Indonesian economy rises, but jobs still scarce

Suhartini stands facing the evening commuter cars on a tree-lined road, her index finger pointing outward. It's a gesture that tells drivers that she's looking for a ride along the busy arterial road ahead.

Suhartini, a middle-aged housewife in flip-flops and jeans, isn't your typical hitchhiker. She and the other 30-odd people waiting aren't looking for a free ride. In fact, they're getting paid.

Commuters pay the hitchhikers, known as "jockeys," so that they can use carpool lanes with a minimum of three passengers. Jockeys get paid $1 to $3 per ride, a pittance to the well-heeled drivers who work in Jakarta's booming downtown. But it's a daily wage to the poor scraping by in the shadows of the soaring office towers.

"The government says the economy is doing well, but my life is just getting harder," says Suhartini, who goes by one name.

After years of drift and disorder, Indonesia's economy is growing at its fastest clip in 11 years, lifted by surging prices for its agricultural and mineral exports. Its economy, the largest in Southeast Asia, is forecast to grow this year by 6.3 percent, up from 5.5 percent in 2006.

But many of Indonesia's poor, who are squeezed by rising commodity prices and a lackluster labor market, don't see the benefits. In 2006, the number of people living below the poverty line actually rose from 16 percent to 17.8 percent, according to the World Bank.

One reason is that natural-resource industries like palm oil and coal don't create many jobs, while labor-intensive textile and electronics manufacturers are struggling to compete with China and India. This puts pressure on the government, elected in 2004 on a vow to overhaul a weak economy and ramp up investment, to deliver on its promise.

"The growth alone isn't generating enough job creation, and that's because the growth isn't in the right areas. That's why we need other programs to create jobs," says Trade Minister Mari Pangestu.

These programs include $11 billion budgeted for central government spending on ports, roads, and power plants. More resources will also go to a World Bank-backed community development scheme that allows 40,000 villages across Indonesia to set their own aid priorities.

Ms. Pangestu, a US-educated economist, says poverty levels have fallen since last year's spike, which was largely caused by higher rice prices. More workers are also finding jobs, though mostly in the informal sector where over two-thirds of Indonesians, such as Jakarta's car jockey, work.

Such jobs don't include benefits, though, and are subject to instant layoffs. By contrast, a 2003 labor law mandates employers to give severance pay for up to 24 months, even to workers fired for negligence. The law's rigidity has drawn flak from investors and economists, who say it discourages new hires and protects a minority of workers at the expense of others.

"Even though companies are growing, they don't want to absorb extra workers. In future, there may be trouble if they need to lay off workers," says Mohamad Chatib Basri, an economist at the University of Indonesia and an adviser to the Ministry of Finance.

Last year President Susilo Bambang Yudhoyono tried to amend the labor law but withdrew a draft from parliament after unions objected. Pangestu says the government will instead offer insurance to companies to cover severance-pay costs, as it wasn't politically feasible to revise the law.

Since the 1998 ouster of Army-backed Suharto's centralized regime, local authorities have gained a much greater share of public income and expenditure. At the same time, Indonesians have begun to elect local leaders, who can no longer blame all their woes on Jakarta. That should allow for local initiatives to spur investment in new areas, says Pangestu. "Local officials are directly elected and they have to create jobs. In the process, hopefully we'll get business-friendly governments who can manage the situation," she says.

In Jakarta, the car jockeys are the byproduct of a carpool program set up to unclog traffic arteries. But as more jockeys join the queue, old-timers like Suhartini get less work. Last year, she could count on three or more rides a day, but now she's down to about one an evening. Still, that beats washing clothes.

"I'm willing to work anywhere. But in my district, I can't make more than 200,000 rupiah ($22) a month. I earn more as a jockey," she says.