The number of informal workers continues to rise amid the lingering effects of the post-pandemic economy, waves of layoffs, and growing inequality in social security access.
According to data from Statistics Indonesia (BPS), the share of informal workers hit a record low of 56.64 percent in 2020.
However, by February 2021, this figure spiked significantly to 59.62 percent. The upward trend persisted, reaching 59.97 percent in 2022 and peaking at 60.12 percent in 2023.
Dr. Hempri Suyatna, a lecturer in Social Development and Welfare at the UGM Faculty of Social and Political Sciences (Fisipol UGM), noted that the recent wave of layoffs, particularly in the manufacturing sector, has pushed many individuals to turn to informal businesses as a means of livelihood.
“The informal sector offers flexibility and is easy to enter, as it generally does not require specific qualifications such as formal education,” he explained.
Dr. Suyatna added that the relatively small capital requirements make the informal sector, especially in trade and services, a practical option for many layoff victims.
While this trend has positive and negative implications for the national economy, he acknowledged that the informal sector plays a role in job creation and income generation.
“This means the sector can serve as a source of income growth for the public,” he stated.
Nevertheless, the expansion of the informal sector also presents challenges, including the potential to reduce state tax revenues and disrupt urban planning, as informal vendors often operate along roadsides or in public areas.
To address these challenges, Dr. Suyatna emphasized the importance of providing social protection for informal workers, most of whom lack access to old-age pensions, death benefits, or workplace injury compensation.
“I believe this poses a major challenge and hampers their productivity,” he concluded.
The government is urged to promote inclusive economic policies, incorporating the informal sector as a key element in building a sustainable economic foundation.
As such, policy approaches must be tailored to the characteristics of informal workers.
“The formalization of informal businesses often stifles their growth and impedes their development,” he explained.
Author: Jelita Agustine
Editor: Gusti Grehenson
Post-editor: Afifudin Baliya
Illustration: Freepik