Population growth isn’t automatically good for Indonesia. Developing young people, and helping them to move are both key to economic development.
Indonesia’s President Joko Widodo recently talked about the ‘demographic dividend’ in an Instagram post, pointing out the high numbers of young Indonesians should not be viewed as a burden on the country but a strength, powering the motor of the Indonesian economy.
The demographic dividend refers to the dominance of young working-age people within the population who, with their purchasing power, can generate wider economic growth.
Reaping the potential of this dividend requires improving human capital – the skills, health and education of the young. Jokowi’s post included an illustration of young Indonesians working on laptops, in labs, in fashion and in various other industries.
While education has been the most prominent tool to accelerate human capital, migration can be an alternative or a complement. Through movement to other regions of Indonesia, individuals can improve their skills and productivity, improving income, access to opportunities, education and health facilities, and securing prospects for their future.
At the regional level, previous studies have shown not only can in-country migration play a critical role in the growth of human capital, the increasing stock in human capital attributed to migrants can also accelerate social services and public amenities, increase tax receipts, and create intangible gains such as knowledge dissemination in local communities.
Migration has been a major driver of population growth in several cities in Indonesia. Since migration is dominated by young and educated individuals, destinations can reap the demographic bonus. The capital Jakarta and its surrounding regions are the main destinations of young migrants. Another is Yogyakarta. This region – home to a great number of reputable public and private universities – has a crucial role in human capital. The majority of young migrants in this region move for education reasons.
Yogyakarta also has an important role as a human capital redistributor. Once they graduate, most former students migrate again, either to their hometowns or new regions. The redistribution of human capital through multiple migrations can improve economic performance across regions.
The population growth in a high-profile industrial city, Batam, has also mainly been attributed to the flow of internal migrants. The presence of a large number of manufacturing industries has attracted many migrant workers. In the eastern part of Indonesia, Sorong City experienced rapid growth in retail, transportation, hotel and accommodation, food and beverage, finance, education, and government services in recent decades. Compared with western Indonesia, the labour market in the east is less competitive, allowing many migrants to develop careers in a relatively short time.
According to Indonesia’s 2020 Census, there were about 44 people in non-working age groups (the very old and the very young) for every 100 people in the Indonesian working-age population, down from 51 in 2010. This trend is predicted to continue for the next 10-15 years before it rises again along with the increasing proportion of the older age population.
The low ratio of dependents to workers should be seen as a window of opportunity for reaping the demographic dividend, which is realised when a population’s human capital — knowledge, skills and competencies — is effectively used in the labour market.
Since 2016, Indonesia has had a high level of human development. Most Indonesians have at least attended secondary school, and nearly a tenth have obtained higher education. However, while the average years of schooling was 12.4 years, the knowledge gained during formal education was equivalent to just 7.8 years of schooling.
The growth of the young population needs to be worked on so that it can become a national strength, as touted by Joko Widodo. Alongside human capital development, migration can be enhanced to provide greater opportunities for development and spread economic benefits more broadly.
Meirina Ayumi Malamassam is a researcher at the Research Centre for Population, Indonesia’s National Research and Innovation Agency (BRIN), with primary research interests in population mobility and regional development. She is on Instagram @AyumiMalamassam