Indonesian Agricultural Labor Policy: Issues and Challenges

Indonesian Agricultural Labor Policy: Issues and Challenges

Published: 2020.10.16
Accepted: 2020.09.21
42
Senior Agricultural Economist and Research Professor
Indonesian Center for Agriculture Socio Economic and Policy Studies (ICASEPS), Ministry of Agriculture, Indonesia
Indonesian Center for Agriculture Socio Economic and Policy Studies

ABSTRACT

This article aims at discussing the policy review of agricultural labor in Indonesia. About 38.52% of Indonesian labor works in agricultural sector. Majority was in food crops sub-sector. The highest proportion of agricultural labor age was 25-56 years old (71.21%). The growth of old agriculture labor (>60 years old) was higher as compared to young agricultural labor (15-24 years old). More than 80% of agricultural labor attained basic education (elementary and junior high schools). It is challenged that 60% of agricultural labor was categorized as smallholders. About 90,251 agricultural young farmers (2.12%) decreases annually. Agricultural labor productivity was lower than that of non-agriculture. The development of small-scale farmers should be implemented based on its typology. There is a need to provide financial incentive in the form of facilitating the accessibility to capital and land tenure anchored in smallholder characteristics for the young farmers. Moreover, it is required to explore and to re-enforce the implementation of government policies appropriately towards improving agricultural labor productivity. There are two areas which require regulatory policy in the future, namely minimum wage and pension plan for agricultural labor and farmers.

Keywords: agriculture, labor, development, policy, Indonesia

INTRODUCTION

It is believed that labor as human activity provides good/service(s) plays a central role in the growth of the economy, particularly as the supplier of input into production. Hence, the sustainability of labor is becoming and will continue to be a critical issue globally. In the case of Indonesia, according to the Law Number 13/2003 on Labor (GoI, 2003), it is defined that labor is every individual or person who is able to work in order to produce goods and/or services either to fulfill individual or societal needs. Consequently, there is a need to develop the quality as well as protection of labor in respect to human dignity and values. As an integral part of the national development, labor is developed through carrying out the framework of building up fully integrated human beings of society. It is aimed at creating a prosperous substance of which material and spiritual benefits are evenly distributed.

Labor development has many dimensions and interconnectivity. It is not only related to the interests within before, during, and after the term of employment but also associated with the concerns of the entrepreneur, government, and public. Consequently, comprehensive and all-inclusive arrangements of labor are essential. It includes, among others, the development of human resources, the improvement of productivity and competitiveness, the extension of job opportunities, the provision of job placement service, and the development of related industries.   

This article discusses the Indonesian labor, focusing on agricultural labor. It comprises the overview, issue, and challenges towards policy development in the country.

INDONESIAN LABOR  

One of the critical substances of labor is related to working age population. This is commonly defined as persons aged 15 years and older, although the age limits can vary from country to country. In the case of Indonesia, the working age population is defined as those aged 15 to 64 years old. The Indonesian labor covers nine-sectors, namely: (1) Agriculture (38.52%); (2) Trade (23.31%); (3) Manufacturing (17.09%); (4) Construction (7.36%); (5) Accommodation (6.86%); (6) Transportation (4.86%); (7) Mining (1.35%); (8) Water Supply (0.37%); and (9) Electricity (0.29%). During the last five-year (2014-2018), the number of Indonesian labor increased from 98.81 million persons to 103.53 million persons with the growth rate of about 1.42% annually (Table 1).

OVERVIEW OF AGRICULTURAL LABOR IN INDONESIA

The Indonesian labor in agricultural sector consists of labor in food crops, horticulture, estate crops, and livestock sub-sectors. It can be viewed at least based on its performance such as number, gender, age, education, and productivity, as presented in the following paragraphs.      

Number of Labor

The number of Indonesian agricultural labor is presented in Table 2. The highest number of labor was in food crops sub-sector, namely 35.41 million persons or about 48.71% of the total number of agricultural labor in the country. The labor growth of this sub-sector was higher than those of other sub-sectors. It is reasonable since food crops sub-sector plays an important role, particularly to support food security of the country.   

