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Women's Economic Participation in Indonesia

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Women's Economic Participation in Indonesia Australia Indonesia Partnership for Economic Governance Women’s Economic Participation in Indonesia A study of gender inequality in employment, entrepreneurship, and key enablers for change June 2017 The Australia Indonesia Partnership for Economic Governance (AIPEG) is a facility to strengthen the evidence-base for economic policy in support of the Indonesian government. The work is funded by the Australian government as part of its commitment to Indonesia's growth and development. This report has been prepared in a collaboration between AIPEG, the Australian Department of Foreign Affairs and Trade (DFAT) and Monash University’s Centre for Development Economics and Sustainability (CDES)1. Women’s economic participation in Indonesia Executive Summary The Indonesian economy has undergone dramatic changes over the last few decades. Indonesia achieved middle income status in 2004 and high growth also rapidly reduced poverty from 23 percent of the population in 1999 to 11 percent in 2016. The share of manufacturing and services in the economy is growing, and agriculture declining (although still a high level overall). Yet one area that has not changed much is participation of women in the labour market. This report presents new research on the labour market situation for women and gender wage gaps in Indonesia, based on the National Socio-Economic Survey (Susenas). At 51 percent, Indonesia’s female labour force participation rate is well below that for males (around 80 percent) and low relative to countries at a comparable stage of development. The main drivers of low female labour force participation in Indonesia are marriage, children below two years of age in the household, low educational attainment (below upper-secondary and tertiary levels) and changing economic structure (decline in the female-friendly sector of agriculture due to transitions from rural to urban areas in particular). One promising trend, however, is that the propensity for women to participate in the labour force appears to be increasing among the younger generation, particularly the more educated living in urban areas. As a member of the G20 group of the world’s major economies, Indonesia has committed to decreasing the gap between female and male labour force participation by 25 percent by 2025. Our projections show that this target will only be reached under the most optimistic circumstances. Under less optimistic (and arguably more realistic) assumptions, female labour force participation may even decrease if the most recent trends continue. Policy support, together with shifting social norms and practices is needed. Our research also finds evidence of a significant gender wage gap in Indonesia. The gender wage gap is 34 percent in the formal sector and 50 percent in the informal sector. Our analysis shows most of this gap is not due to differences in productive characteristics but reflects discriminatory practices. There is also strong evidence of ‘sticky floors’ in the formal sector – women at the lower end of the wage distribution facing a much bigger gender wage gap than women in higher wage jobs. In the informal sector (where most of the women participate), the wage gap is large and constant for all workers. In another area of economic participation, entrepreneurship, women tend to be under-represented. This is despite the concentration of women in the self-employed informal sector. Low entrepreneurship is often attributed to women’s difficulty accessing financial resources. The evidence on this is however mixed and further research in this area is desirable. Women’s economic participation in Indonesia The report also reviews existing research on key enablers for greater economic equality between women and men – education, health, infrastructure, institutions and laws. In particular, education equality is a critical pathway to economic opportunities later in life. Our review of the evidence finds little in the way of gender education gaps amongst younger cohorts in Indonesia. However, the overall educational performance of Indonesians is low. On health indicators, gender gaps in areas such as child mortality and utilisation of health services, observed in many developing countries, are not apparent in Indonesia. However, maternal mortality rates are higher than in comparable countries. Equality in health is a critical area found to determine human capital development (for example, healthier children and adults are more likely to obtain higher education and participate more in the labour market). Inadequate transport infrastructure and services are additional barriers to women’s full economic participation. Efficient and safe transport, in particular can assist women to better juggle work and family responsibilities. Finally, institutions and laws signal commitment to improving gender equality. In Indonesia, despite reasonable maternity leave entitlements for formal sector workers, there are several laws that discriminate against women. This includes tax and inheritance laws, as well as lack of legislation or penalties to protect against sexual harassment. The report concludes with areas for further research including what drives female transitions in the labour market. Ultimately, the aim is to provide the evidence base for Indonesia to increase competitiveness and growth through women’s full economic participation. Women’s economic participation in Indonesia List of Contents 1. Introduction ................................................................................................................................... 1 2. Overview of Gender Inequality ...................................................................................................... 2 2.1 Educational Inequality ............................................................................................................ 2 2.1.1 Education attendance and completion .......................................................................... 2 2.2 Labour Market ........................................................................................................................ 6 2.2.1 Labour Force Participation, Employment and Unemployment ...................................... 7 2.2.2 Employment Status (Formal/Informal) ......................................................................... 10 2.2.3 Industrial and Occupational Segregation ..................................................................... 11 2.2.4 Working conditions ...................................................................................................... 12 2.2.5 Wages ........................................................................................................................... 13 2.2.6 Migration ...................................................................................................................... 16 2.3 Finance & Entrepreneurship ................................................................................................ 17 2.4 Infrastructure ....................................................................................................................... 19 2.5 Health ................................................................................................................................... 20 2.6 Institutions & Laws ............................................................................................................... 22 2.6.1 Law in relation to families ............................................................................................ 23 2.6.2 Labour Laws .................................................................................................................. 23 2.6.3 Property Rights ............................................................................................................. 24 2.6.4 Political Representation ............................................................................................... 24 3. Stagnation of the female labour force participation in Indonesia: An age and cohort analysis .. 25 3.1 Introduction .......................................................................................................................... 25 3.2 Data and Methods ................................................................................................................ 26 3.2.1 Descriptive results ........................................................................................................ 28 3.3 General results ..................................................................................................................... 29 3.4 Age and cohort results ......................................................................................................... 31 3.5 Female Labour Force Participation Projection ..................................................................... 32 3.5.1 Model Performance ...................................................................................................... 32 3.5.2 Prediction of determinant variables ............................................................................. 33 3.5.3 Female Labour Force Participation Projection ............................................................. 34 3.6 Conclusions ........................................................................................................................... 35 4. Gender Wage Gap in Indonesia - a distributional analysis of the formal and informal sector .... 36 4.1 Introduction .........................................................................................................................
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