1. Neil McCulloch Amit Grover ESRC Development Economics Conference Effects of the Global Economic Crisis on Developing Countries – 21/22 January 2010 Estimating the impact of the financial crisis in Indonesia: combining rapid qualitative studies with nationally representative surveys

2. Qualitative study of the financial crisis In February 2009 IDS undertook a set of rapid qualitative assessments in five countries including Indonesia. One urban and one rural village were selected for in depth interviews and focus group discussions Urban village: Gandasari (Jakarta) is a major Industrial Park with a large population migrant workers. Rural village: Simpang Empat (South Kalimantan) heavily dependent on local rubber plantations and coal industry

3. Key findings from the qualitative survey High prices for food, agricultural inputs and transport persisted in both locations Rural village: Reduced worker income from declining production Subsequent decline in other economic activities Some shifts to working in the service sector Urban village: Reduction in working hours in the factories Temporary lay off of permanent workers Discontinuation of contract workers

4. Indonesian macroeconomic context Growth % (y-o-y)3 rd Quarter 20081 st Quarter 20093 rd Quarter 2009 GDP6.44.44.2 Inflation13.5 1 8.48 1 2.83 1 Exports10.6-19.1-22.3 2 Imports11-24.1-30.84 2 Exchange rate (Rp/US$) 9,33111,5179,633 Investment12.23.54 This was no East Asian Crisis However large falls in exports in the third quarter of 2009 Possible higher impact on commodity dependent communities 1 Inflation figures are y-o-y figures for the end of the last month of each quarter. 2 Jan-Oct 2009 over Jan-Oct 2008. Source: BPS, World Bank (2009)

5. Data source Statistics are constructed using the 2008 and 2009 Indonesian Labour Force Survey (Sakernas) 218,833 individuals (69,114 households) sampled in Feb 08 931,890 individuals (291,689 households) sampled in Aug 08. 291,689 individuals (68,535 households) sampled in Feb 09 February surveys are random subset of the August sample Data collected for individuals who are 10 that live in a physical building Lodgings with > 10 people & people whose needs are provided by an organisation are not sampled

6. Were children withdrawn from school ? No longer in schoolIn school last week Age and gender Feb-08Aug-08 Feb-09 Feb-08Aug-08 Feb-09 100.0080.006 0.005**0.9870.988 0.99 110.011 0.01 0.9830.981 0.986 120.0370.034 0.036 0.9580.956 0.959 130.0790.07*0.065**0.9150.919 0.928** 140.1310.11***0.112**0.860.879***0.881*** 150.2010.2 0.191 0.7910.786 0.8 160.2790.287 0.275 0.7120.698 0.713 170.3860.408**0.386 0.6020.575***0.605 Male0.1570.154 0.149 0.8360.834 0.844* Female0.1350.144**0.137 0.8570.845***0.856 Total (10-17)0.1460.149 0.143 0.8460.839**0.85 Source: Sakernas data for respective years Note: Asterisks in each column indicates statistical significant changes from February 2008; * = significant at 10%; ** = significant at 5%; *** = significant at 1%

7. Fall in labour participation for under 18s Participation Age and genderFeb-08Aug-08 Feb-09 100.015 0.013 110.0310.023***0.025 120.0570.04***0.043*** 130.090.066***0.07*** 140.1330.102***0.111*** 15-170.2630.242***0.238*** 18-250.6430.659***0.648 26-350.7540.753 0.757 36-450.7980.793 0.796 46-550.7770.79***0.801*** 56+0.5430.53***0.549 Male (15+)0.8360.835 0.836 Female (15+)0.5120.511 0.518 Total (15+)0.6730.672 0.676 Source: Sakernas data for respective years

8. Unemployment fell for older workers but rose for younger ones Unemployment Age and genderFeb-08Aug-08 Feb-09 100.0650.148**0.066 110.0510.138***0.095 120.0790.109 0.052 130.0780.151***0.09 140.130.142 0.132 15-170.2110.249***0.223 18-250.1980.216***0.214*** 26-350.0870.082* * 36-450.0510.036***0.043*** 46-550.0230.017***0.016*** 56+0.0080.013***0.008 Male (15+)0.0790.076**0.077 Female (15+)0.0930.097*0.088* Total (15+)0.0850.084 0.081*