Labor Gender

The majority (60.36%) of agricultural labor in Indonesia is male (Table 3). It can be seen that the food crops sub-sector was the highest growth, particularly female labor. This was a good condition to support food security in particular. Meanwhile, the growth of horticulture labor was quite positive since there were some opportunities to develop this sub-sector with marketable commodities.

Labor Age

The highest proportion of agricultural labor was who were at the age of 25-56 years old (71.21%) as categorized as prime age group (Figure 1). It was noted that the proportion of old age group (>60 years of age) was respectively quite higher than that of young age group (15-24 years old), namely 17.99% vs. 10.80%. The highest proportion of old labor was in livestock sub-sector since it was frequently operated by senior farmer who raise ruminants (cattle and goat). However, the extent of participation of young labor in the sub-sectors of livestock and food crops was higher as compared to other sub-sectors. It is indicated that livestock and food crops still the largest sub-sectors involved by the youth.

During 2014 to 2018, the growth of old agricultural labor (>60 years) increased about 4.42% per year. Nevertheless, some agricultural labors showed a negative growth. Since agricultural sector is more operated by prime age group (25-59 years old), but who are going to be old. Therefore, there is a need to create agricultural sector to be more attractive particularly to the young generation. 

Labor Education

Above 80% of agricultural labor attained basic education (elementary and junior high schools), followed by attaining middle education (senior high school) as shown in Figure 2. Despite the attained high education (college and university) were few in number, the growth rate was quite positive (Table 5). It is one of the opportunities to improve agricultural development in the country.   

Labor Productivity

The productivity of agricultural labor in Indonesia is shown in Table 6. During 2011 to 2017, the labor productivity in this sector (IDR29.48 million or USD 2,452.40, on average) remains the lowest of all sectors in absolute terms. However, the growth (6.09% annually) was quite positive as compared to other sectors particularly mining and quarrying; electricity, gas and clean water; as well as finance, rental, and services.    

The labor productivity varies considerably between agricultural sub-sectors. The highest and the lowest labor productivities among sub-sectors were horticulture and food crops, respectively. Some agricultural labors had shifted from food crops to estate crops and horticulture sub-sectors, and to a lesser extent livestock (Arifin et al, 2019). Overall, agricultural labor productivity includes its sub-sectors was lower than those of non-agriculture (Table 8).

ISSUES AND CHALLENGES

Based on the previous discussion, there are three prominent problems and challenges of agricultural labor in Indonesia. They are: (1) The existence of small-scale farmers; (2) The presence of young farmers; and (3) The characteristic of labor productivity.  

Existence of Small-scale Farmers

According to  the result of the Agricultural Census 2013 (BPS, 2013), there are 26.14 million agricultural land users/RTUP[1] in Indonesia in which about 98.53% was categorized as farm households/RTP[2] (Figure 3). Both numbers of agricultural land users and farm households had declined over the last ten-year (2003-2013) of about 16.32% and 15.35%, respectively. The decline of these numbers had an impact on increasing the average land tenure from 0.41 hectares per household in 2003 to 0.89 hectares per household in 2013. About 60% of agricultural land users and farm households were classified as small-scale farmers (petani gurem)[3]. It was noted that the decline number of small-scale farmers was likely due to increasing number of agricultural labors leaving agricultural sector, particularly young generation to non-agricultural sectors.

Presence of Young Farmers

In the last five years (2014-2018), the number of young agricultural labor was about 3.89 million (Figure 4), or about 10.80% of the total number of agricultural labor in Indonesia. It was recorded about 90,251 agricultural young farmers (2.12%) decreases annually. The decline number of young labor indicates that agriculture is less interesting for the youth. This is because agricultural sector is perceived as less prestigious, high risk, less assurance, and unstable earning income. Other factors, according to Susilowati (2016), are related to small size land holding, limited non-agricultural diversification opportunities and agricultural processing activities in rural areas, slow farm management succession, and lack of incentives. Another important thing is related to social perception in which some old farmers do not want their children to be farmers with low income and narrow land ownership (fragmentation). As a result, there is a tendency that the youth shift from agricultural sector to non-agricultural sector with an impact of decreasing in effectiveness and efficiency of agriculture and scarcity of agricultural labor.

