JAKARTA: The official jobless rate has crept up as more people report being in search of work, while informal employment continues to dominate the labour market, increasing the risk of Indonesia getting caught in the middle-income trap.

Statistics Indonesia (BPS) revealed in a press conference last Thursday that the number of unemployed increased by more than 140,000 people from 7.24 million in February to 7.38 million in August.

The unemployment rate worsened from 4.68% to 4.75% over the same period.

BPS official Edy Mahmud said in the press conference that agriculture, trade and the manufacturing industry “absorbed most of the workforce”, employing nearly 60% of 147 million working Indonesians.

Informal jobs still account for most employment in Indonesia, representing nearly 60% of the workforce.

In August, the informal employment share stood at 57.93%, up from 57.8% in August of 2025 but down from 59.42% in February.

The number of people employed formally rose by 2.5 million from February to August, while informal employment dropped by more than two million in a shift that is partly attributable to seasonal factors as the dry season slashing temporary farming roles, while fresh graduates also enter the employment market.

BPS defines informal employment as jobs that do not come with social protection or fixed wages and working hours.

Of Indonesia’s 147 million workforce, nearly 100 million are working full time, while some 35.9 million work part-time. Another 12.8 million are categorised as “half unemployed”.

The BPS classifies people who work at least 35 hours a week as employed full-time, while people who work less than that are divided into two classifications: employed part-time or half unemployed.

Part-time workers are those who work for fewer than 35 hours per week but are not seeking or willing to take another job, and who would, if they were, be categorised as half unemployed.

Several analysts and labour unions have criticised the definition, because people who have worked for at least one hour in the week of the survey would be classified as “workers” even though they might be jobless for all practical purposes.

Rahma Gafmi, an economics professor at Airlangga University, told The Jakarta Post last Friday that the informal sector often acted as an “emergency relief valve” that employs workers when there is pressure on the formal sector, albeit with low productivity and uncertain incomes.

She said the increase in informal employment meant the expansion and growth of the formal sector could not yet catch up with the growth of the workforce, which reflected the level of “the real economy’s resilience”.

Rahma argued that Indonesia’s job market was “more accommodative for survival”; it did not represent a “quality structural transformation”.

While a high informal employment rate was common in developing economies, she argued that it should have been shrinking amid Indonesia’s transition to an upper-middle income country.

“If the informal portion is sustained or increases in (an upper middle income country), that is normally a sign of a country getting boxed in in a middle-income trap, where the structural transformation slows and human capital fails to meet the demand of modern industry,” said Rahma.

“Essentially, a cyclical increase in the portion of informal employment is common in a developing country, but it becomes a structural warning signal when it happens persistently in a country accelerating toward becoming a developed economy,” she added.

Permata Bank chief economist Josua Pardede highlighted the fact that the part-time and half-unemployed workers had increased both in absolute figures and percentage, “which means more people are employed but they still need to work more hours to earn an income”.

He told the Post last Friday that creating new jobs “is not enough, we have to ensure that the jobs are more productive and can improve prosperity”.

High informal employment was common in developing economies but should not be considered a normal situation allowed to go on, Josua added, warning that if the transformation came too late, Indonesia might grow without a commensurate improvement in welfare. — The Jakarta Post/ANN