DEMOGRAPHIC VARIABLES AND ITS SIGNIFICANCE FOR

BUSINESS ACTIVITIES
by
Tadjuddin Noer Effendi

Introduction
In a study business environment, demographic variables are important to
understand and to be consider by some one which concerned and involved in business
activities. One of the reasons is that almost all private and public sector has the ultimate
aim for producing and delivering some kind of good or service to people. It would
appear axiomatic, therefore, that necessary and fundamental preliminary of efficient and
affective production and delivery of good and services is a sound and detailed
knowledge of the population which being by business or government agency (Hugo,
1991). Other reason is that knowledge of the population has a potentiality to provide
basic data and information that can be use for helping to strengthen business activities
and in magnetizing investors. In addition, a characteristic of population and their change
over time able to present general pictures of a potential market. For example, a country
having a big population with a high economic status that has purchasing power could
develop an extra-ordinary market expansion. While a country having a big population
but high proportion of population having a low income as indicated by a high incidence
of poverty, a lower level of education and health may not be attractive to investor since
have limitation for market expansion.
A big population characterized by unequal distribution also can hinder
development process and led to hinder the business activities. As we know that about
60% of Indonesia population live in Java and the rest are spreading out in other islands.
To fulfill the need of big population, a state has to invest a lot of fund to develop Java
than other island. As a result, infrastructure and other public facilities are more develop
in Java than outer Java. The available of infrastructures have easy access for investors
to get facilities in developing their activities. Not surprisingly, therefore, investors tend to
be attracted to invest more in Java than outer Java. Another reason for investors being
more willing to invest in Java is that the abundant of laborers are available in Java in
comparison to outer Java.
Demographic variable such as age structures could determine the nature of
business activities. The high proportion of younger age structure can give a potentiality
to other investor to develop their business related to younger age structures needed,
such as school, social facilities etc. However, when fertility rates decline and the

proportion of adult population decrease led to the potential market will change. For
example, the change of population structures of Yogyakarta and Central Java toward
aging population as life of expectancy increase and decrease number of adult
population because or fertility decline subsequently have to force the government
implementing policy to close down or to merger many primary schools. Several years
after, the secondary schools are also finding difficulty to get new pupils. This gives an
illustration on how the change of population structure could determine the public policy.
In contrary, the state has to spend a lot of fund to build new schools to serve young
adult population need in the region where fertility rates still high. In some cases in order
to make available its population need, the state have to provide more budget and grant.
Moreover, more funds have to endow with subsidize to the region that has high poverty
incidence or low quality of population. This perspective assumes that demographic
aspect; especially population growth is place an independent variable.
Other perspective assumes that demographic aspect could place as a
dependent variable. This means that business activities could be influenced
demographic variable. However, this could be occurring in a particular area or country.
For instance in Batam before business activities (industries) are concentrated there, the
number and the population growth was very low. Since business activities are located
there, the rate of population growth increased significantly because abundant of
migrants from other area migrated to Batam. In 1990, the number of population was
about 106.667 and in 1990 increase to 434.299 and in 2010 increase close to 949.775.
This means after industrial development, the population growth of Batam a year in
period 1990-2010 vary between 5-10%. Rapid population growth is a result of inmigration as an attraction of the concentration of business activities (industries) there.
However, the bulk of migrants have created new problems in Batam, such as crime,
housing problem and environment degradation. This in-migration also led to population
structure (age) of Batam are more productive and young potential people. This means
that business activities can be a magnet for people (labor) and lead to determine
population aspect, especially population growth and age structures.
To sum up, theoretically the relationship between demography and business
activities can be analysis from two perspectives.
1. Demographic variables place as an independent variable
Demographic variables
Number of population
Population growth and density
Population structures
(Age, education, employment etc)

Business activities

Economic and social status

2. Demographic variables place as a dependent variables

Business activities
Industries
Services
Agriculture

Demographic variables
Number of population
Population structures

From the previous discussion, it can be learned that demographic information

could help some one to make decision about type, equality, and quantity for their
business. Without those data and information the business person may be find difficulty
in developing their activities. However, business activities can determine population
aspects as well. This gives ample reasons why business person needs to study
demographic aspects. Accordingly, this articles discusses several basic demographic
data and information such a number, distribution and population density, population
structure (age, gender, education and employment) also their change and to evaluate its
implications on business.

