Rethinking Post-Pandemic Labor Policies: Insights from Precarious Workers in Indonesia

Abstract

The current study aims at finding evidence of the impacts of economic shocks on the labor markets in Indonesia. Based on the findings, the study would like to revisit the feasibility of the current labor markets policy in the country that is currently moving towards labor market flexibility. To study the topic, this study used a dataset from the 2021 Inter-Regional Input-Output Table for East Java Province, Indonesia. In the analysis, econometric techniques were employed to: (i) identify vulnerable economic sectors to the economic shocks of the COVID-19 pandemic, (ii) determine the economic losses resulting from the reduction of outputs, and (iii) determine the impacts on the labor markets that resulted from the reduction in the final demand of the economic sectors. The findings of this study reveal that the sectors that had been most affected by the economic shocks are those that make a significant contribution to the gross domestic product and are heavily dependent on labor. Upon simulating the impacts of economic shocks on the labor markets, the labor-intensive service sectors are the most impacted and succeeded by labor-intensive manufacturing sectors and capital-intensive sectors. Hence, in opposition to the current labor markets policy, the findings suggest policymakers to adopt appropriate labor market policies that promote decent work while sustaining economic growth.