Gaps between public perception and system reality of unemployment insurance in Indonesia

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Today, I attended a discussion about Indonesia’s revised employment insurance system and came away with some interesting insights about the gap between international standards, system design, and public perception.

The Recent Reforms

Indonesia has made significant changes to its unemployment insurance system (JKP). Benefits have been increased to 60% of previous salary and extended to cover a six-month period, while simultaneously reducing contributions. From an actuarial perspective, this combination usually raises immediate red flags – increasing benefits while reducing contributions typically doesn’t add up mathematically. The International Labour Organization (ILO) has committed to conducting a thorough financial review of these changes and will report findings back to the National Social Security Council.

Public Perception vs. System Reality

What’s fascinating is the disconnect between public opinion and the actual system design. Many workers and citizens find the system frustrating due to:

  1. Complex eligibility requirements
  2. Cumbersome documentation processes
  3. Ongoing compliance obligations (such as reporting CV submissions)

For example, job seekers must report sending their CV at least five times per month to the BPJS-TK website to continue receiving benefits. This is notably stricter than systems in other countries like Japan, where only two job-hunting activities per month are required.

The JHT Comparison Problem

Part of the public dissatisfaction stems from comparing the unemployment insurance system (JKP) with the old-age savings scheme (JHT). The JHT functions more like a personal savings account, allowing withdrawals during unemployment with relatively simple procedures. In contrast, the JKP, being a unemployment insurance system, necessarily implements more complex procedures to prevent moral hazard.

An International Perspective

Surprisingly, when viewed from a global perspective, Indonesia’s current unemployment insurance system actually makes it far too easy to receive benefits. The perception of difficulty likely stems from:

  1. Limited understanding of how unemployment insurance systems fundamentally work
  2. Unfamiliarity with necessary procedures
  3. The flawed design of self-reporting for monthly unemployment certification

The Core Problem: Weak Employment Services

Perhaps the most critical issue is Indonesia’s underdeveloped job placement infrastructure. In countries like Japan, public employment offices actively match job seekers with openings and can suspend benefits if applicants reject suitable positions without good reason. Indonesia has not had this robust employment service framework yet.

This weakness leads to the government’s concern that too many beneficiaries are collecting the full six months of benefits without finding employment. However, the solution isn’t making benefits easier to access, but rather strengthening job placement services to help people find work more efficiently.

Moving Forward

The key challenge facing Indonesia’s unemployment insurance system is building effective public employment services that connect job seekers with suitable positions. Unfortunately, this critical issue isn’t widely understood among stakeholders, including the government, labor unions, business community, and media.

Until there’s shared awareness and commitment to addressing this fundamental gap, the system will continue to frustrate both administrators (concerned about sustainability) and beneficiaries (frustrated by complex processes and insufficient support for finding new employment).

We will assist the Government in improving the linkage between benefit payments and public employment services.

Note: This article was generated using artificial intelligence technology with human assistance, based on a transcript of my original presentation.