What Are the Labor Impacts of the Global Financial Crisis? Flexibility Vs Protection: a Case Study of Labor Outsourcing in Bekasi, Indonesia

Rizki Fillaili • Neil Mcculloch
Policy brief SMERU Research Institute • March 2011 Indonesia • United Kingdom

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The impact of the global financial crisis (GFC) in Indonesia started to be felt when the economic growth slowed sharply at the end of 2008. Even though the economy still showed some resilience towards the GFC compared to the neighboring countries, marked by 4.4% GDP growth in the first quarter of 2009, we observed a rapid contraction in trade, large declines in export, and major falls in prices of important commodities. The largest fall in sectoral growth was in the manufacturing industries (of textile-leather-footwear, wood, and wood products) and in the trade, hotel, and restaurant (retail and wholesale trade) industries. The growth of these sectors declined to its lowest point in the middle of the 3rd quarter of 2009. In order to obtain a micro-level picture on how the crisis transmitted and how it had impacted the manufacturing sector at the community and household levels, SMERU conducted a qualitative assessment in one urban community close to a major industrial park in Kabupaten Bekasi. As for the macro-level picture of the crisis impact, it was obtained through a quantitative assessment using a nationally representative labor force survey (Sakernas) before and after the onset of the GFC, conducted by research partners from the Institute of Development Studies (IDS), University of Sussex, United Kingdom (UK). This policy brief specifically draws on both assessments to offer key messages with policy relevance especially on the impact of GFC on the labor market.




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