both consumption and investment decisions. In this context, underemployment can be seen as an indicator of (or proxy for) income insecurity in the informal sector. Although some Indonesian workers certainly have adequate incomes and others may possess some family assets, neither of these forms of security are likely to be prevalent among workers in the informal sector. Moreover, there is likely to be a strong positive correlation between the three forms of protection listed above; households without steady sources of employment are less likely to have either assets or adequate income levels. As a result, workers with infrequent and/or irregular work opportunities (i.e., the underemployed) probably live in households that are most vulnerable to external shocks that affect their earnings.

It is important to note, however, that the connection drawn here between underemployment and income insecurity is problematic, at best. The most serious concern is the fact that, while underemployment is a phenomenon that affects individuals, income vulnerability occurs at the household level; because fluctuations are likely to decline at higher levels of aggregation, looking at statistics on underemployment almost certainly overstates the incidence of income insecurity. For example, a household with many insecure sources of income may be far less vulnerable than another household with the same (or even higher) income that comes from only one source. Access to other forms of insurance may vary across households, further complicating the connection between underemployment and income insecurity. Thus, even as one considers the description of the informal labor market which follows, it is important to keep in mind the fact that underemployment is an imperfect (and biased) proxy for income insecurity.

_A Woriang Definition of "Underemployment"for Indonesia_ Underemployment is widespread in Indonesia. The 1993 National Labor Force Survey (SAKERNAS) provides ample evidence of the magnitude of the problem. Using the traditional standard (less than 35 hours per week), nearly two-fifths of the total Indonesian labor force (39.7 percent) are underemployed. Even a stricter standard defined as "severe underemployment" (less than 25 hours per week) identifies almost one-quarter (23.1 percent) as working too few hours.<sup>5</sup> In the informal sector, the incidence of underemployment is far higher. Almost half of the workers in the informal sector (48.6 percent) work less than 35 hours, and 29.8 percent could be categorized as severely underemployed.

The traditional standard of underemployment (less than 35 hours per week) is of limited value to this study for three reasons. First, this standard captures too large a portion of the labor market; any definition that identifies nearly one out of every two Indonesian workers in the informal sector as needing additional security assistance is too Although establishing any definitional cutoff for the near poor would be arbitrary, an example from 1993 demonstrates the magnitude of the group living just above the poverty line; while about 25 million Indonesians (or 13.5 percent of the population) had monthly expenditures below Rp. 20,000, another 52.7 million (or 28 percent of the total population) lived on between Rp. 20,000 and Rp. 30,000 per month. 5 Kenneth Chomitz, 1991.

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