AbsLracL

SubsequenL Lo Lhe 2007 global flnanclal crlsls, lndonesla has managed Lo survlve reasonably well amld Lhe
worldwlde flnanclal melLdown. neverLheless, unemploymenL ln lndonesla remalns hlgh and has never fully
recovered slnce Lhe 1997 LasL Aslan Crlsls. Among Lhe unemployed, youLh unemploymenL comprlses Lhe largesL
porLlon of all and appears Lo be Lhe one LhaL needs Lhe mosL concern. ?ouLh unemploymenL ls malnly caused by
llmlLed demand for labor, shorLage of skllls, and llmlLed LrusL by communlLy. Moreover, Lhere ls also no
comprehenslve communlcaLlon beLween youLhs, governmenL, buslness secLors, and oLher parLles.
ConsequenLlally, economlc lmpacLs and psychologlcal lmpacLs such as reduced lncome, sLress, and
marglnallzaLlon occur. lf lL occurs ln Lhe long run, lL can affecL naLlonal economy and reduce lndonesla's Cu. 1o
cope wlLh Lhls problem, governmenL LogeLher wlLh World 8ank has been lmplemenLlng a pro[ecL called ?ouLh
LmploymenL rogram. 1he pro[ecL has shown slgnlflcanL success, buL yeL Lhe resulL ls noL fully maxlmlzed. 1o
maxlmlze Lhe resulL, youLhs also need Lo reacL and Lake advanLage of Lhls pro[ecL. Pence, Lhls essay proposes a
youLh-led CL1 movemenL Lo reduce youLh unemploymenL. lLs ob[ecLlve ls Lo solve youLh unemploymenL by glvlng
Lralnlngs, and encouraglng enLrepreneur splrlL. 1he essence of Lhls movemenL ls from youLh and for youLh, hence
can resolve youLh unemploymenL problem more effecLlvely and efflclenLly. ln a blgger scale, low youLh
unemploymenL can sLlmulaLe economlc growLh and brlng lndonesla Lo prosperlLy.
Lntrepreneur|a| Sp|r|ts to So|ve
outh Unemp|oyment |n Indones|a

A u L h o r : A r l s y l l a r l z a 8 a z
W o r l d 8 a n k L s s a y C o m p e L l L l o n 2 0 1 0
Entrepreneurial Spirits to Solve Youth Unemployment in Indonesia
1
Lntrepreneur|a| Sp|r|ts to So|ve Unemp|oyment |n
Indones|a

What Makes outh Unemp|oyment so Detr|menta|
Lconomy of Indones|a: 8etween rosper|ty and Ia||ure
Indonesia is the worlds fourth most populous country with total a population of around 230 million
people. It is the biggest economy in South East Asia with GDP (Purchasing Power Parity) more than
$960 billion and economy growth at 4.1% in 2009 (and 6.1% in 2008). Indonesia is also a member of
G-20 and one of the emerging economies in the world. However, even with this market confidence,
rapid growth and optimistic economy, Indonesia is still suffering one of the most prominent economic
indicators of a nation: Unemployment.
In Indonesia, the unemployment problem has been a major concern. Due to the East Asia Financial
Crisis in 1997, the unemployment rate in Indonesia surged from 4.4% in 1996 to 11.2% in 2005. The
crisis in 1997 caused a fierce economic meltdown in Indonesia. Dozens of companies, big and small,
filed for bankruptcy and laid off their workers. A couple years after the crisis, the economy was able to
recover slowly. In 2006, 2007, 2008, and 2009, the unemployment rate was 10.3%, 9.1%, 8.4%, and
7.7% respectively. However, although this percentage has been decreasing, it is still far beyond that
prior to the crisis. It is also still relatively high compared to neighboring emerging countries. In 2008,
the unemployment rate in Malaysia, Singapore, and Thailand was 3.3%, 3.2%, and 1.4% respectively.
Unemployment is a situation in which a person that has the capability and willingness to work but is
unable to find job. Unemployment has long been becoming a major problem in many countries,
regardless whether it is advanced or less developed. Therefore, economists over the world always
consider unemployment rate as one of the most important economic indicators of a nation. It is crucial
because a high rate of unemployment, in a major context, affects the effectiveness of a nations
economy by reducing the productivity in both private and governmental sectors. Unemployment causes
a nation not maximize the productivity of its labor force and may lower the total output of the
economy.
1

