• Desirable but is it attainable?

    Ben D. Kritz

    Ben D. Kritz

    It seems that the Indonesian president, who has been in office for only four months, is not above resorting to tossing some well-worn chestnuts of meaningless populist rhetoric when the opportunity presents itself. Speaking to his Hanura Party Congress following a trip to Malaysia, Brunei, and the Philippines, President Joko Widodo declared that Indonesia would no longer send domestic workers overseas

    “There are only three countries in the world supplying domestic workers, two are in Asia and one in Africa. One of those in Asia is Indonesia. This is a matter of dignity,” Jokowi, as the president is popularly known, was quoted over the weekend by The Straits Times as saying.

    Guess what the other country in Asia is.

    The “we’re going to stop sending maids overseas” line has been used by previous Indonesian administrations; to be fair, probably with sincere intent. Compared to the Philippines, Indonesia has a smaller number of overseas workers, about 5 million versus 10 million, representing a much smaller proportion of Indonesia’s population, about 2 percent compared to 10 percent for the Philippines. Even though the efforts of its overseas workers are duly appreciated and supported by an institutional framework, exported labor does not have nearly as significant an impact on the Indonesian economy or society, and as a result has always been considered ‘a temporary thing’ that the country should eventually outgrow, rather than as a part of its national identity.

    The implicit message that dignified jobs nearer to home and family will be created as an alternative to working overseas strikes a positive chord with the Indonesian working classes, even though efforts to make the aspiration a reality have generally gone nowhere. The same article in The Straits Times points out that Widodo’s predecessor Yudhoyono launched an initiative in 2012 to create a million jobs within a year, with little to no discernible effect.

    Like his predecessor, Widodo will almost certainly find Indonesian exports of low-skilled labor a stubborn trade to eliminate. Although his working-class and commercial background might give him more effective insights into issues of poverty and employment, Widodo has only conventional tools at his disposal with which to tackle them, and can probably be expected to achieve the same lackluster results.

    Those lackluster results—which will differ in no significant way from the results similar initiatives in the Philippines have produced—will be, as they always are, the outcome of a poor grasp of the role of government in an essentially free labor market. Government cannot create demand for jobs, at least not directly; it can support the emergence of economic conditions conducive to business and job growth. That explanation, however, sounds a lot less promising to the ordinary voter whose concern about the economy stops at his front door than “government will create (x) jobs by (date),” so the latter is how the policy intention is related to the public.

    Unless President Jokowi does something unexpectedly innovative, the situation will not be much different next year, or the year after that, or five years from now; that has been Indonesia’s experience. The Philippines under its last two presidents likewise has little to show for efforts towards “skills development” and “job creation.”

    The column by Juan Gatbonton in Sunday’s (February 15) edition of The Manila Times (“Are our poor poor because it suits us to keep them that way?”) explains why society itself is to blame for being unable to shake off the stigma of being a “supplier of domestic workers.” The low wage base, which is to some extent a result of the oversupply of warm bodies, has not only directly increased income inequality, but has skewed social sensibilities downward as well: How the Philippines defines its narrow “middle class” presumes cost-of-living components—such as the ability to hire household labor— that in an economic sense belong to higher income brackets. “Middle class” is not economically defined as “having enough surplus income to underwrite the livelihood of unrelated persons,” and only appears that way in the Philippines because the required level of surplus is unnaturally depressed.

    That state of affairs is only socially and economically sustainable if the low wage base is maintained; as long as it is, the discretionary consumption of the higher income classes can continue. That is partly why raising minimum wages in both the Philippines and Indonesia is a titanic struggle; higher wages work against the prevailing social structure. And since that social structure creates the supply-demand conditions that keep the wage base low in the first place, any attempt to raise minimum wages is contrary to market forces, and usually fails to do anything but reduce the demand for labor (while the supply of labor, of course, remains unchanged or even increases).

    So far the Indonesian plan—they’ve given themselves a deadline of five years to eliminate overseas domestic workers—omits the politically-risky “raise the minimum wage” step, and focuses on conventional ideas like “skills training” and “livelihood programs” to try to create opportunities. Whether the Indonesians can find some magic in these things which don’t usually work will be worth watching, if only to confirm that a broader approach is needed.



    Please follow our commenting guidelines.


    1. All our progressive neighbors here in Asia are industrialized or are in the process, while our government cannot seem to even spell the word. There are no developed economies that are not industrialized, as only industries, not shopping malls or housing and condominium construction, can absorb the supply of labor at decent wages. President Park Chung Hee of Korea in the 50’s and 60’s used overseas workers remittances as capital for industrialization and look at Korea today. Imagine the potential of what is now approaching $25Billion a year in remittances for real economic development if the country were only in the hands of inspired and unconditionally nationalistic leaders ( if Americans can get away with saying “America right or wrong,” so should we ). All this potential are just being wasted by smugglers ($20Billion a year) some of whom double as drug lords and end up as taipans. I can’t speak for Indonesia- maybe they already have a working Industrialization Program that allows them to phase out their labor exports in 5 years- but the Philippines is proceeding with OFWs without an endgame plan, like a ship sailing without a destination, which is par for the course for the yellow idiots running the government today.