prevent a sharp rise in unemployment during the economic crisis, the plummeting of real wages strengthens the case for government interventions in dealing with adverse labour market outcomes.
The
purpose of this paper is to identify the nature of these concerns and
to find mechanisms that the donor community could employ to respond
creatively to the challenges that are likely to emerge in this domain.
