broad to be useful for policy guidance. Second, such figures of underemployment are not consistent with the reality of intensive activity observed in informa **l** abor markets throughout Indonesia. Third, using only the hours worked as an indicator of the need for more work ignores the choices made by some individuals not to work more hours at the prevailing wage rate. Underemployment is likely to be a problem for workers only if they would like to work more hours and cannot.

Fortunately, the _SAKERNAS_ data also include information concerning whether the workers would like to work more hours. While there clearly are problems with using this information (for example, willingness to work more hours must be related to some concept of the wage level, but the survey is silent on this issue), it still seems more reasonable to use this information than to ignore it. Moreover, the proportion of the population that both works less than 35 hours each week and wants to work more (12.5 percent) is both more meaningful and more useful for policy purposes. For the rest of the paper, these two conditions will be used to define the underemployed in Indonesia's informal sector.<sup>6</sup>

# _The Structural Nature of Underemployment in Indonesia_

Using this definition, several striking patterns emerge in the data (see Table 1). First, women experience a higher rate of underemployment (13.0 percent) than do men (11.7 percent). Second, rural workers in the informal sector experience a higher rate of underemployment (13.1 percent) than do their urban counterparts (8.3 percent). Interestingly, the urban-rural distinction is stronger than the gender distinction, as rural men are more likely to be underemployed than are urban women. This feature, combined with the fact that more than four-fifths of the labor force (81.9 percent) is located in rural areas, demonstrates that underemployment in the informal sector remains overwhelmingly a rural phenomenon. Seven out of eight, or nearly 88 percent of the underemployed, are found in rural areas.

**6** Several readers of earlier drafts of this paper have questioned the appropriateness of using 35-hour standard for all types of work in the informal sector; the traditional norm for a "standard" work weeks for an agricultural laborer, for example, mnay be very different from that expected from a street vendor. Although the cut-off of 35 hours admittedly is arbitrary (albeit conventional), the second part of the definition of underemployment (wanting more work) introduces considerable flexibility across types of work. For example, if an agricultural laborer is satisfied with a shorter (but "standard") work week, he or she would be counted among the fully employed. Were such a worker to desire more work, despite completing a "standard" work week, it seems reasonable to consider the person underemployed. Given the low hourly returns to employment in the informal sector, one might argue that the weekly cut-off be raised from 35 hours to 40 hours or more, but once one departs from convention, the selection of any other line would appear even more arbitrary unless it is connected to another standard, such as the poverty line or the minimum wage.

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