Informality and the Education Factor in Indonesian Labor

Axellina Muara Setyanti


Informal sector plays a major role in Indonesia. In 2018, this sector generates 57,9 percent employment of the total workforce. Moreover, Small and Medium Enterprises (SMEs), one of the biggest pockets of informal workers account 64.19 million business units and contributes 99,99 percent to the total business units in Indonesia. Using the data from Survei Angkatan Kerja Nasional (Sakernas) 2018, this study aimed to identify the characteristics of informal workers in Indonesia and to understand does the informality vary across the workers’ education level. The results show that the higher of workers’ education, they are less likely to work in informal sector. Group of people who have higher probability to work informally are those who live in rural, women, elderly, have less household members, have primary to secondary education background, and not holding training certificate. The informal sector should get a particular attention from policy makers so it can improve working conditions to make better employment that offer greater economic inclusion, generate higher income, and create pathways out of poverty.


Informal workers, Informal Sector, Employment, Education

Full Text:



Aagarwal, M Kumar. and Dhakal, R Chandra.,

(2010). Informal Sector And Income

Generation In Nepal--A Case Of Chitwan

District. Indian Journal of Labour

Economics, 53(2).

Badan Perencanaan Pembangunan Nasional

(Bappenas). (2009). Kajian Evaluasi

Pembangunan Sektoral Peran Sektor

Informal Sebagai Katup Pengaman

Masalah Ketenagakerjaan. Jakarta:

Kedeputian Evaluasi Kinerja

Pembangunan Bappenas.

Badan Pusat Statistik (BPS). (2018). Persentase

Pekerja Formal Menurut Provinsi 2015-

Jakarta: Badan Pusat Statistik.

Badan Pusat Statistik (BPS). (2019). Analisis

Hasil SE2016 lanjutan Potensi

Peningkatan Kinerja Usaha Mikro Kecil.

Jakarta: Badan Pusat Statistik.

Bromley, R. (1978). Urban Informal Sector-Why

Is It Worth Discussing-Introduction.

Oxford: Pergamon Press.

Brown, A. M. B., & Roever, S. (2017). Enhancing

productivity in the urban informal

economy. DFID-ESRC Joint Fund for

Poverty Alleviation Research, RES-167-

-059 Making Space for the Poor: Law,

Rights, Regulation and Street-Trade in

the 21st Century

Calás, M.B., Smircich, L. and Bourne, K.A.,

(2009). Extending the boundaries:

Reframing “entrepreneurship as social

change” through feminist perspectives.

Academy of Management Review,

(3), pp.552-569.

Carr, Marilyn and Chen, Martha (2002)

Globalization and the Informal

Economy: How Global Trade and

Investment Impact on the Working Poor,

Working Paper on the Informal

Economy Working No. 1 INTEGRATION

(Geneva: International Labour Office).

Chant, S., & Pedwell, C. (2008). Women, gender

and the informal economy: An

assessment of ILO research and suggested ways forward. Geneva: ILO.

García, G. A., & Badillo, E. R. (2018). Rationing

of formal sector jobs and informality: The

Colombian case. Journal of International

Development, 30(5), 760-789.

Gomes, D., Iachan, F., & Santos, C. (2019).

Labor earnings dynamics with a large

informal sector. Meeting Papers Society

for Economic Dynamics No. 793.

Handayani, G. A., Priyagus, P., & Amalia, S.

(2018). Analisis mobilitas tenaga kerja

pada sektor informal. Jurnal Ilmu

Ekonomi Mulawarman (JIEM), 2(4).

Hieu, N.T.M., Giang, N.T.H., Ngoc, V.T.M., Duc,

N.V. and Quan, T.T., (2014). Does the

informal economy mitigate poverty and

how does it work?: the case of Vietnam.

Retrieved from


e.pdf on July 15th 2020.

Hohberg, M., & Lay, J. (2015). The impact of

minimum wages on informal and formal

labor market outcomes: evidence from

Indonesia, IZA Journal of Labor &

Development, 4(1), 1–25.

Ikhsan, Mohamad, (2005), Peran Pasar Tenaga

Kerja yang Fleksibel Dalam Mengatasi

Pengangguran. LPEM Working Paper

No. 11/2005. Lembaga Penyelidikan

Ekonomi dan Masyarakat, Universitas

Indonesia, Jakarta.

ILO. (2013). The Informal Economy and Decent

Work: A Policy Resource Guide.

