ABSTRACT
Indonesia's large population and low dependency ratio result in an abundant supply of labour. This chapter examines aspects related to Indonesia's labour market that influence whether Indonesia's abundant labour force hinders or helps the country's competitiveness. It uses a simple guiding framework, the concept of unit labour cost (ULC), which is widely known as a measure of international competitiveness. The chapter provides a broad-brush discussion of various issues that affect labour cost and labour productivity in Indonesia. It discusses the skills gap in the labour market and policies that can be implemented to address it, and minimum wages and severance pay policies. The chapter also provides an update of labour market conditions in Indonesia. The main explanation for the high rate of youth unemployment is the long transition from full-time education to the labour market, reflecting the difficulties.