NUMBERS, DISTRIBUTION AND POPULATION DENSITY

From the number of Indonesians population in 2010 (237.6 million), it lies in
fourth place after RRC (1,346million), India (1,198 million) and United State (315
million). This large number of population has potential to attract investor because there
would be big market opportunities and an abundant amount of potential labor. Of
course, this would help the development process and stimulated economic growth.
Indonesia is one of destination countries for industrial expansion of industrial countries
(Japan, South Korea, Cina, Hongkong, United States). Investment in several business
activities has stimulated economic growth ranging between 5-8% per year. This
economic growth has led to open opportunities for other business activities.
However, this investment has created many problems cause of the unequal of
quality and population distribution. Regions have large population such as Java may
can attract more investors while other regions such as Papua, Maluku less attractive for
them. Table 1 indicates the comparison of the population in Java and outside Java in
the year 2010. Table 1 indicates about 60% of total population of Indonesia of live in
Java, an island with its area covers only 7% of the total land area of the country.
Especially, Jakarta population density in 2010 is about 14,440 persons per square
kilometers (see Table 1). The high of population density such as Jakarta is a place has
been more attractive for doing business both trade and service. However, it has been
probably beyond the limit of carrying capacity of the environment to support the need of
its population. This limitation has an implication, especially the cost in developing
business, especially manufacturing, in Jakarta. It is more costly in Jakarta comparison to

Table 1
Population Numbers by Gender, Distribution, Density,
and Provinces in 2010

places out side of Jakarta. The reason is that in developing business activities there is a
need take into account the impact upon the environment. Environment has to protect
and to minimize the impact of business on declining the quality environment of
livelihood. This is important to consider in maintaining the sustainable development. To
achieve this, an effort to prevent the degradation of environment we need to develop a
plan and policy in controlling the impact of business activities on quality of environment.
Java, Bali and Sumatra (so called Western Indonesia) have numbers of
population about 78.8% of Indonesia population. The rest about 21.2% of population are
distributing in Kalimantan, Sulawesi, and other islands (so called Eastern Indonesia).
Papua with its area cover 19.3% of the total inhabited only have 1.5% of Indonesian
population. This unequal population distribution has an important implication on
business development. The eastern of Indonesia is less attractive to investor has led to
the business activities not developed in a good way in the region in comparison to Java
and the rest of Western Indonesia. For example Maluku and Papua have the population
density only 12 persons per square meters. In contrast Java has population density
1,055 persons per square meters. The different may have effects on development
process, the development process is faster in Java and the rest of western than eastern
Indonesia and this has an implication on inequality of welfare. This has implication on
business activities.
Demographic data presents in Table 1 could be use for an investment planning
as well. Java has a population density about 1055 per square kilometers could be use
as an indicator that labor and market are available there. However, it has limitation
because land for industries has been limited so that land price is relatively expensive in
comparison to other areas where population density is low. Another problem needs to
be considering in areas having high population densities is for preventing environmental
degradation and pollution. This need more fund so that the cost higher in comparison to
the lower one. Labor cost may be lower but cost for environmental management in order
to support sustainable environment may be more expensive. Those data can help the
businessman to consider other alternatives in decision for their investment.

