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The Informal Sector and Informal Employment in Indonesia

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About the Country Report This country report is one of the outputs of Asian Development Bank’s (ADB) regional technical assistance BPS–Statistics Indonesia (RETA) 6430: Measuring the Informal Sector. The BPS–Statistics Indonesia, one of the three partner statistical agencies of RETA 6430, worked closely with ADB in adapting the mixed survey approach for collecting informal sector and informal employment data, in analyzing the survey results, and in writing this country report. The country report presents an in-depth analysis for the provinces of Yogyakarta and Banten. Of the total employment in Yogyakarta and Banten in 2009, 89.14% and 75.90 % were informal, respectively. The method for estimating the contribution of the informal sector to the gross domestic product, the resulting estimates, labor productivity, and the characteristics of informal sector production units are also discussed in this report. The Informal Sector and About the Asian Development Bank Informal Employment in ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries substantially reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to two-thirds of the world’s poor: 1.8 billion people who live on less than Indonesia $2 a day, with 903 million struggling on less than $1.25 a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org COUNTRY REPORT 2010 ISBN 978-92-9092-243-8 Publication Stock No. RPT113003 Printed on recycled paper Printed in the Philippines BPS–Statistics Indonesia The Informal Sector and Informal Employment in Indonesia COUNTRY REPORT 2010 © 2011 Asian Development Bank, BPS-Statistics Indonesia All rights reserved. Published 2011. Printed in the Philippines. ISBN 978-92-9092-243-8 Publication Stock No. RPT113003 Cataloging-In-Publication Data Asian Development Bank and BPS-Statistics Indonesia. The informal sector and informal employment in Indonesia. Mandaluyong City, Philippines: Asian Development Bank, 2011. 1. Informal sector. 2. Informal employment 3. Indonesia. I. Asian Development Bank. The views expressed in this report are those of the authors and do not necessarily reflect the views and policies of BPS- Statistics Indonesia and the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB and BPS-Statistics Indonesia do not guarantee the accuracy of the data included in this publication and accept no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB and BPS-Statistics Indonesia do not intend to make any judgments as to the legal or other status of any territory or area. ADB and BPS-Statistics Indonesia encourage printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB and BPS-Statistics Indonesia. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB and BPS-Statistics Indonesia. Note: In this report, “$” refers to US dollars. Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel +63 2 632 4444 Fax +63 2 636 2444 www.adb.org For orders, please contact: Department of External Relations Fax +63 2 636 2648 [email protected] Contents List of Tables, Figures, and Appendixes v Foreword viii Abbreviations x Executive Summary xi Chapter 1: Introduction 1 1.1 Background 1 1.2 Objectives 2 1.3 Informal Sector Statistics in the Realm of Official Statistics 2 1.4 Main Data Sources 2 1.5 Layout of the Report 2 Chapter 2: Employment in the Informal Economy 4 2.1 Labor Force Characteristics 5 2.2 Jobs in the Informal Sector 6 2.3 Persons Employed in the Informal Sector 8 2.4 Informal Employment 9 2.5 Industry of Economic Activity 10 2.6 Occupation 12 2.7 Employment Status 14 2.8 Wages and Earnings 14 2.9 Type of Tax Payments (for Employers and Self-Employed) 16 2.10 Type of Enterprise 17 2.11 Size of Establishment 19 2.12 Legal Organization of the Enterprise 20 2.13 Workplace 20 2.14 Age Composition 22 2.15 Level of Education 23 2.16 Employment Conditions of Informal Employees 26 2.17 Exclusion of Agriculture, Forestry, and Fishing 27 Chapter 3: Contribution of the Informal Sector to GDP 30 3.1 Industry 30 3.2 Agriculture and Non-Agriculture Sectors 31 3.3 Labor Productivity 31 iii iv Contents Chapter 4: Characteristics of Informal Sector Enterprises 34 4.1 Household Unincorporated Enterprises with At Least Some Market Production (HUEM) 34 4.2 Financing and Other Support Structures 36 4.3 Problems and Prospects 37 Chapter 5: