The Measurement and Trends of Unemployment in Indonesia: The Issue of Discouraged Workers

Abstract

This study reviews the measures of unemployment used in Indonesia. The finding indicates that the relaxation of labor force definition in 2001 by including discouraged workers results in artificially high unemployment rates and disguises the actual decline in unemployment post-crisis. Another finding indicates that discouraged workers in Indonesia are not confined only to the poor and those who are denied access to the proper job market. We recommend that, if Indonesia still wants to utilize a broader definition of the labor force, it should adhere to the ILO's recommendation of only including those discouraged workers who are still willing to work.

Keywords: discouraged workers, open unemployment, measurement, Indonesia

JEL Classification: J60