POPULATION GROWTH
Population growth can be use as basic information for business investment.
They not only assisting in understanding the existing condition but it also can give us
information about trend and prospect of population in the future. Table 2 presents the
population growth rate by province of Indonesia in period 1980-1990, 1990-2000 and
2000-2010. In average before 2000 population growth has decreased but in the last
decade it has increased from 1.35 % in 2000 to 1.49% in 2010. Data in Table 2

indicates that there is a significant provincial variation in the growth rate of population in
period 1990-2010, ranging from 0.37% of Central Java and 5.46% of West Papua.
Those data also presents that in several provinces the population growth in the past 10
years under 1%, such as in Central Java (0.37%), East Java (0.76%) and West
Kalimantan (0.91%). West Java and Banten located surrounding Jakarta, its population
growth about 1.89 % and 2.79% above national growth rate. It seems that the district of
Jabotabek as a greater of Jakarta Metropolitan has been received more in-migrants
from surrounding areas and peoples move out of Jakarta. This fact offered an indication
that to develop business (retail and service) may be better to invest outside Jakarta than
in center of Jakarta.
Provinces outside Java that had experiences in the decline of population growth
were Riau, South Sumatera, Bengkulu, West Nusa Tenggara, West and Central
Kalimantan, North Sulawesi, Southeast Sulawesi. There have been several aspects
causing the decline of population growth. The decline of population growth in Java
provinces are partly causing of fertility and influx of out-migration of provinces the
population growth in the past 10 years under 1%, such as in Central Java, and East
Java. Whereas, West Java and Banten are located surrounding Jakarta, its population
growth above national growth rate. It seems that the district of the region especially
Jabotabek receive more in-migrant since many manufactures operated there. West and
Central Kalimantan, the decrease of population since the large number of population
moved out to other areas cause of social disturbance (riot and social conflict) that
occurred in 1998.
Fertility and mortality decline in several provinces of Java indicates that there is
social change toward small family in response to family planning in the last 10 or 20
years ago. This would be effect on the change of the age structure of population, and as
a consequent, the age structure will change toward aging population. This will be
discussing in the next section (age structures section).
The decline of fertility rate in few provinces have caused by some factors namely:

Social change, especially female education has increased and female has
initiated to enter the labor market of public sector in order to get wages. This
brings change in social (life) behavior of women, especially toward marriage.
They tend to delay marriage since they have to finish education for the sake or
their career development in work place. For the marriage women, planning
spacing of pregnancy is becoming a norm and the preference to have children
depend on the family economic condition. Two children have already been a
norm in young family. in several provinces

Table 2
Population Growth by Province in periods 1961-2010

The awareness in birth control has spread out and has already been accepted in
the society.

The first age marriage has increased significantly, especially for young
generations followed with young eligible couples.

Small family norm are starting to be accepted and children are seen to be an
economic burden (not as fortune any more).

Service towards the effort to controlling and delaying pregnancy has available
and easy to find.

The decline of mortality rate is cause from several factors namely:

Prevention for infection and spread disease has improved significantly. People
are already free from spread disease.

Primary health care had developed and spread out so that people have easy
access to find the health service.

Access to service for pregnancy, childbirth, and modern facilities for mother,
baby and child are already easy to find.

Incidence for poverty tended to decline due to family health nutrition had been
improving and nutrition for child under five years has improved significantly as
well.

Life expectancy for all age has increased.

Data in Table 2 also indicates that several provinces their population growth

have increased at above level of national growth rate. These include provinces of Riau,
Riau Island, East Kalimantan, Central Kalimantan, and Papua. This fact can use as an
indicator that some business activities may have attracted people in-migrated to those
provinces as an effort looking for job to those provinces. For Central Kalimantan,
Southeast Sulawesi, and Papua beside in migration there is might be in association with
the high fertility as result of low quality of human resources cause of the high proportion
of poverty. By analyzing the population growth, we have an idea that there is open
opportunity in those provinces to do business activities. However, the low level of living
condition, low family income as indicated by high poverty rate, the market might is quite
limited leading the prospect for business also limited.
In Riau and East Kalimantan population growth have increased may be caused
by influx of in-migration (young peoples) looking for job there. These areas have
experienced rapid development activities since there are many investors investing in
industries and other business activities. For example in Batam, Riau Island, the bulk of
investment since 2000 lead to the economic growth of Batam has reached
approximately 7% a year. Batam City in the period of 1990-2000 has population growth

