Quality Jobs or Cheap Labor? The Real Test of Indonesia’s Demographic Bonus
Mohammad Nur Rianto Al Arif
(Professor at UIN Syarif Hidayatullah Jakarta,
Secretary General of the Central Board of the Indonesian Lecturers Association,
Board Member of ISEI Jakarta Branch,
Board Member of the Central Board of IAEI)
Indonesia is often described as being in a historical “window of opportunity,” namely enjoying a demographic bonus. The proportion of the productive-age population (15–64 years) is reaching its peak in Indonesia in the 2020s–2030s.
On paper, this is good news. Many countries such as Japan, South Korea, and even China have used this momentum to leap into upper-middle-income status.
However, behind the demographic euphoria, there is an unease that cannot be ignored: will Indonesia’s demographic bonus truly become a “bonus,” or will it risk turning into a “curse” if it is not accompanied by the creation of quality jobs?
This question is not merely academic. It touches the reality of millions of young people graduating from schools and universities, only to be trapped in informal jobs, low wages, contract work without certainty, or even unemployment.
Amid relatively stable economic growth, the quality of growth—especially in creating decent work—still lags behind.
When the demographic bonus is not accompanied by structural economic transformation, it will not be able to realize shared prosperity.
A demographic bonus is not an automatic gift but a structural condition where the working-age population outnumbers the non-productive population.
To become a “bonus,” it requires prerequisites such as relevant education, good health, high productivity, and a labor market capable of absorbing workers properly.
Without these, the demographic bonus will accumulate into social problems such as unemployment, working poverty, and vulnerability to social conflict.
Indonesia is currently enjoying a declining dependency ratio. This means that the economic burden borne by the productive population toward the non-productive population is lighter.
However, this ratio only has meaning if the productive-age population is truly productive. "Productive" does not simply mean working, but working in jobs that provide added value, decent wages, social protection, and social mobility.
At present, Indonesia’s labor market structure is still dominated by the informal sector. Many young workers are employed in low-wage services, gig economy jobs without protection, or low-technology manufacturing that is easily replaced by automation.
The phenomenon of “working but remaining poor” is increasingly real: people work hard, yet their wages are not enough to escape structural poverty.
One trap in labor discourse is reducing the problem to the open unemployment rate.
The government often claims success when unemployment declines. However, this figure does not always reflect job quality.
Unfit jobs—low wages, excessive working hours, and no social security—are still counted as “employed.”
This is the core issue: a demographic bonus requires quality jobs. Without quality jobs, an abundant labor supply becomes excess supply that can ultimately suppress wages.
Market logic works in a simple way: the more workers there are, the lower their bargaining position.
If the state does not intervene with regulations and industrial policies that favor improving job quality, the demographic bonus will produce a generation of cheap labor.
Furthermore, the mismatch between education and industry needs worsens the situation. Many university graduates work in fields unrelated to their competencies.
This condition is not merely an individual failure but a systemic one: educational curricula lag behind economic transformation needs, while industry has not moved up to high value-added sectors.
Indonesia’s Constitution actually provides a strong mandate regarding work and welfare. Article 27 paragraph (2) of the 1945 Constitution states that “Every citizen has the right to work and to a livelihood worthy of humanity.”
Article 28D paragraph (2) adds the right to work and to receive fair and proper compensation and treatment in employment.
Article 33 emphasizes that the economy shall be organized as a common endeavor based on the principle of kinship, with key sectors controlled by the state for the greatest prosperity of the people.
This constitutional mandate is clear: the state must not be neutral in labor market matters. The state is obliged to create structural conditions so that citizens obtain decent work.
If left solely to market mechanisms, the demographic bonus may clash with the Constitution. An absent state allows labor to become a cheap commodity, not a subject of development.
The problem is that our development paradigm is still often trapped in macro growth figures, not the quality of citizens’ lives.
Investment is pursued, but industrial orientation has not been fully directed toward creating quality jobs. Many investments are capital-intensive, absorb minimal labor, or absorb labor with low job quality.
The term “demographic curse” is not empty rhetoric for countries that failed to manage their demographic bonus.