From an individual point of view, unemployment is also daunting. If a member of family is
unemployed, particularly if he is the financial backbone of the family, the family may not be able to
meet its financial needs. This problem can create many other worrying problems. It can cause a family
to lose its shelter due to the incapability of paying mortgage or house rent. It also leads to stress,
malnutrition, illness, and depression. If the unemployment rate of a country is high, many families will
experience such problems and hence the human development of that country can be hampered.
1he Lp|c Story of S|x M||||on Iob|ess ouths
People that are able to work, whether employed or not, are called the labor force. This can be divided
into several groups in terms of age structure. One of these groups is that from age 15 to 24. Even though
this age structure of labor force is far smaller relative to adult labor force (age >24), it is an important
part of employment and cannot be neglected. For young people, employment is an important means to
complete adulthood. It is also the stage where youths can start building their future careers. Among
their peers, employed youths are respected because they have moved one step forward to attaining self-

1
This logic comes from the production-possibility frontier (PPF). If an economy has high unemployment, it
conducts production activity below its PPF. Full employment will maximize it by moving the production activity
to the PPF curve.
Entrepreneurial Spirits to Solve Youth Unemployment in Indonesia
2
reliance and independence from parents. Particularly for the poor, a decent job can give a new chance
for young people to have a better quality of life, higher income level, and better education. By
extension, employment is also the most important indicator to make decisions regarding marriage or
start living separately from parents.
From an economic point of view, youth labor force is also important to increase productivity. By adding
young workers in the labor force, a nation can increase its efficiency and reduce economic costs. Young
workers are also crucial to the economy as the means to transfer know-how and skills, hence preventing
the loss of human capital.
Regrettably, youth labor force in Indonesia is also facing the unemployment problem. As a matter of
fact, the share of young people among the unemployed is the highest. From 1994 to 2004, the
proportion of youth unemployment ranged between 62% and 68% in urban areas and slightly higher in
rural areas, between 71% and 79%.
2
In 2007, while the share of youth labor force is only around 20% of
total labor force; youth unemployment comprised more than 50% of total unemployment (See Table 1).
Table 1. Youth Unemployment in Indonesia
Year
Total Labor
Force (Age 15+)
Youth Labor
Force
Adult
Unemployed
(Age 25+)
Youth
Unemployed
Youth
Unemployment
Rate
2004 104,433,800 21,236,000 10,251,000 6,277,000 29.558%
2005 106,599,400 22,995,400 11,899,000 7,459,000 32.437%
2006 107,093,000 22,454,100 10,931,000 6,816,000 30.355%
2007 110,534,000 22,512,600 10,011,000 5,660,000 25.141%
Source: ILO
Even though there is a decreasing trend after the nations economic recovery from the 1997 East Asian
Crisis, youth unemployment in Indonesia is still problematic. The impacts are not limited only to the
economy as an aggregate, but also to the youths themselves. Being unemployed creates many pressures
for young people. These pressures may result in loss of confidence, financial insecurity, pessimism, and
social isolation.
Lconom|c Impacts
If youth unemployment remains for the long run, the impacts are worrisome. Financially, youth
unemployed face daunting difficulties of a life with little or no income at all. These difficulties prevent
youths from attaining better education and higher wage and risk falling into poverty. These
consequences, in worst case, make them unable to fulfill their daily needs such as food, clothing, and
proper shelter, which in the end expose them to greater risks of diseases and malnutrition. From
national point of view, lower income level can reduce a nations GDP.
Another significant impact is the loss of know-how and skills of the unemployed. For example, a fresh
graduate that remains unemployed for a year or more and does not attend an additional course or other
positive activities, such as training may forget knowledge he had learnt from university. Therefore,
when he gets a job after a long period of time, he will need re-training, which is costly and ineffective
in terms of money and time. When youth unemployment drags on too long, its economic impacts not
only on individuals and employers, but also on the national economy as whole. Inefficiency in labor
force, vanished knowledge and reduced productivity will inflict large economic costs on society

