Bandung, IndoensiaSentinel.com — The government faces a difficult challenge on stopping the massive wave of worker layoffs across various sectors. The Ministry of Manpower (Kemnaker) reports that the number of workers affected by layoffs reach 44,195 this mid-August 2024. The numbers rise significantly compared to the recorded 32,064 layoffs between January and June 2024.
The manufacturing sector, particularly the textile, garment, and footwear industries, was mostly impacted by the layoffs. According to Kemnaker data, of the total 42,863 layoffs as of July 2024, up to half happened in the manufacturing sector, with 22,356 workers affected by the layoffs. While the rest 20,507 occurred in non-manufacturing sectors.
The top five industries with the highest number of layoffs were, manufacturing (22,356), other service activities (11,656), agriculture, forestry, and fisheries (2,918), mining and quarrying (2,771), and wholesale and retail (1,902).
Central Java became the region with the highest number of layoffs, overtaking Jakarta with a total of 13,722 layoffs. Shockingly, up to 90 percent of worker layoffs in Central Java occurred in the manufacturing sector, affecting 13,271 workers.
Erick Thohir to Dissolve Jiwasraya, Policy Restructuring Reaches 99.6%
Minister of Manpower, Ida Fauziyah, addressed the issue, emphasizing that layoffs should be a last resort for companies when there is no other way.
“Layoffs should be the last option. And we hope it remains the last resort. If layoffs are unavoidable, workers must be provided with job loss insurance and other entitlements. Additionally, new job opportunities must be created,” Ida stated at the Indonesian House of Representatives in Central Jakarta on Friday, August 16.
Factors Behind Worker Layoffs
An economist from the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, mentioned that the layoffs in several industries have been a problem even before the COVID-19 pandemic, thus describing the layoff crisis as a complex issue.
A combination of factors, such as shrinking domestic and international market potential, relatively high investment costs, and low investment realization in labor-intensive industries, have led to reduced job absorption while also resulting in massive worker layoffs this year.
Meanwhile, Senior Analyst Ronny P. Sasmita from the Indonesia Strategic and Economic Action Institution (ISEAI) identifies several factors contributing to the recent surge in worker layoffs.
First, weakening demand for domestically produced goods and services, both in local and export markets, has forced many companies to halt their production, with some even going out of business. Because of that, employee reductions have become unavoidable.
Second, declining consumer purchasing power due to the lack of domestic product ability to compete with imported goods. The lower-middle class prefers products of the same type and category from the import market with lower prices compared to domestic products. This further worsens the situation for domestic businesses.
Third, the manufacturing sector, which is crucial for producing consumer goods domestically, is being neglected. It is caused by premature deindustrialization driven by the government’s industrial policies, which have overly focused on specific commodities and sectors.
The government’s excessive focus on nickel commodities, nickel downstreaming, electric vehicle batteries, electric cars, and infrastructure has neglected the manufacturing and agricultural sectors. As a result, many manufacturing companies have gone bankrupt, and food security has become vulnerable.
Fourth, the lack of aggressive economic growth and poor growth quality could be the root cause of the high layoff rate. Ronny believes the government’s failure to achieve strong economic growth and improve its quality is causing the manufacturing sector, which is the largest employer, to become underdeveloped.
(Raidi/Agung)
