Indonesia has maintained annual economic growth of around 5% for much of the past two decades, while keeping inflation generally manageable and avoiding the major public-finance crises experienced by some emerging markets. Poverty has declined and the country has reached middle-income status, but employment data point to a gap between economic expansion and the quality of jobs being created.
According to MAT, approximately 80% of new jobs created between 2019 and 2024 were informal. Average monthly earnings in this segment stood at around USD 114, considerably below the cited minimum wage of USD 181.
The share of Indonesia’s population classified as middle class also declined, falling from 21% in 2019 to 16.6% in 2025. A substantial proportion of the population remains just above the poverty threshold, with limited financial protection against economic shocks that could push households back into poverty.
Manufacturing’s Role in Formal Employment
The employment challenge is linked to the structure of economic development. Manufacturing has traditionally supported emerging economies through two channels: improving productivity and creating formal employment for large numbers of workers with moderate skill levels.
Services can generate substantial productivity gains, but their capacity to absorb workers varies considerably between sectors. Software, finance, design and professional services can deliver high output per employee, although they generally do not employ large sections of the workforce. Retail, hospitality and personal services can provide employment on a much larger scale, but jobs in these activities are often associated with lower productivity and wages.
Shift from Agriculture to Informal Services
Indonesia’s experience illustrates the risk of premature deindustrialisation, in which workers move out of agriculture without entering large-scale manufacturing employment.
Instead, many transition directly into informal services. This allows economic output to continue expanding, urban areas to modernise and consumer markets to grow, but the development of a broad middle class with secure employment and stable incomes can lag behind overall GDP growth. The distinction between economic expansion and the quality of employment is therefore central to assessing the country’s development progress.
Employment Quality as a Development Indicator
Indonesia’s figures also raise questions for other developing economies pursuing growth through services, digitalisation and entrepreneurship. Expansion in these areas does not necessarily translate into sufficient numbers of formal jobs with higher productivity and better wages.
The ability to create such employment remains important for countries seeking to converge with higher-income economies. Rising GDP alone does not establish broad-based prosperity; the transition of a large share of the population into more productive, secure and better-paid work is also essential.
