Indonesia, as Southeast Asia’s largest economy, is home to a diverse labor market that spans agriculture, manufacturing, trade, and services. Understanding the most active employment sectors in Indonesia is crucial not just for policymakers and economists, but also for young job seekers, investors, and industry leaders looking to tap into one of Asia’s most dynamic workforces.

Recent labor force data from Indonesia’s Central Statistics Agency (BPS) reveals several trends that will shape the country’s employment landscape in years to come—including sectoral dominance, informal work structures, and the demographic divide between aging laborers and reluctant youth.

This article will explore the top job-absorbing sectors in Indonesia, current challenges and trends, and what the future holds for workforce development across industries.

Major Employment Sectors in Indonesia

According to BPS’s August 2023 data, five industries dominate job absorption in Indonesia:

1. Agriculture, Forestry, and Fisheries

This sector remains the largest employer in Indonesia, absorbing over 39.4 million people or around 28.6% of the national workforce. From rice farmers to fisherfolk, this sector has historically been the backbone of rural employment.

However, despite its size, agriculture is one of the lowest-paying sectors. Older workers (aged 60 and above) in agriculture earn an average monthly income of just Rp 1.27 million, significantly below the national average of Rp 3.27 million.

2. Wholesale and Retail Trade

Employing approximately 26.5 million people (18.9% of workers), this sector includes traditional markets, modern retail chains, and small businesses. It is often the first point of entry for informal workers, especially in urban areas. Women, in particular, dominate micro-retail and food selling, contributing heavily to family incomes.

3. Manufacturing Industry

The manufacturing sector employs about 19.3 million workers, accounting for 13.8% of employment. It includes food processing, textiles, automotive, and electronics. Though offering relatively better pay than agriculture or retail, many roles remain labor-intensive and repetitive, especially in export-oriented factories.

4. Accommodation and Food Services

This sector, closely tied to tourism and domestic consumption, employs over 10.8 million people. It has bounced back since COVID-19, with MSMEs (micro, small, and medium enterprises) playing a key role in job recovery.

5. Construction

With around 9.25 million workers, construction is vital for infrastructure expansion but is highly seasonal and male-dominated. Labor protections and safety standards remain areas of concern.

Workforce Composition and Emerging Trends

The Prevalence of Informal Employment

Indonesia’s workforce is largely informal. As of February 2024, over 59% of employed individuals (about 84 million people) were working without formal contracts, social protection, or access to insurance.

Informality is most common in agriculture and retail. Although it provides easy access to income-generating activities, it leaves workers vulnerable to exploitation, lack of healthcare, and income instability. The government’s efforts to formalize labor remain limited due to enforcement challenges and limited employer incentives.

Aging Workforce in Agriculture

One alarming trend is the aging of agricultural workers. According to GoodStats, over 52% of workers aged 60 and above are employed in agriculture, often continuing out of necessity rather than choice. Meanwhile, only 6% of Gen Z express interest in working in agriculture, citing low pay, limited technology, and a lack of social prestige.

This generational gap may lead to serious challenges in food security, rural economic development, and sustainability unless addressed with urgency.

Urbanization and Sector Shifts

Indonesia's rapid urbanization is slowly changing the structure of employment. As more people move to cities, sectors like logistics, e-commerce, digital services, and creative industries are emerging as new employment engines—particularly for the urban youth.

However, rural areas still depend heavily on traditional sectors, and bridging this rural-urban gap in opportunity remains a development priority.

Challenges Across Employment Sectors

1. Wage Inequality

Despite economic growth, wage disparity remains a persistent issue. For example, while agriculture workers earn an average of Rp 2.41 million, workers in electricity and gas sectors can earn up to Rp 6.75 million per month—almost three times more.

The country must invest in productivity improvement and value chain development to raise incomes in low-wage sectors.

2. Skills Mismatch

There is a growing mismatch between educational qualifications and market demand. Many graduates find themselves overqualified for available roles or lacking relevant digital and soft skills, especially in manufacturing and service sectors. This results in underemployment and slows innovation.

3. Limited Job Security

With such a high rate of informal employment, job security remains elusive for the majority. Informal workers face sudden income loss during illness or economic shocks and are often excluded from retirement benefits or health coverage.

Future Outlook: Policy Recommendations for a Stronger Workforce

To ensure a more resilient labor market, Indonesia must strategically reform its employment sectors. Here are several pathways forward:

1. Formalization of Informal Jobs

• Government subsidies or tax breaks for MSMEs that register workers formally.
• Expand access to universal health insurance (BPJS) and retirement schemes.
• Simplify labor laws to reduce compliance costs for small businesses.

2. Youth Engagement in Agriculture

• Promote agritech startups through incubators and grants.
• Introduce agriculture-focused vocational schools with practical training.
• Create public-private partnerships to showcase successful young farmers.

3. Workforce Upskilling

• Invest in TVET (Technical and Vocational Education and Training) institutions tailored to future industry needs like AI, robotics, logistics, and green energy.
• Launch online learning platforms accessible in rural areas.
• Partner with private companies to provide on-the-job training and certifications.

4. Support for MSMEs

Micro, small, and medium enterprises remain the largest source of employment across sectors. Providing them with access to finance, digital tools, and export support can multiply their impact.

Conclusion

The landscape of employment sectors in Indonesia reflects a dynamic economy at a crossroads. On one hand, agriculture and informal trade continue to dominate due to legacy systems and lack of alternatives. On the other hand, digital transformation, industrial diversification, and urban expansion are creating new pockets of opportunity.

To build a future-ready workforce, Indonesia must balance tradition with innovation—upgrading wages, formalizing labor, and investing in human capital development. By addressing generational divides, regional disparities, and sectoral challenges, Indonesia can ensure inclusive, sustainable job growth for decades to come.