How to boost female labor force participation in Indonesia

Published on Friday, 19 February 2016

Published by Simone Schaner on Friday, 19 February 2016

Indonesian women selling vegetables and fruit.
Indonesian women selling vegetables and fruit.

Indonesia has experienced rapid economic growth and substantial demographic change over the past 20 years, but its female labor force participation (FLFP) rate has remained relatively stable. Why is this?

As part of an ADB technical assistance project on economic analysis for gender and development, we looked into the data in a report co-authored by Smita Das, research fellow at the Evidence for Policy Design Program, Harvard Kennedy School of Government. It turns out that although overall FLFP has hovered around 55% for the past 20 years, this may mask important changes in the underlying makeup of the female workforce.

For instance, cohort analysis using Indonesia’s national labor force survey (SAKERNAS) data shows that young, urban women are entering the workforce in greater numbers, while young rural women are less likely to work. The type of work is important, too – younger urban women are entering wage jobs, while rural women are leaving informal and unpaid work.

We also find some evidence that wage jobs may be, on average, more desirable: better educated women are more likely to work for wages and female wage workers have more decision-making power and are less accepting of domestic violence. We cannot say, however, if this is because more empowered women are more likely to work for wages, or if wage work empowers women. Alongside this, 25% of unemployed Indonesian women say they would like to work, so there is room to help women enter the labor force.

Results also show that the gender gap in wage jobs, while still sizable, has shrunk markedly in recent years. In 1990 the median woman earned 57% of the wages paid to the median man, but by 2011 this figure had increased to 84%. But part of these gains are driven by the fact that in recent years, female wage workers have been better educated than male wage workers. In spite of this, women remain notably underrepresented in leadership and management positions. Finally, there is evidence that childcare responsibilities limit women’s engagement in the labor market.

So how can we use these findings to identify the best policies to help women to gain access to desirable, rewarding jobs?

Although Indonesia can glean some lessons from nearby countries, there are not many rigorous studies in the Indonesian context that identify the causal effect of labor market policies on FLFP. But that doesn’t mean nothing can be done. We suggest that a policy combining skills training and job matching services could help women gain access to high-quality wage jobs.

We also believe that the best way forward would be to combine a pilot of such a program with a rigorous experimental evaluation; this way we could learn about the causal impact of the program on FLFP while also measuring its cost effectiveness. Such evidence would tell policy makers whether the program should be scaled up, while generating evidence that could inform future efforts to help women find access to meaningful, high-return work. This would help ensure that women have both the skills they need to succeed on the job, and the resources to find a suitable job once those skills have been acquired.