approximately 15.63% and in 2000-2010 decreasing to about 7,7% a years, but this still
about 4 times of national population growth. The industries activities have attract more
labor migrated to this region. Free zone policy has attracted investors to invest in varied
of business activities there. This has created a lot of job opportunities and business
activities both formal and informal sector to support the need of its population. This has
a magnet to attract more productive of young people looking for job there. It is not
surprisingly; therefore, the age structures of Batam tend to dominate by productive age
groups. This of course has implication on business activities opportunities in order to
meet the young adult needs. However, the massive in-migration has created a negative
impact on Batam environment. Subsequently, most of in migrants established their
houses by cutting the jungle illegally cause of the degradation of environment quality
due to spread out squatter in reservoir zone. One of the impacts is that the reduced the
supply of cleaning water for consumption. In addition, Batam labor market (industries) is
not able to absorb all of young in-migrants. Most of them have to wait for a while in
getting job as their aspiration. The other had find difficulty entering labor market caused
of them not able to meet the need of labor market. Faced with these problems then
forcing some of them to become unemployed. Crimes and social problems come out
and this phenomenon would affect the future business atmosphere.

POPULATION STRUCTURES
Age
Population growth caused by fertility, mortality, in and out migration would effects
the age structures of population. To understand the relationships between population
growth and the age of population structure we used data population structures by age.
Since 1980 Indonesia had experienced the decrease of fertility and mortality has led to
decreases of population growth (see Table 2) and changed the age structures of
population. This change has effects on demographic structures in which so called
demographic transition: the age of population structures change towards young
population. Proportion population of age 0 14 groups reduced followed by increased of
age 15 24, 25 64 groups. Old peoples (age >65) tend to increased but it relatively
slower compare to young people. The change of population structures indicates in
Figures 1.
The change of age structures has an implication on nature of business. The
young population would have deferent preferences over old population. An implication
from the decline of population growth caused by fertility decline is that the school age of
primary school has decline significantly in few provinces (namely Central Java, East

Java and Yogyakarta) in recent years. For example, in Yogyakarta caused of number
student for grade 1 reduced significantly, the state has applied a policy to merger and
close down the primary school that is lack of new pupils (grade 1). In contrary, the
needs of young and old peoples tend to increase in turn have create other business
opportunities. It should be notes, however, in the long run the increase of old people will
negatively affects on economic growth. The increased of old people will results in lower
saving, less spending and decreased productivity and economic growth (Basri, 2012:
30).

Figure 1
Indonesia Population by Age Group in 1970-2010
60
50

Age groups

Percentage

40

>65
25-64

30

15-24
0-14

20
10
0
1970

1980

1990

2000

2010

Source: BPS, based on 1970-2010 Population Census, Jakarta

These aggregate shifts of age structures are very important for business activities
because many needs for good and services are strongly concentrated in particular age
groups. This will cause corresponding variations in the level and type demand for
particular goods and service. For example, the increase of age 15-65 group will effect
on productive of working age. This in turn will stimulate economic growth. The reasons
for this lies on the increase of age 15-65 groups will reduced dependency ratio. This
means that the expenditures have to spend for unproductive age groups then can be
saved in turn would increase ability of saving and investment. In addition, the
purchasing power of productive of age 15-64 groups will increase expenditure for
secondary and tertiary needs led to increase of demand and business opportunities.
Modigliani and Brumberg (quoted in Basri, 2012: 30) noted that countries with
young population tend to have higher level of consumption than countries with older
population. Young people at the start of their careers buy more cars, houses, furniture,
and other household goods, whereas older are groups consume less and save more. I

10

predict that level of consumption will remain strong in Indonesia. Consumer-oriented

companies can therefore expect to do well. With consumption currently accounting for
65 per cent of the economy, high demand should continue to stimulate economic
growth. However, it should be noted that in the future years dependency ratio of old
population will increase and in turn affect the decreased of productivity and economic
growth. This could happen since the ageing population will results in lower saving and
less spending. Table 3 shows summary of dependency and economic support ratios,
selected Asian Countries in 2000, 2025 and 2050. It can be seen that decreased in child
dependency ratio in 2020 and 2050 and increased old dependency ratio led to decrease
economic ratio.
Table 3
Summary of dependency and economic ratios, selected Asian Countries, 2000, 2025 and 2050
Total dependency
ratio

