Abstract

Data on informal employment officially published by Statistics Indonesia (BPS) so far still uses a simple definition based on only the employment status. As a result, the data cannot be compared with data from other countries since by definition it does not follow the global standard definition by the International Labour Organization (ILO). Therefore, the redefinition of informal employment needs to be done in the Indonesian context to provide a more accurate picture of informality. This study aims to provide a new picture of informal employment to the results of the National Labour Survey (Sakernas). It also aims to identify the determinants of informality under the redefined concept for each of three different employment statuses, which are self-employment, employee, and family worker. Achieving those aims, our study could contribute to more appropriate policies on informality as well as enrich studies on informality in the Indonesian context. We analyzed 508,340 samples which were employed in August 2023 using multinomial logistic regression to identify the determinants of informality for each of three groups. Redefinition of informal employment using ILO’s standard definition resulted in a higher figure of informality in Indonesia than the existing figure using a nonstandard definition that was officially published by BPS. Our estimation pointed out that the difference is around 15 to 18 percentage point. Besides, the estimation results also pointed to an increasing trend of informality during the period 2021-2023 instead of an opposite decreasing trend based on the existing definition at the same period. It seems more realistic considering the Indonesian economic condition in the last three years. Moreover, the estimation results of logistic regression pointed out that the probability of being an informal self-employment worker is higher for workers who were in urban areas, male, married or ever married, low educated, older and have a disability than their counterparts with opposite characteristics. We also found a tendency that informal self-employment could grow in each sector except for the construction sector and other sectors covering electricity-gas, water provision, insurance & financial services, real estate, and education services. In general, the odds of being an informal employee were positively impacted by working status as employees in urban areas and socio-demographic status as male, unmarried, and low educated. Whereas, sectors that tend to absorb more informal employees are agriculture, construction, and other services. Our study recommends the need for assistance for business activities in rural areas, such as promoting OSS registration and easiness of its access. Besides, improving the capacity of the informal workers through proper training and education could help them become more competitive and enter the formal sector quickly, particularly for young workers. We also suggests the government push the issuance of social security and other rights by the employers focusing on the sectors with a low level of formalization.