level is a significant problem, and a _targeted_ new public works program could be used to provide income security to vulnerable workers in the informal sector. Second, underemployment, by itself, could be identified by the Government of Indonesia as an economic and social problem requiring policy recourse, even if it is unrelated to the concept of income insecurity at the household level. These two rationales, however, justify two very differently structured programs; each is considered below.

# _Public Works to Provide Income Security_

As mentioned above, there almost certainly are locations where vulnerability to economic shocks at the household level is a significant problem. This vulnerability usually is the result of very low income levels combined with very limited outside income opportunities. These conditions can be found in some part of Java, but are more commonly observed in some of the outlying provinces.32 A program designed to provide income security to the vulnerable workers in the informal sector would need to incorporate three important features: geographical targeting, household targeting, and an adequate duration period. Because income insecurity is not a pervasive problem in all parts of Indonesia, a new program would need to be directed at the areas with the highest vulnerability as opposed to all areas characterized by low incomes. On Java, for example, the vulnerability suggested by low levels of individual earnings may be mitigated to some extent by the fact that households in many parts of Java face a rich set of possible income sources to provide household income security; in such areas, no new scheme to provide additional income security may be necessary.33 Even on Java, however, it is likely that households located in remote and isolated areas (e.g., coastal or mountainous villages) and characterized by low income levels may still face the problem of income insecurity.

Similarly, many low income areas in Eastern Indonesia appear to lack the informal insurance provided by growing demand for labor. In such areas, low incomes and the paucity of income security mechanisms may translate into serious vulnerability to economic shocks. Under such conditions, significant segments of the population may have investment and consumption decisions distorted by income insecurity. Any program designed to address the problem of income security would need to concentrate its efforts on specific and isolated vulnerable regions on Java (and on Sumatra, Kalimantan and Sulawesi) and more broadly on the vulnerable provinces in Eastern Indonesia.34 This geographical variation in vulnerability suggests that a program designed to provide

> 32 See, for example, Timmer, et al (1993),

> 33In fact, in such areas, new wage-paying public works schemes may undermine or even displace some of the welfare-enhancing activities already taking place in the private sector.

34 At the program design stage, program planners must note that income vulnerability probably is not measured very well by underemployment statistics. The fact that Bali records more than twice the rate of underemployment than does NTT should make anyone wary of using this statistic as an indicator of the need for additional income security programs. A program to provide additional income security might be better targeted using information about income levels and local infrastructure than using employment data.

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