Child dependency
ratio

Old dependency
ratio

Countries

2000

2000

2000 2025 2050

Japan

0.468 0.673 0.838

0.217 0.226 0.254 0.250 0.447 0.583

0.637 0.582 0.545

South Korea

0.393 0.477 0.678

0.299 0.252 0.270 0.094 0.226 0.417

0.647 0.622 0.564

Indonesia

0.546 0.456 0.573

0.473

0.333 0.313 0.073 0.123 0.260

0.683 0.695 0.652

Philippines

0.676 0.458 0.521

0.615 0.353 0.305 0.061 0.105 0.216

0.677 0.672 0.649

Thailand

0.450 0.453 0.660

0.366 0.274 0.278 0.084 0.178 0.382

0.787 0.728 0.653

Bangladesh

0.622 0.428 0.523

0.569 0.344 0.309 0.052 0.084 0.213

0.753 0.761 0.728

India

0.620 0.459 0.531

0.540 0.336 0.300 0.081 0.123 0.232

0.641 0.638 0.601

2025

2050

2025

2050

Economic support
ratio
2000 2025 2050

Source: Mason, Lee and Russo (quoted in Basri, 2012, p.310)

It is not easy to find any data refer to Indonesia that can use to show the
relationship between expenditure and age structures. To illustrate those relationships
we use examples Australian household expenditure and American expenditure by
various broad categories according to the age structures see Figure 2 and Figure 3.
Figure 2 indicates that the expenditures of household for recreation tend to increased
gradually up to age groups 45-55 and then decrease gradually. This means that age
groups below 33-35 are potentially for recreation market. The market for clothing,
medical care, housing and food could be identification as well. This pattern similar to the
united state as indicated in figure 3. By analyzing relationships between age structure
and household expenditure, we able to identified demand (market) for various goods
and service. It is important to note that age structures not only main factor shaping
demand for a product, but it can be used to understand the potential market. This
means that one of the areas where demographic analysis may be most helpful to
business person is that it can help in identification the location of potential market. In

11

addition, it can help in understanding the behavior of the diverse consumer groups that
make up markets for goods and services both for existing situation and for the future.

Figure 2
Australia: Average Weekly Household Expenditure on Selected
Items by Age, 1988
120
100
80
60
40
20
0
24 and
under

25-34

35-44

housing

45-54

food

55-64

recreation

65+

age

clothing

medical care

Source: Hugo, Graeme, 1981, p. 8

Figure 3
United States: Expenditure on Selected Items by Age, 1988
2000

1600

1200

800

400

0
less than 25

25-34

rent

35-44

45-54

food away from home

55-64

65-74

education

75+

age

health care

Source: Hugo, Graeme, 1981, p. 9

12

Education
Structure and level education of population is important data and information and
they can be use for helping in developing business activity. Data and information on
population education structure and level of a region could give a picture of skill
formation of the labors that is needed for supporting business activities. The region has
low level of education maybe less attractive for business activities which needs support
of skilled labors. For business, activities that do not really on unskilled labors the low
level of education structure would not be a problem but the level of wage would still be
in consideration. Usually educated skill labors require different wages from unskilled
labors. Business activities that are trying and seeking to find out low wage levels tend to
look for regions have low level of education.
Education level of population in normal condition could also be used as an
indicator for understanding economic status of population. Regions with relatively have
high proportion of educated people tend to have high incomes. Hence, it could also be
used as proxy purchasing power of population. The life style and the need of population
are influencing by education level. Based on those reasons, the need for goods and
service for educated and uneducated people are different. As an example, the computer
business could develop well in Yogyakarta because the proportion of highly educated
populations is higher but computer business would not develop in regions where the
proportion of educated population is low such in Papua or Central Kalimantan.
In the period between 1973 and 1991, the state has spending large investment
for school building program. The out come is impressive, primary enrolment gradually
increase close to 100%. As a result, there was a steady declining in illiteracy, between
1961 and - 2003 fell from 44% to 10% for men and from 69% to 16% for female. In
addition, in this period also experienced a rise in secondary enrolment from 10% to
40%. Despite a massive effort carried out by the state, in term of education level,
Indonesia lagged far behind the neighboring countries such as the Philippines,
Malaysia, and Singapore. More than half of the population above 10 years old is only
graduated from primary school. Graduated high education (tertiary education) are lower
about less than 2% in 1990 and increased to about 6% in 2010, except Jakarta,
Yogyakarta, Bali, East Kalimantan, Riau Island (see Table 4). Low level of education to
some extent has implication on the quality of human resources led to low of purchasing
power since they involved in low wages of employment (informal sector). In Eastern
Indonesia, the proportion of population had graduated from secondary and tertiary not