9. Hours worked unchanged during the crisis Hours of work Age and genderFeb-08 Aug-08 Feb-09 1015.20117.226 17.785 1115.03818.482 14.51 1217.37218.681 19.11 1320.17322.903 20.831 1424.362 26.272 23.639 15-1733.25735.702***33.736 18-2541.12941.909***41.332 26-3542.55642.788 42.567 36-4542.21642.326 42.152 46-5540.39540.55 40.354 56+34.77 35.228 35.077 Male (15+)42.09942.614 42.053 Female (15+)37.61 38.028 38.023 Total (15+)40.398 40.885 40.512 Source: Sakernas data for respective years

10. Share of employment and hours worked by sector Share of EmploymentHours of work Sector of the individualFeb-08Aug-08 Feb-09 Feb-08 Aug-08 Feb-09 Agriculture0.4210.405***0.414 32.433.2***32.6 Mining and Quarrying0.010 0.011 45.244.2 44.0 Industry0.122 0.120 43.843.7 43.6 Electricity, Gas and Water0.002 42.644.0 42.8 Construction0.0460.053***0.044 46.047.0*45.8 Trade Restaurant and Acc0.2030.207 0.209*49.3 48.9 Transport and Comm0.0580.060 0.056 48.449.1 48.9 Financial Inst, Real Estate0.014 44.142.9 43.0 Social Services, Social & Pers0.1240.127 0.130**43.0 42.0***43.3 Source: Sakernas data for respective years

11. Share of employment and hours worked by work category Share of workersHours worked Category of workFeb-08Aug-08 Feb-09 Feb-08Aug-08 Feb-09 own business0.1950.203***0.198 42.143.2***41.8 business owners with non permanent or unpaid workers0.2090.210 0.205 39.840.0 40.4** business owners with permanent or paid workers0.029 0.028 45.446.1 45.5 employee0.2770.273 0.275 46.446.0**46.2 casual work agriculture0.0600.058 0.061 34.736.2***34.5 casual work non agriculture0.0470.051***0.049 44.044.3 43.3 unpaid work0.1830.175***0.184 30.431.0***31.1***

12. Wages increased during the crisis Percentage changes Real Wage (Rupiah per month)Nominal Wage (Rupiah per month)Real WagesNominal wages Age and gender Feb-08Aug-08Feb-09 Feb-08Aug-08 Feb-09 Feb08- Aug08 Feb08- Feb09 Feb08- Aug08 Feb08- Feb09 15-17469,651470,892487,492 493,976502,855 529,973 0%4%2%7% 18-25724,545700,371766,104 761,080747,424 831,871 -3%6%-2%9% 26-351,005,889998,3531,079,065*1,056,6691,065,434 1,171,276***-1%7%1%11% 36-451,311,0451,332,8891,465,920***1,377,2361,423,376 1,591,641***2%12%3%16% 46-551,608,7411,641,4811,789,487***1,689,1701,752,972 1,943,712***2%11%4%15% 56+1,243,4241,216,6401,497,141**1,305,1011,298,746 1,623,825**-2%20%0%24% Male1,162,3481,173,3851,293,014***1,221,1631,252,976 1,404,218***1%11%3%15% Female886,075909,449984,577***930,151970,307 1,068,290***3%11%4%15% Total1,070,2001,082,3601,190,994***1,124,0991,155,490*1,293,105***1%11%3%15%

