both trade for goods and services as well as investment flows were affected.<sup>20</sup> Accordingly, Indonesia experienced its deepest contraction in two decades during the second quarter of 2020.

52. **In the early days of the pandemic, workers – especially in urban areas – lost their jobs while others had to work fewer hours and earned less.** In the first six months of the pandemic, more than 5 million people (2.5 percent of the working-age population) lost their jobs and 24 million workers (11.8 percent of the working-age population) had to work reduced hours, with urban areas being the most affected. The unemployment rate rose by 1.8 percentage points to 7.1 percent in the third quarter of 2020 (yoy), mainly driven by urban unemployment increasing from 6.3 to 9 percent, while rural unemployment only increased from 4 to 4.7 percent. Underemployment increased by 7.3 percentage points to 28.9 percent. The intensity of underemployment was exacerbated by the pandemic, reducing average working hours by 0.5 hour, and earnings by about 5 percent.

53. **For 3.4 million new labor market entrants, the economy added only 1.9 million jobs in 2020.** To compensate for losses in households’ livelihoods and the loss of jobs for men, women’s entry into the labor force increased by 2.8 million women in 2020. This was substantially more than the previous 5-year average when women’s entry into the labor force grew by 1.1 million. At the same time, 330,000 men left the labor force, in stark contrast to the customary number of 1.3 million men entering the labor force yearly. Jobs became less secure, with 4.5 million formal jobs vanishing, while 6.4 million informal jobs being created (figure 22A). Some of them were in the digital economy as gig workers to buffer the impact of job loss (Word Bank 2023). However, 4 million of the new jobs were unpaid family work and often in agriculture, mostly filled by women. Net job losses among men were particularly prevalent in manufacturing while service jobs became informal.<sup>21</sup> Overall, COVID-19 increased women’s employment in 2020, compensating for employment losses by men, while informality helped as a buffer.

54. **Informality acted as a buffer for job losses, but only to a limited extent and at the aggregate level of the economy.** The large increase in informal jobs during the pandemic compensated for the loss of formal jobs. However, the compensation acted at the aggregate level of the economy rather than the individual level. While men lost their formal jobs, most informal jobs were taken up by women. This suggests that women sought informal work to compensate for income loss at the household level. These losses might have occurred for formal as well as informal jobs, at the intensive margin due to lower working hours and at the extensive margin by job losses.

55. **COVID-19 also affected the youth by leading to school dropouts and part-time work, while diminishing work opportunities for older youth.**<sup>22</sup> The youngest (aged 15 to 18) were more likely due to COVID-19 to work while being in school, more often above 20 hours per week. In addition, the pandemic increased the number of younger youth neither in school nor employed. For the older cohort of youth aged 19 to 24, the pandemic similarly led to school dropouts but led

> 20 World Bank, Indonesia Economic Prospects, December 2020.

> 21 Putra, Ovsiannikov, and Kotani, “COVID-19-Associated Income Loss and Job Loss.” 22 Halim, Hambali, and Purnamasari (2023).

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