# **2 An overview of the Indonesian labor market**

**This section describes key characteristics of the Indonesian labor market with the objective of informing the findings from the upcoming analysis.** Specifically, this section presents trends in employment in Indonesia by key demographic characteristics including gender, age group, sector of employment, and level of education. This section also presents trends in formal and informal employment by these same key demographic characteristics. Given that the analysis focuses on the relationship between the employment rates of the elderly and younger persons in Indonesia, understanding their labor market characteristics will be important to shed light on the findings. It will also provide insight on whether substitutability between older and younger persons is plausible.

**The employment rate is highest for workers aged 35 to 54, followed by those aged 25 to 34, 55 to 64, and 65 and older.** Young persons aged 15 to 24 have the lowest employment rate. This pattern is driven by the employment rate of men, who have substantially higher employment rates compared to women, and shown in Figure 2 and Figure 3. Nonetheless, between 2016 and 2023, the employment rate of women has increased at a faster rate compared to men, across all age groups. In the same period, the employment rate has increased for both gender and across all age groups.

**The employment rate of older persons aged 55 and older has experienced the largest increase in recent years.** The employment rate for persons aged 55 to 64 has increased by 3.3 percentage points, while that of persons aged 65 and older has increased by 8.3 percentage points. The increase is higher for women (see Figure 3) compared to men (see Figure 2). To elaborate, the employment rates of women aged 55 to 64 and 65 and older have increased by 4.2 and 9.3 percentage points respectively in the period. On the other hand, the employment rates of men in the same age groups have increased by 2.8 and 6.2 percentage points respectively. That said, the employment rate for women remains lower than that of men despite the increase, given its relatively low starting point.

**Figure 2: Male employment as a share of the population by age group, 2016-2023 (%)**

<!-- Start of picture text --> 100<br>80<br>60<br>40<br>20<br>0<br>2016 2017 2018 2019 2020 2021 2022 2023<br>15-24 25-34 35-54 55-64 65+<br>Employment rate (%)<br><!-- End of picture text --> Source: Author’s calculations using Sakernas data

**Figure 3: Female employment as a share of the population by age group, 2016-2023 (%)**

<!-- Start of picture text --> 100<br>80<br>60<br>40<br>20<br>0<br>2016 2017 2018 2019 2020 2021 2022 2023<br>15-24 25-34 35-54 55-64 65+<br>Employment rate (%)<br><!-- End of picture text --> Source: Author’s calculations using Sakernas data

**The increase in the employment rate has occurred against the backdrop of rising educational attainment.** Figure 4 shows that an increasing share of Indonesians have secondary and tertiary education. The share of the population with a secondary education increased from 49.3 percent in 2016 to 53.5 percent in 2023. In the same period, the share of the population with a tertiary education had increased from 9.4 percent to 10.7 percent. Subsequently, the share of younger persons with a

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