Qualified Human Capital

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INDONESIA NEEDS QUALIFIED HUMAN CAPITAL

SANTO KOESOEBJONO AND SOLITA SARWONO*

INDONESIA has just completed elections for the peo-ple’s representative councils at the central and region-al levels. It was the world’s largest legislative elections carried out in one single day by almost 190 million peo-ple. In a few months, a new president will be elected and a new cabinet formed. The new government will face various challenges in improving the country’s economy and growth, in line with the growing population.

During the past decade, demography has been back at the center of international discussions related to various sub-jects, such as climate change, need for water, smoking and drugs, and ethnic conflicts. The declining fertility in most parts of the world resulting from strong family planning com-mitment, has reduced the urgency in debates on population development issues. The attention is shifting from fertility to the relationships between age groups or inter-generations within the populations.

Like in many other developing countries, the number of children in Indonesia has dropped as a consequence of de-creasing fertility during the last decades. At the same time the larger cohorts of children born before the fertility decline are becoming older, hence increasing the working age popu-lation between 20 and 60 years.

The large size of the working age group forms a huge labor force which includes women. Labor can be seen as capital that can lead to fast economic growth. This is often referred to as the ‘demographic dividend’ or ‘demographic bonus.’ This term has lately been frequently used by Indonesian pol-iticians and officials.

One needs to be aware, however, that the benefit of demo-graphic dividend can only be realized if the working popula-tion has a good education and are highly skilled. Poor quali-ty of human capital risks missing out on the chance to benefit from the demographic bonus/dividend, as this would reduce the people’s prospect to gain higher productivity and higher skilled—and thus better paid—labor. Good education is an in-vestment triggering a country’s economic growth.

As time goes by, the working group becomes older, the size of aged persons will be larger, while the number of working population keeps shrinking due to the persistent low fertili-ty. The growing size of the retiree group is consuming funds originally allocated for investments. At this point the period to enjoy demographic dividend will reach its end. Therefore countries should equip their workforce with good education to benefit fully from the demographic dividend before this period is completed. Since 2010, Indonesia has entered the period of demographic bonus that will end by 2030.

Recent research argues that the demographic dividend is not only the result of declining fertility. It is triggered by edu-cation that has a dual effect on fertility and productivity. Ed-ucation triggers fertility decline (i.e. postponement of mar-

riage age, limiting the number of children, birth spacing) and at the same time it stimulates growth of productivity. The im-pact of education is evident in a better educated and more skilled labor force, enabling a rise in productivity and hence economic growth.

The effect of education is continuous and the benefit from demographic dividend will not vanish despite the rising number of old-age people. This is evidenced by the recent Hannover Exhibition (Germany) of new technologies and in-novations as products of highly skilled human capital which will sustain economic growth in an aged society. Many elder-ly people continue to be active and productive, sharing their experiences with the younger generation and contributing to technology and economic development.

The new viewpoint on demographic dividend has signifi-cant consequences on government policies on education. Ed-ucation is a long-term and continuous investment in human resources. Enhancement of the quality of education from pri-mary to secondary and tertiary levels (including vocational training) is crucial in order to obtain a highly-qualified hu-man capital.

In the advent of a new president and new cabinet in Indone-sia, the candidates and their advisors should give top priori-ty to education, to reforming the existing system, making it more effective and comprehensive in order to produce quali-fied and competitive human capital.

To broaden knowledge, students should be encouraged and motivated to read books and articles, rather than restrict them-selves to reading and learning by rote the notes given by their teachers/lecturers. Mastering the English language is essential since the results of scientific progress are mostly published in English and seldom translated into Bahasa Indonesia. To back up this system, the staff at the educational institutes should be of high standard and well informed and updated on the recent international developments in specialized fields. Higher edu-cational institutes, in particular, owe their students a good ed-ucation in return for high tuition fees.

Education relates closely with the population’s state of health and thus the health of the labor force. Poor health may lead to low productivity. A skilled worker should work and live in a good physical and mental health condition, in a healthy environment, including in smoke-free working and living areas, as smoking is a serious health hazard.

So, to the new president of Indonesia: please make educa-tional reform your top priority. Lack of qualified human cap-ital will not only reduce the benefi ts of the demographic divi-dend, it will also cause the nation to lose its competitive edge in an increasingly globalized world.●

*) Santo Koesoebjono is an economist-demographer and Solita Sarwono is a psychologist-health educator, both residing in the Netherlands.

Published in Tempo, May 4, 2014 | | 51

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