Employment has re-emerged as a political flashpoint after President Prabowo Subianto, in his first annual state address before Indonesia’s People’s Consultative Assembly on August 15, declared that the country’s unemployment rate had fallen to its lowest level since the 1998 Asian financial crisis.
Prabowo said employment was one of his main priorities. His measures include accelerating investment in downstream natural resource industries through the establishment of the Danantara Investment Management Agency (BPI Danantara).
“Danantara will create millions of quality jobs, especially in downstream industries. Alhamdulillah, today the national unemployment rate has fallen to its lowest level since the 1998 crisis,” Prabowo said before the Assembly.
The President’s statement is in line with data compiled by Statistics Indonesia (BPS). The latest National Labor Force Survey (Sakernas) conducted in February 2025 showed that the open unemployment rate stood at 4.76%. This reflects a downward trend over the past four years, from 6.62% in 2021; 5.83% in 2022; 5.45% in 2023; and 4.82% in 2024.
Head of the Manpower Planning and Development Agency at the Ministry of Manpower, Anwar Sanusi, said that statistically, there has been a decline compared to the previous year.
“This is a record we can claim as an achievement, especially in the post-Reformasi 1998 era and the Covid-19 pandemic,” said Anwar Sanusi, Head of the Manpower Planning and Development Agency at Indonesia’s Ministry of Manpower, to SUAR, Saturday (16/08).
Furthermore, according to Anwar, the labor force participation rate shows an increase of 0.8% — from 69.8% in 2024 to 70.6% in 2025.
“These two data points can serve as a positive signal without disregarding the data on layoffs—which we will soon present—as a comprehensive picture of our employment conditions,” he said.
The difference in perception between the public and the government regarding the definition of unemployment can only be resolved if fundamental issues such as open unemployment and absolute poverty are truly understood.
Regardless of the statistical calculation basis that shows such positive developments, the Head of the Manpower Division of the Indonesian Employers Association (Apindo), Bob Azam, emphasized that the president’s statement in the state address should not be accepted at face value.
According to him, the difference in perception between the public and the government regarding the definition of unemployment can only be resolved if fundamental issues such as open unemployment and absolute poverty are truly understood.
“Those problems are experienced by the lowest class of our society, which cannot possibly be left behind by the government, and therefore make our government struggling,” explained Bob when contacted by SUAR.
In such circumstances, according to Bob, the government must mobilize the middle class, which has a high level of consumption, while strengthening sectors that have the largest labor absorption capacity.
“What drives the economy in Indonesia is the middle class. Spending by the lower class does not really create a multiplier effect, but middle-class spending does, so the economy will run if the middle class is supported,” he stressed.
The Vice President Director of PT Toyota Motor Manufacturing Indonesia did not deny that aside from government priority programs such as Koperasi Merah Putih and Makan Bergizi Gratis—which are claimed to create thousands of jobs—there is also a role for the private sector in attracting investment that can increase labor absorption.
“Attracting private investment is not easy. If demand keeps declining, what kind of investment would want to come in? So, we have fundamental homework to increase people’s purchasing power, especially the middle class,” he said.
Bob reminded that if the government, especially local governments, does not refrain from raising taxes recently while purchasing power is weakening, the national economy could enter a vicious circle.
“We must stimulate consumption so that investment flows in, labor is absorbed, and state revenue increases. This is the cycle we need to build. Our collective task is to identify business sectors that can generate greater revenue for state income, so that it does not burden the fiscal balance in the long term, while also providing incentives for economic growth,” concluded Bob.
Field Conditions
The Chairman of the Confederation of Indonesian Workers’ Union (KPBI), Ilhamsyah, even expressed regret over the President’s statement, which he believes contradicts the situation on the ground.
“Indeed, we don’t have comparative data, but we have observed long queues of young people seeking jobs, even leading to unrest in Bekasi, because the number of applicants exceeded the organizers’ expectations. People flocked to the job fair in very large numbers to get employment,” Ilhamsyah said when contacted by SUAR.
The activist, who is also the Head of the Election Winning Division of the Labor Party, added that layoff (PHK) data in the first half of 2025 almost matched the total layoffs for the entire year of 2024.
“Is the BPS data real and not manipulated? What does it concretely look like? With our potential natural and human resources, we as part of the working class also want to be optimistic and hope economic growth can reach double digits,” he asserted.
Padang Wicaksono, a labor economics lecturer at the Faculty of Economics and Business, University of Indonesia, explained that the skepticism between statistical data and field conditions is justified. Unemployment figures are often equated with the open unemployment rate, meaning people who are completely jobless.
In fact, at the same time, the trend of hidden unemployment has increased to 11.67 million workers, equivalent to 8% of the total working population. The hidden unemployment he refers to includes workers with less than 35 hours of work per week who are still willing to accept additional employment.
At the same time, the trend of hidden unemployment has risen to 11.67 million workers, equivalent to 8% of the total working population.
Padang noted that formal labor absorption is limited because most job seekers have low educational backgrounds and skills. “This is followed by increasingly competitive business dynamics, which lead to layoffs, pushing those who were previously formal workers into informal employment,” Padang explained in a written statement to SUAR.
This shift in employment status has implications for reduced income and welfare levels, in addition to workers no longer being able to access benefits from BPJS Health or BPJS Employment. Therefore, a decrease in unemployment figures needs to be understood holistically by taking into account the shift in employment status, considering the highly dynamic nature of unemployment in Indonesia.
Anwar Sanusi added that their mandate for skill enhancement always coordinates with the labor market so that every job vacancy can be filled by workers who have the capacity to perform the work.
“We can say there are many positive signals for future employment prospects, in addition to anticipating ongoing layoffs. From these signals, we hope to supply workers whose competencies match the job requirements, thus supporting company performance,” concluded Anwar.