Book Chapter
Indonesia: employment and inequality trends

This chapter analyses the labour market dynamics in Indonesia from 2001 to 2015 and explores the role of the changing nature of occupational employment in explaining the rising earnings inequality during the same period. We find evidence of a disproportionate increase in the returns to tertiary education, the increasing shares of highly skilled and elementary workers, and a sign of job polarization.

The extent to which changes in inequality over time can be attributed to changes in the distributions of worker characteristics and changes in the returns to these characteristics is also quantified. The results suggest that in all the periods where Gini of earning is rising, the changing earnings structure, most notably returns to education, residency, and possibly routine-task intensity, contributes to the rise.