Geneva: ILO.

-----. (2018). Women and men in the informal

economy: a statistical picture (third

edition) / International Labour Office –

Geneva: ILO.

Jennings, M. (1993). Gender issues in the

informal sector: constraints and

opportunities. Trócaire Development

Review, 49-66.

Kar, S., & Marjit, S. (2009). Urban informal sector

and poverty. International Review of

Economics & Finance, 18(4), 631-642.

Kementerian Koperasi dan Usaha Kecil dan

Menengah (Kemenkop dan UKM).

(2018). Perkembangan Data Usaha

Mikro, Kecil, Menengah (UMKM) Dan

Usaha Besar (UB) Tahun 2017 – 2018.

Retrieved from






%202018.pdf on July 10th 2020

Lee, B., Park, J., & Yang, J. S. (2018). Do older

workers really reduce firm productivity?.

The Economic and Labour Relations

Review, 29(4), 521-542.

Losby, J. L., Else, J. F., Kingslow, M. E.,

Edgcomb, E. L., Malm, E. T., & Kao, V.

(2002). Informal economy literature

review. ISED Consulting and Research,


Montes, J. G. D., Corrales, J., & Singh, P.

(2016). The'informality gap': can

education help minorities escape

informal employment?: evidence from

Peru. IZA Discussion Paper No. 10389

Nackerdien, F., & Yu, D. (2019). A panel data

analysis of the formal-informal sector

labour market linkages in South Africa.

Development Southern Africa, 36(3),


Nilakusmawati, D. P. E., (2009). Kajian Aktivitas

Ekonomi Pelaku Sektor Informal di Kota

Denpasar (Studi Kasus Wanita

Pedagang Canang Sari). Piramida

Jurnal Kependudukan Dan

Pengembangan Sumber Daya Manusia,

Noeraini, A. A. (2015). Ekonomi Informal di

Indonesia, Suatu Tinjauan Pustaka.

Sustainable Competitive Advantage

(SCA), 5(1).

Omom, P. O. (2017). Urban Informal Sector:

How much Women are Struggling for

Family Survival. International Journal of

Physical and Social Sciences, 7(10), 40-

Petrova, K. (2019). Globalization and the

Informal Economy in Developing

Countries. In Globalization and

Development (pp. 49-73). Springer,


Peredo, A. M., & Chrisman, J. J. (2006). Toward

a theory of community-based enterprise.

Academy of management Review,

(2), 309-328.

Pitoyo, A. J. (2007). Dinamika Sektor Informal Dl

Indonesia Prospek, Perkembangan, dan

Kedudukannya dalam Sistem Ekonomi

Makro. Populasi, 18(2).

Rogan, Mike & Cichello, Paul. (2017). Can

informal employment actually reduce

poverty?. Wiego: Women in Informal

Employment Globalizing and

Organizing. Retrieved from on July 15th 2020.

Singh, M. (2009). Social and cultural aspects of

informal sector learning: meeting the

goals of EFA. In International Handbook

of Education for the Changing World of

Work (pp. 349-358).Springer,


Tansel, A., & Acar, E. O. (2016). The

formal/informal employment earnings

gap: evidence from Turkey. In Inequality

after the 20th Century: Papers from the

Sixth ECINEQ Meeting. Emerald Group

Publishing Limited.

Taymaz, E. (2009). Informality and productivity:

Productivity differentials between formal

and informal firms in Turkey. Country

Economic Memorandum (CEM)–

Informality: Causes, Consequences,


UNDP. (2013). Challenges of the Middle Income

Countries: Seoul Debates. Seoul South

Korea: United Nations Development


Uribe J, Ortiz C, García G. 2007. La

Segmentación del Mercado Laboral

Colombiano en la Década de los

Noventa. Revista de Economía

Institucional 9(16): 189–221. e, timber

and mining (pp. 1-28). IIED Working


Weng, X. (2015). The rural informal economy:

Understanding drivers and livelihood

impacts in agricultur

Uribe J, Ortiz C.

Informalidad Laboral En Colombia

–2000: Evolución, Teorías y

Modelos. Programa Editorial

Universidad del Valle: Cali-Colombia


Wijayaningtyas, M., Sipan, I., & Lukiyanto, K.

(2017, November). Informal worker

phenomenon in housing construction

project. In AIP Conference Proceedings

(Vol. 1903, No. 1, p. 070006). AIP

Publishing LLC.


  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.