Jakarta. Indonesia is sitting on a potential economic goldmine with more than 70 percent of its population in the productive age group, yet experts caution that the nation risks wasting its once-in-a-lifetime demographic dividend if structural challenges are not addressed.

Speaking at the Investor Daily Summit 2025 on Wednesday, behavioral economist Talitha Chairunissa of the Indonesian Economists Alliance (AEI) said Indonesia’s dependency ratio has fallen below 45 percent, meaning each 100 working-age Indonesians supports just 45 non-working-age individuals. “This is a golden window, a demographic bonus that comes only once in a nation’s history. It must not be wasted,” she said.

The dependency ratio is a demographic measure comparing the number of dependents (people too young or too old to be in the workforce) to the working-age population (people aged 15-64) in a society

Despite headline GDP growth consistently above 5 percent, Talitha said productivity remains stagnant, regional disparities are significant, and the connection between economic growth and public welfare is weakening. Real wages have risen only 1.2 percent, while 80 percent of new jobs are in low-paying household sectors. The eastern regions of Papua and Maluku, she added, continue to lag far behind Java in terms of economic development.

Indonesia’s unemployment rate currently sits at 4.76 percent, the lowest in two decades, yet in absolute terms, more than 7 million people remain jobless, with youth unemployment at 16.16 percent. The Manpower Ministry estimates that roughly 10.7 million Indonesians enter or seek work annually, reflecting a labor market under strain despite favorable demographic conditions.

Investment Minister Rosan Roeslani highlighted a critical challenge for investors: the skill level of Indonesia’s workforce. Nearly half of the labor force, about 44 percent of 152 million workers, has only an elementary school education. Another 17 percent are junior high graduates, 21 percent senior high, and only 14 percent hold diplomas or university degrees.

“For investment to flow, investors want to know if the talent is ready. This is a shared responsibility,” Rosan said at the summit. The government is promoting upskilling programs to ensure Indonesian workers meet industry needs.

AEI economists argue that the nation’s fiscal and policy priorities must align with its demographic potential. Talitha pointed out that Indonesia’s tax-to-GDP ratio remains low, around 10.5–11 percent, far behind regional peers such as Thailand (16 percent), Malaysia (17 percent), and South Korea (27 percent). Meanwhile, the 2026 state budget earmarks 37 percent for populist programs such as free nutritious meals for children and village cooperatives, leaving essential investments in healthcare, education, clean water, and infrastructure in underdeveloped regions underfunded.

Talitha warned that the demographic dividend could easily be lost without targeted policies to boost productivity, reduce inequality, and create quality jobs. “We are growing as a nation, but not all citizens are growing with it,” she said, calling for a new social contract that ensures public resources and policies benefit both current and future generations.

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