13

Table 4
Education Structures of Population by Province in 1990 and 2010
Education (%) 1990*
Education (%) 2010**
Provinces
Primary

Secondary

Tertiary

Primary

Secondary

Tertiary

Ache
North Sumatra
West Sumatra
Riau
Jambi
South Sumatra
Bengkulu
Lampung
Bangka Belitung
Kepulauan Riau

73.2
69.8
72.1
75.8
78.3
79.1
76.8
81.7
-

25.4
28.7
26.1
22.8
20.5
19.8
21.5
17.5
-

1.4
1.5
1.8
1.4
1.2
1.1
1.6
0.8
-

47.9
46.5
50.9
50.9
56.6
58.3
53.7
56.7
60.6
39.1

44.2
47.6
42.3
43.5
38.7
36.4
39.8
39.8
34.8
52.9

7.9
5.9
6.8
5.6
5.2
5.3
6.5
4.0
4.6
8.0

DKI Jakarta
West Java
Central Java
Yogyakarta
East Java
Banten

51.9
80.9
83.0
67.7
81.2
-

42.8
17.8
16.0
29.4
17.6
-

5.3
1.3
1.0
2.9
1.2
-

30.8
57.7
61.6
42.6
60.3
51.7

55.3
37.2
33.5
47.0
34.9
41.6

13.9
5.8
4.9
10.4
4.8
7.7

Bali

75.6

22.4

2.0

50.9

39.9

9.2

West NusaTenggara
East Nusa Tenggara

84.5
86.2

14.5
12.8

1.0
1.0

64.4
68.0

30.8
27.4

4.4
4.6

West Kalimantan
Central Kalimantan
South Kalimantan
East Kalimantan

83.7
76.3
78.2
69.2

15.3
22.6
20.6
28.5

1.0
1.1
1.2
2.3

64.4
57.7
58.6
46.4

31.7
36.3
35.7
46.3

3.9
6.0
5.7
7.3

North Sulawesi
Central Sulawesi
South Sulawesi
Southeast Sulawesi
West Sulawesi
Gorontalo

71.2
78.0
76.7
77.8
-

26.9
20.6
21.5
20.8
-

1.9
1.1
1.8
1.4
-

48.1
57.7
56.2
66.1
63.7
63.1

45.0
36.3
36.4
29.8
31.7
32.1

6.9
6.2
7.4
4.1
4.6
4.8

Maluku
Maluku Utara
West Papua
Papua

74.9
79.6

23.7
19,0

1.4
1.4

49.3
54.1
45.1
63.6

43.7
40.2
45.6
31.3

7.0
5.l7
9.3
5.1

INDONESIA

73.4

22.3

1.6

55.7

38.3

6.0

Source: *BPS, 1992, Population of Indonesia: Result of Census 1990, Seri S2, p.141
**BPS, 2011, Welfare Statistics 2010, Jakarta, p.89

14

much difference from rest of Indonesia. This may have influenced why investor may not
interesting to invest their capital in some provinces of Indonesia. Not only skill labors are
difficult to find out but also the market could not develop cause of lower purchasing
power.
Data from Table 4 also shows that within 30 years, from 1990 to 2010, the
change of education level of population relatively significant. The proportions of primary
educated populations are decreasing followed by increasing of graduates of secondary
school but the proportions of population that have graduated from tertiary education are
still low (below 10%), although in some provinces show significant increase. This
reflects that although in several provinces the improvement of welfare but has not any
significant change in education level of population. From the business point of view,
those changes have not yet give the possibility for market expansion and may be is still
difficult for developing business activities. May be this is one of the obstacles in tracking
investors to invest their capital in several provinces, especially in the eastern provinces
of Indonesia.