2
See Suryadarma et al. (2007)
Entrepreneurial Spirits to Solve Youth Unemployment in Indonesia
3
sychosoc|a| Impacts
Unemployment also creates psychological vulnerability among young people, leading to more crime
and drugs. Particularly where parents and communitys supervision is lacking, young people can easily
fall into the wrong place and get acquainted with unjust society. In Indonesia, many crimes such as
drugs trafficking, riots, stripping, and robbery are carried out by youths that mostly unemployed. One
apparent example is stripping done by youngsters, which often occurs in public places in Indonesia.
They often carry out their activities in desolate places, usually at night (even though they also often do
it during daytime), preying on elderly, women, or children. Particularly when preying a woman, it is not
unusual that they finish it by raping the ill-fated woman.
Therefore, whatever their negative activities are, these kinds of young people create anxiety in the
society. People do not feel safe walking alone at night, while suspiciousness that forges discomfort and
insecure communities increases. Furthermore, this suspicion in the society will spread to business
activities. Many business people tend to avoid unsecure places; hence the business sector will not grow
in such places. Accordingly, business is usually unattracted to places where these young criminals often
operate, leaving the place in negligence, increasing the crime rate further, and deteriorating the society
deeper. This kind of cases often occurs in big cities in Indonesia, such as Jakarta, Surabaya, and Medan.
Marginalization and exclusion are also other social impacts caused by youth unemployment. As
mentioned before, employed youths are usually respected and proud of their status. Consequently, those
who have no jobs are usually excluded by the society, living with shame and low respect. According to
empirical studies, youth unemployment can cause psychosocial consequences such as reduction in self-
esteem, diminished levels of well-being, and frequent isolation from peers.
3

What to Do?
Ultimately, the high proportion of youth unemployment of total unemployment shows that the youth
labor force needs more concerns from both government and the business sector. The impacts of the high
number of unemployed youths, particularly if prolonged for years, can be fatal and may cause problems
financially, mentally, and socially. The question is, if youth unemployment is such a big issue, what
should be done to decrease its number? Are there any good solutions to cope with this problem? In the
next part, this essay will show youth-led solutions to solve the youth unemployment problems in
Indonesia.
Search|ng for the Core rob|ems
If youth unemployment can cause such costly impacts, it is important to learn and study the main cause
of youth unemployment. Generally, youth unemployment in Indonesia is predominantly caused by low
demand for workers, limited skills of job seekers, and youths doubt to start a new business.
Supp|y-Demand rob|em
One main cause of high the youth unemployment rate in Indonesia is limited demand for labor force in
spite of the abundant supply. Its industrial sector, as the biggest sector and the source of employment in
Indonesia, is still facing many problems to employ more workers, particularly after the 1997 East Asian
Financial Crisis. The problem of unemployment started to surge when, out of a total 222 banks, there
were 67 banks closed and 12 others were merged from 1997 to 1999.
4
This catastrophe caused many
companies to not be able to finance their business activities. The government also raised the interest
rate to the sky-high levels, hurting many businesses opportunity to expand. As a result, local companies
not only the small ones, but also the big ones went bankrupt and laid off their workers.

3
See Warr, P. (1979).
4
See Fane, G and McLeod, R. (2001).
Entrepreneurial Spirits to Solve Youth Unemployment in Indonesia
4
Currently comprising up to 48% of total GDP, the industrial sector in Indonesia is not getting enough
support from the government to expand business activities and create new jobs. The 2007 Global
Financial Crisis once again raised the unemployment rate in Indonesia. Many young workers that just
started working were laid off to cut company spending.
The agricultural sector has also been negatively affected. Many people lose their jobs every year
because of the destruction of the ecosystem and global warming, causing floods to occur more often
and poor harvests. In Indonesia, there is a tradition that the eldest son in rural family has to take care of
his familys farm. They usually do not have any skill to do other jobs. When their farm is devastated,
they cannot seek for other jobs and hence become unemployed. As the environment degrades more,
more farms will be ravaged and more young farmers will lose their jobs.
The problem of limited demand for workers is not limited only to blue-collar workers, but also white-
collar workers. To decrease the number of youth unemployment in Indonesia, more jobs for skilled
and unskilled labor have to be created, balancing supply of and demand for labor to proper
equilibrium.
oor Lmp|oyee Sk|||s
In addition to limited demand for labor, another cause of youth unemployment in Indonesia is due to the
lack of skills of jobseekers to meet employers requirements. With limited jobs available and abundant
jobseekers, competition in labor market becomes fiercer. Hence, many jobseekers in Indonesia that do
not have sufficient non-academic skills remain unemployed even though they hold university degree.
5

