The Economic Research and Community Institute of the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), has highlighted the phenomenon of underemployment or partial unemployment affecting many young people in Indonesia. This phenomenon can also be referred to as being partially unemployed. LPEM FEB UI emphasized that many young people work short hours, receive low wages, and are often underemployed in jobs that do not fully utilize their skills. This is not by choice, but rather due to the lack of better options.
In the Labor Market Brief Volume 6, Number 10, October 2025 report, the paradox of the labor market in Indonesia is discussed. Despite the decrease in the open unemployment rate since the pandemic, the quality of available jobs has not significantly improved. This situation is more prevalent in the informal sector and rural areas, as well as among the younger and less educated population. According to researchers Muhammad Hanri, PhD, and Nia Kurnia Sholihah, ME, this phenomenon may signal an initial path to economic recovery, but raises questions about whether the job market is truly heading towards health.
Underemployment, or being partially unemployed, entails working but only obtaining a few hours of work per week. Another scenario includes individuals with degrees and specific skills being compelled to work in the informal sector for low pay and without job security. They do not fall under the category of unemployed, as technically they have a job. Yet, they are not fully absorbed by the job market.
The indicators of partial unemployment, as measured by BPS, include those working less than 35 hours per week who still want to increase their working hours, as well as those working part-time not by choice but due to the lack of other opportunities. Understanding underemployment reveals the quality of available jobs, highlighting the importance of whether the jobs provide decent income, stable working hours, and room for development. In many cases, underemployment is closely tied to informal work, low income, and economic uncertainty.
Partial unemployment can sometimes be associated with the gig economy, which is often perceived as more flexible, not bound by office hours, and offering the freedom to choose jobs based on interest. However, the part-time work situation in Indonesia, as depicted in the LPEM FEB UI report, does not wholly reflect the freedom associated with the gig economy. Many of those classified as underemployed are in the opposite situation – working fewer hours than the normal working week not by choice but due to limited demand, scarce opportunities, or economic conditions that have yet to recover. They still aspire to work longer hours and earn higher income, but the job market does not provide the space for this.
Statistics on partial unemployment in Indonesia, based on BPS data, show variations based on gender, location, and age. Measures within these categories illustrate changes over the years with different percentages for males and females, urban and rural areas, and different age groups. The dominance of certain demographics in part-time work highlights the need for tailored strategies to address underemployment.
LPEM FEB UI recommends expanding demand-based training models targeting rapidly growing sectors such as logistics, digital services, modern agribusiness, and renewable energy. Encouraging the quick legalization and facilitation of micro and small businesses to easily integrate into the formal ecosystem is also crucial. Strengthening labor data systems is essential to ensure policy interventions are not uniform but localized and effective. With accurate data on dominant sectors, workforce profiles, and local job demands, training programs and workforce incentives can be directed more efficiently.
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