Economically active population
The land of Thousands of Island is known for its unique culture and majestic beauty. The cultural fervor of the country is reflected in its population which counts to around 201 million people. The Indonesia population makes it ranked fourth in the world only after China, India and United States of America. Out of the more than 13,000 islands of the land only a handful are inhabited that shoots up the population density of the country to a higher level. The island of Java upholds it with more than 107 million people living in that island in an area which spreads to not more than the area of New York State. The Indonesian population presents the picture of a mixed group of ethnic cultures and several linguistic groups.
The increase in population size has been the result of fertility and mortality trends, while international migration has not played a determining role in Indonesia (Dobossy et al., 2003). The combination of these fertility and mortality processes is also called the demographic transition (Hilderink, 2000).
Fertility is measured by the Total Fertility Rate (TFR), which is defined as “the average number of children that would be born per woman if all women lived to the end of their childbearing years and bore children according to a given fertility rate at each age (CIA World Factbook, 2012).‟ This is a period rate, which is widely used and measured among demographers. From this point forward, all TFR references are referring to the period total fertility rate, unless stated otherwise.
The fertility rate in Indonesia is now down to about 2.1 which is almost exactly replacement level and suggests that population will stabilize in the foreseeable distant future. Women are also having babies later, which also slows the rate of population growth. The UN’s medium population projection is that fertility will continue to fall to around 1.85, which would mean the total population, now 232 million, would stabilize at 290 million soon after 2050. However, if fertility falls faster than expected, population could peak by 2035 at just 257 million. As is it, the population is now only growing at barely 1 percent compared with over 2 percent in the 1970s and 1980s, and the rate of increase will continue to fall year by year. The country is also now in the very usual position that the total number of people in each five-year cohort between 0 and 30 is almost exactly the same size: 20 million. There is no baby bulge or bust to worry about.
There are several positive consequences of these overall trends. The first is that the percentage of the population in the 15-59 bracket has already reached 64 percent compared with 58 percent in 1990. This will edge slightly higher to 65 percent by 2020 but essentially is now on a plateau and will remain there for a long time. The median age, which in 1990 was only 21, is now 28 and will climb to 32 by 2020. In other words, it is entering the range which, other things being equal, individual enterprise and productivity are at their peak.
The second is that the pressure for new job creation is easing rapidly, making it more likely that the nation can focus more on quality and productivity. The working-age population grew by 26 million between 1990 and 2000, but the increase fell to 23 million in the decade just ended and will be only 20 million in the decade to 2020. Meanwhile, it will be another two decades at least before the percentage of old people becomes a significant issues. The 65-plus group will be only 7.5 percent by 2020 compared with 6.1 percent today.
Another benefit, at least compared with sexist neo-Confucian countries and parts of India, is that there is no male preference. The ratio of male to female births has been steady at a natural 1.05 for decades. This in turn makes it more likely that fertility will stabilize at or near replacement level while China’s shortage of women will undermine its efforts to sustain the birth rate. Raising the fertility rate (births per woman) to a replacement level of 2.1 will be of limited value if there is a 15 percent shortfall in the number of women (as is the case now in the 0-10 group).
The mortality trends in Indonesia have also shown a diverging path from the average South East Asian mortality development. Indonesia has been characterized by a high mortality level relative to the social, economic and cultural level of the country (Kamarás, 1999). The increasing mortality affected the working age males and females (Valkonen, 1991), whereby the increasing mortality of middle-aged (30-59 years old) males was responsible for 85% of the mortality increase. Jozan (1991) relates the unhealthy lifestyle and Valkonen (1991) relates the increased amount of cardiovascular diseases to be the cause of male health deterioration.
Directly related to the mortality is the life expectancy at birth, which also suffered from the above mentioned. A widening gap between male and female life expectancy arose between 1980 and 1996, resulting in a male life expectancy at birth of 69,8 and 77,8 years for females in 2008. Although male and female life expectancies at birth have witnessed growth over the past 20 years, they are still lagging behind the South East Asian average (WHO, 2010).
The population decrease occurred simultaneously with the ageing of the population. This is shown by an increasing number of the population aged 65+ and a decrease in the number of under 15 year olds, thereby changing the ratio of elderly persons to that of children (the ageing index) in the advantage of the elderly. The growing amount of elderly people has its impact on the dependency ratio (number of people aged 0-14 and 65+ divided by the number of people aged 15-64) and the old age dependency ratio (number of people aged 65+ divided by the number of people aged 15-64). This leads to an increased burden on the active labour force, which is paying the taxes that make the system of Indonesian social securities, pensions and retirements, work.
The development of the labour force therefore plays a crucial role in the maintenance of the public finances (Euwals et al., 2006). Measures to re-establish a stable supply of labour have to be taken, as ageing puts pressure on the (supply of) labour force and therefore on the public finances. The two most effective measures to increase the labour supply are an increase of the labour force participation and a reform of the social security and retirement agreements (Euwals et al., 2006).
It is expected that an increased flexibility and higher employment rates will result in increased labour participation rates for males and females, which is a necessity to overcome the increasing costs of an ageing society.