These non-academic skills, which are also called soft skills, include presentation abilities, conflict
management, teamwork, and the capability to speak in front of the public. Millions of fresh-graduate
jobseekers, particularly those in cities outside Jakarta, do not know the importance of these soft skills
and therefore study hard to pursue academic excellence alone. Hence, companies with high requirement
do not want to accept jobseekers with low soft skills.
To make matter worse, most universities in Indonesia exacerbate this situation by offering only
academic education but lack additional, non-academic education. These universities thus produce fresh
graduates that are not fully equipped to face job challenges. Consequently, although there are many
university graduates that have desirable academic records seeking job in Indonesia, they cannot meet
job requirements due to these insufficient non-academic skills and are overridden by those that skilled
academically and non-academically.
Afra|d to Iace 8us|ness Cha||enges
Many youths also afraid to start a new business, because they think it is very risky. It requires a big
amount of capital, entrepreneurial skills, and good networking. However, many youths think that they
do not have these requirements and, sadly, do not want to try to have it. As a developing country,
generally people in Indonesia still have unsophisticated mindset in terms of employment compared to
neighboring countries such as Singapore and Malaysia. Rather than starting a new business that costs a
lot of money, time, and energy, they prefer to work as employees because will certainly get regular
income from salaries. By contrast, starting a new business may be profitable and may not, depending on
the products, consumers, marketing, etc.
Unfortunately, most parents, particularly those from low- and middle- income families, also do not
encourage their children to start a new business. They prefer their children to find a job (even though
with low salary) to start a new business (even though it may generates a lot of money). This shortage of
entrepreneurial skills cause only a few people, those with entrepreneurial spirits, that want to start a new
business. As the result, new job opportunities are barely created in Indonesia.

5
See Luk. (2010).
Entrepreneurial Spirits to Solve Youth Unemployment in Indonesia
5
1|me to Change w|th outh-Led G.L.1 Movement
The previous sections have mentioned the impacts and causes of youth unemployment. It is now the
time to show youth-led solution in reducing this problem. The pioneers of this movement are preferably
young entrepreneurs and employers that have proved to buil their careers successfully. Why must
young entrepreneurs and employers have to be the ones to facilitate these programs? The reason is
because they are fresh and open-minded people with experience and skills that adequate enough to
transfer their experience to the youths, whether employed or not. Even though older entrepreneurs are
usually more experienced, inexperienced jobseekers can communicate easier with and be more open to
these younger people to make the process of this movement occur more smoothly.
Figure 1. G.E.T Movement to get jobs more easily

