Service sector

Covid-19 attracts more workers to low-paying jobs in Indonesia’s service sector

JAKARTA, March 6 (Jakarta Post/ANN): More and more Indonesian workers have turned to service sector jobs in recent years as factories have laid off workers amid the COVID-19-induced economic downturn. the pandemic.

However, the latest data shows that these workers remain concentrated in traditional sectors with relatively low wages because the country lacks highly skilled human capital, which hampers the benefits of Indonesia’s economic tertiarization, a phenomenon that had stimulated the growth in developed countries.

Traditional sectors, including wholesale and retail trade, accommodation and food service activities, and transportation and storage, employed the majority of Indonesia’s workforce in services in August 2021, according to the latest. data from Statistics Indonesia (BPS). In comparison, sectors such as healthcare, education, finance, business services and IT employ a larger share of the workforce in developed economies.

“Some service sectors have been affected [by the pandemic] quite significantly, especially those related to public mobility,” Faisal Rachman, an economist at Bank Mandiri, a public listed company, said on February 25.

“However, once the [mobility restrictions] eased, these sectors could rebound more quickly. In contrast, the manufacturing sector needed time to accelerate.

More than 25.7 million Indonesians work in wholesale and retail trade, accounting for nearly 40% of the entire service workforce.

Accommodation and food service workers accounted for 14.2% of the total, making this sector the second largest employment base.

Most workers in these major service sectors have less than a vocational or college education, except in the education sector.

In accommodation and food services, for example, 37.7% of workers had a high school education and 34.1% had a primary education or less.

The Covid-19 pandemic has forced people to look for jobs outside of factories, especially in agriculture and services. Manufacturers have had to lay off or lay off workers as production has been suspended.

Now that the world is recovering from the pandemic, rising commodity prices and logistical disruptions continue to put pressure on these companies.

As a result, the share of service sector value added in gross domestic product (GDP) rose slightly to almost 45% in 2020, from 44.65% a year earlier, according to World Bank data. .

The main service sectors, however, had average wages that were lower than the overall figure, which included agriculture and industry.

Wages in wholesale and retail trade averaged Rp 2.3 million ($160) per month in August 2021, according to BPS data. It was 15.9% lower than the overall average salary. Information and communication offered the highest average salary among the service sectors, at 4.13 million rupees per month, or 50.96% more than the overall figure.

Most workers in modern service sectors, such as information and communication, financial and insurance activities, and real estate activities, had at least a high school diploma.

Just over half of workers in financial and insurance activities, for example, have at least some vocational training. Not all sectors with a huge skilled workforce offer a high salary.

A typical worker in education earned the lowest at 1.63 million rupees per month. Most education workers had college degrees.

However, modern high-paying service sectors employed less than 3 million people, or only 4.56% of the total service workforce.

Josua Pardede, chief economist at the listed Bank Permata, said that while information and communication were expected to become one of the main drivers of economic growth in the near term, the Moving too soon to the service sector could make it harder for Indonesia to be a high-income economy by 2045.

“There may be service sectors with important roles,” Josua said Wednesday. “Some sectors are important but less labor intensive and contribute to current account deficits. We have to find the solutions [for these sectors].” – Jakarta Post/ANN