13. Wages changes by sector Percentage changes Real Wage Rupiah per monthNominal Wage Rupiah per monthReal WageNominal wages Sector of the individual Feb-08Aug-08 Feb-09 Feb-08Aug-08 Feb-09 Feb08- Aug08 Feb08- Feb09 Feb08- Aug08 Feb08- Feb09 Agriculture717,624795,119***723,491 756,034851,767***788,112 11%1%13%4% Mining and Quarrying2,015,3962,102,264 1,840,817***2,125,9652,258,565*2,015,873 4%-9%6%-5% Industry920,908869,769***1,002,005***966,614927,115**1,085,574***-6%9%-4%12% Electricity, Gas and Water 1,848,2311,767,199 1,806,329 1,941,7461,888,439 1,959,084 -4%-2%-3%1% Construction1,084,0871,024,250*1,218,448***1,138,9291,093,257 1,324,231***-6%12%-4%16% Trade Restaurant and Acc 902,201914,102 955,810**946,907974,677 1,035,862***1%6%3%9% Transport and Comm1,273,1831,277,662 1,569,649***1,337,0791,362,912 1,703,966***0%23%2%27% Financial Inst, Real Estate 1,744,7261,652,934**1,831,938**1,830,4551,761,249 1,984,687***-5%5%-4%8% Social Services, Social & Pers 1,181,9871,246,432***1,344,543***1,241,5381,331,335***1,461,161***5%14%7%18%

14. Compositional changes affect Wages changes

15. Income did not rise for other work categories Real Income/Real Wage Category of workFeb-08Aug-08 Feb-09 own business706,257825,304***722,141 business owners with non permanent or unpaid workers business owners with permanent or paid workers employee1,070,2001,082,360 1,190,994*** casual work agriculture362,462385,016 357,935 casual work non agriculture588,261607,836 562,252 unpaid work

16. Reasons for ending employment Reason for ending work/changing jobAug-08Feb-09 Fired/Made redundant0.0500.060*** No demand or firm went bankrupt0.1410.177*** Income too low0.2050.195* Unsuitable work environment0.0930.094 Contract finished0.1570.165 Other0.3530.310*** Redundant or No demand Sector of the individualAug-08Feb-09 Agriculture, Plant, Hunt0.2300.274*** Mining and Quarrying0.1160.232*** Industry0.2470.307*** Electricity, Gas and Water0.1310.145 Construction0.2580.342*** Trade Restaurant and Acc0.1680.161 Transport, Storage and Comm0.1390.185** Financial Inst, Real Estate0.0980.119 Social Services, Social & Pers0.0820.118***

17. Multivariate analysis: school enrolment School Dropout rates are higher for: older males large households with high dependency ratios rural areas households headed by casual workers household headed by agriculture workers children in households where the head and spouse achieve lower education qualifications Large differences in dropout rates between provinces. Virtually no change in dropout rates before or during the crisis

18. Labour participation and unemployment Labour participation Labour participation increases with age and education Women and large urban households less likely to participate Small reductions in labour participation over time after controlling individual and household characteristics Unemployment Unemployment increases with household size and education Older workers and households with higher dependency ratio less likely to be unemployed Unemployment may have increased for young workers and reduced for older workers

19. Qualitative vs. Quantitative results Qualitative (Feb 2009)Quantitative (Feb08-Aug08-Feb09) School AttendanceNo change, but some arrears in payment No change or continued improvement for 13/14 year olds. possible seasonal withdrawal in August for girls and 17 year olds. Female labour participation No change Child labourNo change Significant falls in the participation of 12-17 year olds in the labour force Unemployment Increase for young migrant industrial workers; and workers associated with the rubber industry Rising for 15-25 year olds; falling for 25-55 year olds Hours of workReduced for contract workers Virtually no significant changes by age or sector InformalitySome suggestions of increased informality Evidence for increased own business and casual non-agricultural work in 2008, but little overall change Wages and Income Large falls in take home pay for contract workers; reductions in income for local businesses Significant and large increases in real wages for employees; but little change in incomes in the informal sector

20. Summary and conclusions Indonesia weathered the financial crisis comparatively well In spite of dramatic exports declines little evidence of subgroups being particularly affected Parents kept children in school as labour market for younger worker deteriorated Unemployment rose for workers between 18 and 25 but fell for workers above this age Surprising increase in real wages of employees A lesser dependence on international trade and good macroeconomic management are possible reasons why Indonesia fared better during the 2008-2009 financial crisis

21. Thank you