What is Informal Employment

This chapter examines economic growth, labor market segmentation, informal employment, and labor productivity in Indonesia from 1990-2015. It shows four important facts. First, Indonesia was ever among countries in Southeast Asia with the highest economic growth before the country was severely hit by the Asian financial crisis in 1997/98. In 1999, the country started to recover, and since then, the economy has performed exceptionally well until these days. Second, total employment increased continuously, although as a percentage of total labor force, it tends to decline. Second, total labor productivity also continued to increase. Third, employment is still dominated by the informal sector. This chapter also discusses labor market policy in Indonesia. This chapter concludes that there are many factors that simultaneously determine directly or indirectly the growth of labor productivity, including good macroeconomic management and effective labor market policies.