Employment
Besides education as discussed in the previous section, labor force and
employment data could also be use as an indicator to examine the social and economic
transformation process of a region. Labor force participation rate could show
populations participation in labor market. The higher labor participation rates means the
working age populations who are in endeavor to be involved in economic activities are
high. Population growth, the expansion of education, the willingness of female to enter
labor market, and the type of employment in a region could determine labor force
participation in the labor market. Regions which is still depend much on agricultural
sector or informal sector as a source of their income, the labor force participation rate
are significantly higher compared to regions where the economy rely on manufacturing
sectors. Understanding these data and information, businessperson could examine the
changes that will happen and could develop a plan or model for predictions on labor
force supply and market prospect for business development or expansion.
In period 1990-2010, the labor force participation in all provinces has
experienced a significant increase (see Table 5): from below 60% rise to a level above
60%. This indicates that the flow of working age population in entering labor market is
increasing. Population growth that occurred few decades ago has contributed to this
increase. Babies born 20 years ago are starting to enter the labor market. This increase
of labor participation rate might also cause of the increase of female labor force entering
the public sectors a long with the increase their education. However, not all of the

15

Table 5
Labor Force Participation Rate and Open Unemployment by provinces 1990 and 2010
1990*
2010**
Labor Force
Participation
Rate (%)
53,2
53,9
51,0
53,2
56,6
54,9
59,5
56,8
-

Open
Unemployment
Rate (%)
2,8
3,2
3,0
2,8
1,9
2,9
1,8
1,9
-

Labor Force
Participation
Rate (%)
63.2
69.5
66.4
63.7
65.8
70.2
71.9
67.9
66.5
68.8

Open
Unemployment
Rate (%)
8.3
7.4
6.9
8.7
5.9
6.6
4.6
5.6
4.6
6.9

DKI Jakarta
West Java
Central Java
Yogyakarta
East Java
Banten

48,7
49,7
58,6
63,4
57,3
-

7,1
4,1
2,6
2,5
2,7
-

67.8
62.4
70.6
69.8
69.1
65.3

11.0
10.3
6.2
5.7
4.3
13.7

Bali

61,7

2,0

77.4

3.1

West Nusa Tenggara

East Nusa Tenggara

59,2
63,2

2,2
0,8

66.6
72.8

5.3
3.3

West Kalimantan
Central Kalimantan
South Kalimantan
East Kalimantan

61,2
58,7
57,8
53,6

1,9
1,8
3,3
4,3

73.2
69.9
71.3
66.4

4.6
4.1
5.2
10.1

North Sulawesi
Central Sulawesi
South Sulawesi
Southeast Sulawesi
Gorontalo
West Sulawesi

51,3
54,5
44,1
53,5
-

4,3
2,7
4,8
3,3
-

63.3
69.2
64.1
71.9
64.4
71.5

9.6
5.2
8.4
4.6
5.2
4.6

Maluku
North Maluku

49,6
-

3,4
-

66.5
65.1

10.0
6.0

West Papua
Papua

60,9

3,1

69.3
80.9

7.7
3.5

67.7

7.1

Provinces
Aceh
North Sumatra
West Sumatra
Riau
Jambi
South Sumatra
Bengkulu
Lampung
Bangka Belitung
Riau Island

INDONESIA

Source: *BPS, 1992, Populations of Indonesia: Result of Census 1990, Jakarta, Seri S2, p.267
**BPS, 2011, Welfare Indicators 2010, Jakarta, p. 201