Characteristic of Labor Productivity

Indeed, agricultural labor productivity is critical for the welfare of the rural population and for long term economic growth and structural change. According to Arifin et al (2019): “….. In the process of economic structural transformation, countries generally experience a significant contraction in the share of employment in primary agriculture as growth rates diverge between agriculture, industry and services, as agricultural production consolidates into somewhat larger and often more mechanized units, and as surplus underemployed agricultural labor is absorbed in other segments of the economy. Moreover, other segments of the economy have been slow to absorb surplus agricultural labor, resulting in significant levels of seasonal or other underemployment of people in rural areas. Lack of demographic pressures, small farm sizes, topographical challenges and other factors have contributed to very low rates of mechanization in Indonesian agriculture”.

        Attention to agricultural labor productivity is not only in terms of farm income but also related to attract entrepreneurial particularly youth to be respectable Indonesian farmers in the future. It is expected that labor productivity and agricultural income would be more promising.

AGRICULTURAL LABOR POLICY

To overcome the problem and challenges of Indonesian agricultural labor, it is necessary to implement economic transformation with unburdened economy in order to enhance the role of small-scale farmers and young farmers towards improving labor productivity in agriculture. This can be implemented through introducing good agricultural practices, improving capacity, developing integrated agriculture, strengthening institution, providing insurance, and assuring market.

Small-scale Farmer Policy

The development of small-scale farmers should be implemented based on its typology[1]. It is started from developing the capacity through education and training, both technical (farm management) and non-technical (managerial) based on the concept of agribusiness. Assistance for commodity development should be carried out selectively since the acceleration of commodity development cannot be essentially separated from community development.

The implementation of small-scale farmer development is collectively through the organization of farmer groups. It should be noted that the development activities must pay attention to the substance of their status (owners and tenants) as well as the identity status in order to facilitate the identification and accuracy of the implementation of development programs. Above all, the allocation of village funds program is one of opportunities that can be organized to develop the small-scale farmers in Indonesia. 

Young Farmer Policy

In general, young people do not have the preference to work in agricultural sector. They are more likely to choose to work in non-agricultural sectors. Therefore, the youth can be attracted to agriculture if: (1) Agriculture would earn enough for them to raise a family, (2) They are provided basic resources such as land, capital, training, farm equipment and market, and (3) They are able to see the meaning and significance in their work (White, 2015).

In fact, the Indonesian Ministry of Agriculture has issued the Minister Regulation Number 33/2017 on the Development of Young Farmers in Joint Business. It is aimed at: (1) Increasing the role of youth supporting the priority programs; (2) Developing the institutional economic managed by the youth towards increasing competiveness and its bargaining position; and (3) Guiding the youth with oriented agribusiness activities. So far, the implementation of this program has not significantly achieved. Therefore, the Ministry of Agriculture issues another supporting program namely Petani Masuk Sekolah (Farmers Entering School) through introducing agricultural education curriculum at school. 

Above all, there is a need to provide financial incentive in the form of facilitating the accessibility to capital and land tenure anchored in smallholder characteristics for the young farmers. Hence, it is required to implement business diversification based-integrated rural industrial development supporting by specific program such as village funds. The youth is the future of the nation, and the rural youth is the future of agriculture and rural industry.

Labor Productivity Policy

To increase the agricultural labor productivity in Indonesia, it is required to explore and to re-enforce the implementation of government policies appropriately (Arfin at al, 2019). First, achieving more economic scale in smallholder production by facilitating community-based land consolidation, dynamic market in agricultural land rentals and sales as well as mechanized services provisions in line with crop cycle, and enabling environment through land administration reform. Second, encouraging more diversified farming systems to make fuller use of available labor and other resources as well as better mitigate weather, pests and diseases, as well as other risks. Third, increasing productivity, added value, and risk management capabilities through improving biosecurity control/practice(s), acquiring new knowledge and skills, fostering rural entrepreneurship, encouraging on-farm and off-farm collective actions, and strengthening institutional agriculture.