Institutionalizing Informal Employment and Informal Sector in Official Statistics 39 Chapter 6: Summary and Conclusions 42 6.1 Summary of Main Results 42 6.2 Importance of Measuring Informal Employment and the Informal Sector 42 6.3 Other Issues 43 Chapter 7: Recommendations 44 Appendixes 46 References 118 Tables, Figures, and Appendixes Tables 2 Number of Informal Employment by Province and Production Unit 4 2.2.1 Total Number of Jobs by Activity and Production Unit 7 2.2.2 Total Number of Jobs by Nature of Employment and Activity 7 2.3 Percentage of Employment by Employment Status, Nature of Employment, and Sex 8 2.5.1 Comparison of Industry Classification: ISIC Rev. 3 vs. Sakernas 11 2.5.2 Nature of Employment by Industry and Province (%) 12 2.5.3 The Structure of Employment (Total and Informal) by Province and Sex 13 2.8.1 Average Wage and Earnings by Employment Status and Nature of Employment 15 2.8.2 Average Wage and Earnings by Employment Status, Nature of Employment, and Sex 16 2.8.3 Average Wage and Earnings by Employment Status, Nature of Employment, and Urbanity 16 2.9.1 Distribution of Production Units of Own-Account Workers and Employers Registered in Tax Agency, by Urbanity and Type of Tax Payment 17 2.9.2 Tax Agency Registration and Tax Payments of Enterprise Owned by Own-Account Workers (%) 17 2.10 Percentage of Type of Enterprise and Nature of Employment 18 2.11.1 Employment by Type of Production Unit, Nature of Employment, and Employment Size of Establishment (%) 19 2.11.2 Employment by Employment Size of Establishment, Nature of Employment, and Urbanity (%) 19 2.12 Employment by Legal Organization, Nature of Employment, and Sex (%) 20 2.13.1 Employment by Place of Work and Nature of Employment (%) 22 2.13.2 Informal Employment by Place of Work (Excluding Farm and Agricultural Plots) and Urbanity 23 2.14.1 Employment by Urbanity and Age Group (%) 23 2.14.2 Employment by Nature of Employment and Age Group (%) 23 2.14.3 Informal Employment by Unit of Production and Age Group (%) 23 2.15.1 Employment by Level of Education and Employment Status (%) 24 2.15.2 Unpaid Family Workers with No Education by Industry 24 2.15.3 Employment by Level of Education, Employment Status, and Sex (%) 25 2.15.4 Employment by Level of Education, Employment Status, and Nature of Employment (%) 26 2.16.1 Number of Wage Workers Who Received Benefits by Nature of Employment and Sex 27 2.16.2 Percentage of Wage Workers Who Received Benefits by Nature of Employment and Sex 28 2.17.1 Informal Employment by Employment Status, Production Unit, and Sex (Excluding Agriculture) (%) 28 2.17.2 Employment by Employment Status and Production Unit (Excluding Agriculture) 28 4.1 Distribution of Reasons for Establishing HUEMs by Province 35 4.2.1 Access to Credit (%) 36 4.2.2 Distribution of HUEMs by Reason of Not Applying for Loan; by Reason for Loan Rejection (%) 37 4.2.3 Distribution of HUEMs by Impact of Loan (%) 37 4.3.1 Distribution of HUEMs by Type of Problems Encountered (%) 37 4.3.2 Proportion of HUEMs Helped by Professional Business Organization, by Type of Difficulty (%) 38 5.1 Summary of Recommendations 41 Figures 2 Nature of Employment by Production Unit 5 2.1.1 Labor Force Characteristics by Sex: Agriculture vs Non-Agriculture 5 2.1.2 Labor Force Characteristics by Sex, Nature of Employment, and Sector 6 2.2 Employment by Type of Enterprise: Primary and Secondary Jobs (%) 6 v vi Tables, Figures, and Appendixes 2.3 Formal and Informal Employment in Informal Enterprise by Sex and Province 9 2.4.1 Employment by Type of Production Unit, Nature of Employment, and Sex 9 2.4.2 Informal Employment by Production Unit and Province 9 2.4.3 Distribution of Men and Women Engaged in Informal Employment (%) 10 2.5.1 The Structure of Total Employment in Yogyakarta and Banten 10 2.5.2 The Structure of Informal Employment in Yogyakarta 12 2.5.3 Structure of Informal Employment in Banten 12 2.6.1 Employment by Occupation and Nature of Employment in Yogyakarta 13 2.6.2 Employment by Occupation and Nature of Employment in Banten 14 2.7 Employment by Employment Status, Nature of Employment, and Sex (%) 15 2.10.1 Percentage of Jobs Worked at Formal/Informal Enterprise by Type of Enterprise in Yogyakarta 18 2.10.2 Percentage of Jobs Worked at Formal/Informal Enterprise by Type of Enterprise in Banten 18 2.12 Employment by Legal Organization, Nature of Employment, and Sex
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