Failure will lead to serious consequences: mass youth unemployment, uncontrolled urbanization, crime, and political instability.
In Indonesia, early signs are visible in youth anxiety over high living costs, difficulty finding decent jobs, and limited social mobility.
When education no longer guarantees a better life, trust in meritocracy collapses. This condition is dangerous for social cohesion.
The demographic curse is also linked to technological transition. Automation and artificial intelligence have the potential to replace repetitive and low-wage jobs—the very jobs filled by many young workers.
Without a strategy for skills upgrading and the creation of new high value-added sectors, the demographic bonus will face a “technology tsunami” that narrows employment space.
The main issue is not the number of workers, but the economic structure. Indonesia has relied too long on extractive sectors and medium-to-low technology industries.
Low added value means low wages. Countries that succeeded in utilizing the demographic bonus carried out industrial leaps: from agrarian to high value-added manufacturing, then to innovation-based economies.
Indonesia’s structural transformation is moving slowly. Downstreaming of natural resources has begun to be intensified, but it is not yet fully integrated with human resource development.
Without this integration, downstreaming only shifts added value, without massively improving labor quality.
On the other hand, MSMEs that absorb the majority of workers still struggle with low productivity. MSME digitalization is often promoted, but without support in financing, logistics, and fair market ecosystems, MSMEs find it difficult to upgrade. As a result, the demographic bonus is absorbed into low-productivity sectors.
If the demographic bonus is an opportunity, public policy is the key. Several crucial strategies can be pursued by the government.
First, value-added and technology-based industrialization. The state must encourage sectors capable of creating quality jobs, such as medium-to-high technology manufacturing, the green economy, renewable energy, the knowledge-based creative economy, and modern services.
Investment incentives must be directed toward quality labor-intensive sectors, not merely capital-intensive ones.
Second, reform of education and vocational training. Education must be connected to future needs, not past ones.
Curricula must be adaptive to digital transformation, the green economy, and creative industries. Vocational education must not become a “second-class track" but a prestigious path that guarantees relevant skills and decent wages.
Third, worker protection and stronger labor market regulation. Labor market flexibility must not mean worker vulnerability.
The state needs to ensure decent wage standards, universal social security, and protection for gig economy workers. These are not barriers to investment, but prerequisites for sustainable development.
Fourth, strengthening MSMEs so they can move up the value chain. The demographic bonus is largely absorbed by MSMEs. Improving MSME productivity means improving the quality of life of millions of workers.
Access to affordable financing, technological assistance, supply chain integration, and protection from unfair competition with large corporations are key.
Fifth, decentralization of economic opportunities. The demographic bonus often accumulates in major cities, triggering excessive urbanization.
The state needs to create new growth centers in regions, based on local potential such as modern agriculture, sustainable tourism, and regional processing industries, so that quality jobs are not concentrated only in big cities.
The state must not merely act as a referee but as an architect of development. Article 33 of the 1945 Constitution places the state as the manager of key production sectors for the prosperity of the people.
This means the state needs a long-term industrial vision, not patchwork policies. This vision must be cross-regime, cross-ministerial, and consistent.
The demographic bonus is a temporal momentum; its window does not remain open forever. If missed, Indonesia will face an aging population without ever enjoying prosperity.
A country that fails to utilize the demographic bonus will bear a double burden: an elderly generation needing social protection and a frustrated young generation.
The demographic bonus is not destiny but an opportunity that must be worked for. It can become a machine of inclusive growth or a social time bomb.
The question is not whether Indonesia has a demographic bonus, but whether Indonesia has the political courage and structural vision to manage it.
The Constitution has provided direction: decent work, social justice, and shared prosperity. The task is to translate that mandate into concrete strategies in industrialization, education, and social protection.
Without quality jobs, the demographic bonus is merely demographic statistics without welfare meaning.
With the right policies, the demographic bonus can become the foundation of a more just, productive, and dignified Indonesia.
In the end, the demographic bonus is a mirror reflecting the quality of our policies. If what we see is a young generation working hard yet remaining poor, then what must be corrected is not the demography, but our development direction.
This article was published in Kompas on Tuesday, February 10, 2026.