CONCLUSION

As an integral part of agriculture, labor plays an important role in the development of this sector towards Indonesia economy. Since there is a tendency of the absence of attractive employment opportunities in agricultural sector, it would potentially drive brain drain due to large number of small-scale farmers, lack of interest of young generation, and low labor productivity. Consequently, the development of agricultural labor is indispensable. This is not only limited to value and capacity development but also includes sufficiency of labor by maintaining its retention with adequate improvement.  

The development policy of agricultural labor in Indonesia can be implemented through paying attention to small-scale farmers, attracting young generation, and improving labor productivity. On the one hand, it is carried out by improving the quality of human capital, providing better infrastructure and facilities, allocating adequate development budget, and maintaining the stability of the macro-economy. Thus, it may create conducive conditions to encourage capital accumulation through investment activities. On the other hand, the development program is critical to alter the mind-set that agriculture is a marginal sector in which it could be a prevalent and prosperous activity using Information and Communication Technologies (ICTs).  

In terms of regulatory measures, there are at least two areas which need to be developed for future agenda, namely: (1) regulation on the minimum wage for agricultural labor, as has been applied in other sectors of the economy; (2) pension policy for both labor and farmer as has been implemented in developed countries.

REFERENCES

Arifin, B., N. Nuryantono, S. H. Pasaribu, F. Yasmin, M. A. Rivai, and R. Kurniadi. 2019. Profitability and Labor Productivity in Indonesian Agriculture. Retrieve from http://documents.worldbank.org/curated/en/739411554283544226/Profitability-and-Labor-Productivity-in-Indonesian-Agriculture (22 June 2020). The World Bank. Jakarta.

[BPS] Badan Pusat Statistik. 2013. Hasil Sensus Pertanian 2013 (Indonesian Agricultural Census 2013). Indonesian Central Bureau of Statistics. Jakarta.

[BPS] Badan Pusat Statistik. 2019. Keadaan Angkatan Kerja di Indonesia, Februari 2016 sampai Februari 2019 (Labor Force Situation in Indonesia, February 2016 to February 2019). Indonesian Central Bureau of Statistics. Jakarta.

[GoI] Government of Indonesia. 2003. Undang-Undang Nomor 13/2003 tentang Ketenagakerjaan (Law Number 13/2003 on Labor). Government of Indonesia. Jakarta.

[IFAD] International Fund for Agricultural Development. 2013. New Directions for Smallholder Agriculture (edited by P. Hasell and A. Rahman). International Fund for Agricultural Development. Oxford Press. Oxford.

[Pusdatin] Pusat Data dan Informasi Pertanian. 2019. Statistik Ketenagakerjaan Sektor Pertanian Tahun 2017-2019 (Agricultural Labor Statistics, 2017-2019). Indonesian Ministry of Agriculture. Jakarta.

Susilowati, S.H. 2016. Fenomena Penuaan Petani dan Berkurangnya Tenaga Kerja Muda serta Implikasinya bagi Pembangunan Pertanian (Farmers Aging Phenomenon and Reduction in Young Labor: Its Implication for Agricultural Development). Forum Penelitian Agro Ekonomi, Vol. 34 No. 1, Juli 2016: 35-55. Indonesian Center for Agriculture Socio Economic and Policy Studies. Bogor.

White, B. 2015. Generational Dynamics in Agriculture: Reflections on Rural Youth and Farming Futures. Cah Agric 24: 330-334, doi: 10.1684/agr.2015.0787. Netherland.


  1. RTUP/Rumah Tangga Usaha Pertanian (Agricultural Land User) is a household manages owned, rented, shared, as well as waged agricultural production and services with the aim at selling the agricultural products wholly or partially.
  2. RTP/Rumah Tangga Petani (Farm Household) is a household carries out one or more agricultural productions (BPS, 2013)
  3. Petani Gurem (Small-scale Farmer) is a household controls less than 0.5 hectares of land (BPS. 2013)
  4. IFAD (2013) classifies three typologies of small-scale farmers. First, subsistence-oriented small-scale farmers that only sells a portion of crops to get cash income but always buy (net buyer) food needs throughout the year. Second, commercial small-scale farmers related to commodity value chain. Third, small-scale farmers in transition are farmers who have opportunities to work off-farm activities.

Comment