Indonesia’s Labor Market Challenges in the Digital Age

RRI.CO.ID, Jakarta - Advances in technology and the economy are opening numerous job opportunities, but Indonesia continues to face challenges such as a dominant informal workforce and a skills mismatch.

The 2026 Employment Outlook Report by the Employment Planning and Development Agency of the Ministry of Manpower outlines strategies to make Indonesia’s workforce more competitive in a rapidly changing global economy.

Agency Head Anwar Sanusi said shifts in the world of work in the 21st century are driven by global factors, including artificial intelligence, automation, digitalization, and demands for sustainable development.

“Indonesia is in a position to transform its labor market. The 2026 Employment Outlook provides an overview of the opportunities, challenges, and policy directions needed to strengthen labor market resilience,” Anwar said on Monday, June 22, 2026, as quoted on the ministry’s official website.

One major issue is the dominance of the informal sector, which accounts for about 58 percent of the workforce.

Another challenge is competency gaps: research shows that around 50 percent of Indonesian workers have only elementary to secondary‑level digital literacy, while industry forecasts indicate that more than 80 percent will need adequate digital skills.

The mismatch between education graduates’ skills and labor market needs also hampers competitiveness, limiting the ability to seize new opportunities from economic transformation.

The report notes that digital platform‑based jobs are growing, creating opportunities but also requiring regulatory adjustments on employment relations, social protection, and workers’ rights.

Despite these challenges, the Employment Outlook highlights opportunities for job growth through industrial downstreaming and the green economy.

Downstreaming of natural resources is expected to spur new jobs, while the transition to a green economy could generate about 3.88 million green jobs by 2026, supported by renewable energy, circular economy initiatives, transport electrification, and industrial modernization.

Anwar emphasized that these opportunities can only be maximized if human resources are prepared to meet industry needs.

Efforts include revitalizing vocational training centers (BLK), strengthening technology‑based training, developing competencies in digital and green energy sectors, and aligning national work competency standards (SKKNI) with industry requirements.

“Strengthening workforce competencies, increasing the relevance of vocational education and training, and fostering solid collaboration between the government, the business sector, and educational institutions are key factors in capitalizing on opportunities arising from economic and technological transformation,” Anwar said.

He hopes that the 2026 Employment Outlook will guide policymakers, businesses, academics, and stakeholders in strengthening the competitiveness of Indonesia’s workforce and building a more resilient, productive, and sustainable labor market. ***