Jakarta. Indonesia is facing a growing labor market imbalance, with around 1.5 million workers left unabsorbed each year as job creation lags behind incoming job seekers, the Indonesian Employers Association (Apindo) warned on Tuesday.

According to Bob Azam, head of labor affairs at Apindo, about 3.5 million people enter the workforce annually, while the economy is only able to absorb roughly 2 million. 

“Our labor conditions are showing warning signs,” Bob said during a hearing with House Commission IX at the parliamentary complex.

Despite Indonesia’s steady economic growth of around 5%, job creation remains limited. The imbalance risks pushing more workers into the informal sector, where job security and income stability are typically lower.

Apindo estimates that around 60% of Indonesia’s workforce is now employed in the informal sector, compared to 40% in the formal economy. Data from the Central Statistics Agency (BPS) supports this trend, showing that as of November 2025, about 85.35 million people, or 57.7% of workers, were in informal employment, while 62.57 million, or 42.3%, were in formal jobs.

Beyond job availability, workforce quality remains a key challenge. A significant portion of Indonesia’s labor force has relatively low educational attainment, limiting productivity and competitiveness.

BPS data shows that 34.6% of employed workers have only elementary education or lower, while university graduates account for just 10.8% of the workforce.

Indonesia’s total labor force reached 155.27 million in November 2025, with a labor force participation rate of 70.95%. The number of employed people stood at 147.91 million, while the open unemployment rate was recorded at 4.74%.

Bob said greater investment in training is urgently needed to help workers transition into more productive and higher-paying jobs, but funding for such programs remains limited.

“Training needs are very high to enable workers to shift into more productive jobs with better income,” he said.

Apindo also flagged regulatory uncertainty as a concern for businesses, adding that wage regulations have been revised multiple times over the past decade. The group called for more flexible labor policies, balanced with stronger industrial relations at the company level.