This essay comes up with a solution by proposing the G.E.T movement. This movement which
consists of three main steps: Gaining additional skills and knowledge, 2) Establishing future
entrepreneurship plan, and 3) Tackling youth unemployment by creating new jobs hopefully can help
young jobseekers to offer new job opportunities and reduce unemployment. The main substance of this
proposal is to attack youth unemployment problem (mentioned in the previous section) directly at the
cores. By putting this proposal into practice, youths in Indonesia not only acquire additional know-how
to compete in the job market, but also can create new job opportunities. If this is done on a national
scale simultaneously, Indonesia will not only be able to reduce its unemployment problems, but also
have better human capital and higher incomes.
Ga|n|ng Add|t|ona| Sk|||s and know|edge
The first part of this proposal emphasizes the importance of upgrading youths quality as human capital.
Many youths in Indonesia neglect soft-skills because they think these skills are not important. They do
not realize that this lack of skills can impede their success in getting jobs. By contrast, if job seekers
realize the significance of these soft-skills and start to learn these earlier, they will have a competitive
advantage and be ready to face job challenges and meet job requirements. Fortunately, youths can solve
this lack-of-skills problem without so much difficulty if preemptive efforts are carried out from a
preliminary stage.
Gaining additional skills and knowledge can be implemented in several ways. One way is by holding
seminars given by skillful and experienced youths. On these occasions, they can show university
students and young job seekers the substance of presentation skills, ability to work in groups,
managerial skill, and readiness to face the public. Not only showing the importance of these additional
skills, they also need to share their own experiences, how these skills can help their careers and
communicate with colleagues, partners, and general public. Sharing or QA sessions are also crucial to
ensure that these youths fully understand the main essence of these programs.
In addition to seminars, off-campus trainings are also useful. If most youths already know how these
additional skills can help their careers, practical training is the best follow-up step. They will be more
focused and motivated following the training because they know it can be used to learn competitive
advantage in applying for job. By giving such training, tutors and instructors can additionally give
G = Gaining additional skills and knowledge
E = Establishing future entrepreneurship plan
T = Tackling youth unemployment by crerating new jobs
Entrepreneurial Spirits to Solve Youth Unemployment in Indonesia
6
comments and suggestions to improve the quality presentations, communication skill, and speeches of
the trainees.
Lstab||sh|ng Iuture Lntrepreneursh|p |an
Having job is very important for youths. An employee can gain working experience, create networks,
and save more money by having a job. However, as mentioned before, youths do not need to depend on
their jobs continuously because there is another opportunity that is more beneficial for them:
entrepreneurship. In this second approach, young entrepreneurs need to encourage other youths the
importance of entrepreneurial spirits. The first approach already gives opportunities to youths to gain
much additional knowledge that can provide them with advantages in searching for jobs. Fortunately,
these additional skills are also useful for them to start an entrepreneurship. Hence, youths can maximize
this benefit by planning to start a new business while still young.
When a youth already found a job, they can start planning a new business by building network, saving
more cash, and gaining experience. Because starting a new business is a big step in youths life, hence it
has to be planned meticulously. Recklessness can easily lead a business to failures and bankruptcy.
Even though careful planning does not guarantee a business can prevent bankruptcy, it can reduce the
businesss risk to bankrupt. Young entrepreneurs also need to motivate other youths not to afraid of
failures. A failure can be considered as a learning cost in running a business. If someone failed once,
they can learn from it and try to prevent it in the future.
1ack||ng outh Unemp|oyment by Creat|ng New Iobs
The first step is about assets that need to be accumulated in starting a new business, while the second
step is about the plans that need to be made. The last and most important step is to put the first and
second steps into practice, which is to tackle youth unemployment by creating new jobs. When youths
already have managerial skills, entrepreneurship plans, leadership, some amount of capital, and several
years of working experience, they are ready to start their own business. Young entrepreneurs can start
this campaign and spread the advantages of creating new business to other youths. As mentioned
before, many youths are afraid to take the risk of starting new business. However, if there are successful
young entrepreneurs that have already become a model for them, youths can be assured that starting a
new business will make them independent and have entrepreneur skill. This assurance can be in the
shape of motivation, training, encouragement and support.
This creation of new jobs apparently can resolve the supply-demand problem market. Moreover, young
entrepreneurs can create new business relations and have a better income. They can also gain the know-
how to start a new business and spread it to other youths hence more jobs can be created. Young
businessmen that already have a good network also need to invite other parties, such as banks and
government, to make this project work more efficient. In terms of banks, easy access to credit is very
important for new entrepreneurs to start a new business. In terms of government, less complicated
bureaucracy, such as simplified permit systems to start new business can help the project.
These three steps are already booming in the Capital City of Jakarta. In Jakarta now, there are plentiful
youths that are ready to leave their jobs earlier and starting their own business. Even though they realize
that starting a new business is very risky, they know that it is very important to create more job
opportunities. When they failed, they will take lessons from it and try to improve more. Besides, they
have already built networks, accumulated capital, and gained experience from their previous jobs that
are essential in making a new business. These confidence and resources will help them to create a
profitable business. However, in many cities outside Jakarta, particularly small cities, youths are still
afraid to do so. Hence, successful young entrepreneurs in Jakarta need to spread this fashion to other
cities to create entrepreneurial spirits in all over Indonesia.
Entrepreneurial Spirits to Solve Youth Unemployment in Indonesia
7
Co||aborat|on w|th Government
Fortunately, government has also shown an effort to resolve this youth unemployment problem.
Supported by the World Bank, the government has proposed Youth Employment Program (YEP). This
proposal has two main components: enhancing employability/maximizing existing jobs and creating
new jobs. To achieve these two components, YEP implements three approaches:
1. Up-scale JSDF-EYE (Education for Youth Employment) pilot project
2. Youth entrepreneurship
3. Continual Assessment
The first approach, which is conducted by Ministry of Education, mainly gives education to youths in
order to make them capable to enter employment. This program has been imposed since 2003 in six
provinces in Indonesia and has been successfully upgrading youths skills and employing 89% of youth
graduates from 2003-2006. The second approach encourages youth to start a business instead of being
employed. Government supports it by piloting Business Development Service (BDS) Model and
establishing a youth-friendly micro bank. This approach is very important; concerning the limited
demand for labor force is one of the main causes of youth unemployment in Indonesia. It encourages
youths to start their own business and create more job opportunities that can bring back supply-demand
of labor market to its equilibrium. So far, this approach successfully helps youth to get entrepreneurship
training and build networks. They also have easy access to credit from development banks, such as
Grameen Bank. Lastly, government always evaluates these projects and tries to improve their
effectiveness to reduce youth unemployment.
Because both GET and YEP have the same objective, entrepreneurial spirit can be encouraged
maximally. Moreover, this collaboration is a good chance for youths in attracting the government and
community to show what their real potentials and capabilities are. By proposing YEP, the government
has opened the opportunity to settle youth unemployment problem. Hence, youths have to answer this
opportunity by doing their best and to use every opportunity given by the government. If the ongoing
YEP project is supported by the newly proposed GET movement, government, youth, and other parties
can cooperate together to reduce youth unemployment.
Figure 2. Collaboration of GET and YEP to solve youth unemployment problems

Conc|us|on
According to the conclusion of Youth Speak Seminar that was held by World Bank in Jakarta on June
29, 2007, youth need more chances to be entrusted and supported by other parties to show their ability
and chances to gain employment. Cooperation between GET and YEP is a chance to resurrect this trust,
considering their coherent objective: to reduce youth unemployment by encouraging entrepreneurship.
Therefore, youths need to try their best in creating more jobs by entrepreneurship. If the collaboration
succeeds, it can respond to the causes of youth unemployment problems and try to diminish it. If this
problem is solved, Indonesia can have a better economy with educated and prosperous youths.
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Entrepreneurial Spirits to Solve Youth Unemployment in Indonesia
8
keference
CIA. (2010). The World Factbook Indonesia. Retrieved March 7, 2010 from CIA the World Factbook
website: https://www.cia.gov/library/publications/the-world-factbook/geos/id.html.
Fane, G and McLeod, R. (2001). Banking Collapse and Restructuring in Indonesia, 1997-2001. Canberra:
Australian National University.
ILO. (2010). KILMnet [online]. Retrieved February 28, 2010 from ILO website:
http://kilm.ilo.org/KILMnetBeta/.
Luk. (2010).Dua Juta Diploma dan Sarjana Menganggur (Two Millions Bachelors Unemployed). Kompas,
pp.12.
Mada, K. (2009). 60 Persen Sarjana Menganggur (60% of University Graduates Unemployed). Retrieved
February 25, 2010 from Kopas.com website:
http://edukasi.kompas.com/read/2009/01/14/1640427/60.Persen.Sarjana.Menganggur.
Mroz, T and Savage, T. (2003). The Long-Term Effects of Youth Unemployment. Washington, DC:
Employment Policies Institute.
Suryadarma et al. (2007). Reducing Unemployment in Indonesia: Results from a Growth-Employment
Elasticity Model. Jakarta: SMERU.
United Nations. (2003). Youth Employment. In World Youth Report 2003 (pp. 54-71). New York, NY:
United Nations.
Warr, P. (1979). Work, Unemployment and Mental Health. Oxford: Clarendon.
World Bank. (2007). Youth Speak Comments and Inputs on the Proposed Youth Employment Project
Concept Note [PowerPoint Slides]. Retrieved February 18, 2010 from World Bank website:
http://siteresources.worldbank.org/INTEAPREGTOPSOCDEV/Resources/ID-Youth-Presentation-June07.pdf.