16

working age populations acquire employment as their aspiration. Most of them are
continuing looking for jobs owing to the competition to enter labor market more tight in
recent years. As the results, open unemployment has been increasing more than twice
in period 1990-2010. This is an indication that labor market was not able to absorb labor
force. There is tendency that more young educated who just graduated from secondary
and tertiary schools were waiting for a moment looking for job as their aspiration. Not
surprisingly, therefore, that open unemployment rate relatively higher for young
educated (age 20-24) than other age groups (see Figure 4). What is implication of
higher open unemployment rate for business activities? An implication is that the
criminal rate tend to higher so that for developing of business activities in the place has
higher open unemployment rate we have to careful and probably we need more social
cost than in region have lower one.
Figure 4
Open Unemployment Rate by Age Groups 15-24 and 25-65
in Urban dan Rural, Indonesia, Year 2010

Rural

Age groups

Urban

Total
Age 25-65

Indonesia

Age 15-24

10

15

Percentage

20

25

Source : BPS, 2011, Laborer Situation, Agust 2010, Jakarta, p. 25, 26, and 27

Access to job opportunities in formal sectors, especially modern sector

(industries) became even more difficult to be entering by labor force. Facing with this
situations more labor has seek to find prosperity in service sector, namely informal
sector. Many workers of the formal sector that has discharged or received trouble in
putting an effort in formal sector also attempt to enter the informal sector. Table 6
indicates that within 30 years (1990-2010) labor force employing in agricultures have
decreased significantly and following an increase in industries and service sector.
However, more labor force involved in service sector than industries. This reflects that
many laborer forces whose have shifted from agriculture sector had entered service
sector.
The proportion of labor force employed in industry is higher (more than one third)
reported in provinces of Java, except Jakarta (see Table 6). Out side Java only three
provinces Bangka Belitung, Riau Island (Batam) and East Kalimantan are higher

17

Table 6
Percentage of Population 10 Years and over Worked During The previous Week by Industry and Province
in 1990 and 2011
Province
1990 (%)*
2011 (%)**
Agriculture
Industry
Service Agriculture
Industry
Service
Ache
North Sumatra
West Sumatra
Riau
Jambi
South Sumatra
Bengkulu
Lampung
Bangka Belitung
Riau Island

65.5
60.4
59.8
58.1
69.7
64.5
70.9
70.2
-

8.9
10.4
9.2
13.1
8.1
10.4
6.4
8.7
-

25.6
29.2
31.0
28.8
22.2
25.1
22.7
21.1
-

23.8
25.2
21.0
30.2
37.3
34.3
26.1
26.4
13.7
5.4

18.2
25.8
21.8
21.1
15.7
17.3
18.6
26.5
41.7
45.7

58.0
49.0
57.2
48.7
47.0
48.8
55.3
47.1
44.6
48.9

DKI Jakarta
West Java
Central Java
Yogyakarta
East Java
Banten

1.1
36.8
47.9
45.5
50.1
-

28.1
23.2
19.4
19.4
16.4
-

70.8
40.0
32.7
35.1
33.5
-

0.5
15.8
16.9
3.8
21.9
7.5

22.3
40.9
41.3
33.0
35.6
42.9

77.9
43.3
41.8
63.2
42.5
49.6

Bali

44.1

21.5

34.4

4.0

29.4

66.6

West NusaTenggara
East Nusa Tenggara

54.3
75.2

16.9
12.2

28.8
12.6

30.3
11.4

19.5
15.3

50.5
73.3

West Kalimantan
Central Kalimantan
South Kalimantan
East Kalimantan

72.5
61.9
53.8
43.2

8.1
15.2
14.6
20.5

19.4
22.9
31.6
36.3

20.1
33.0
18.2
11.5

25.7
23.2
27.8
31.9

54.2
43.8
54.0
56.6

North Sulawesi
Central Sulawesi
South Sulawesi
Southeast Sulawesi
Gorontalo
West Sulawesi

55.7
67.5
57.6
68.0
-

13.0
8.8
10.1
7.8
-

31.3
23.7
32.3
24.2
-

17.5
20.6
12.6
11.7
19.2
27.5

24.5
18.8
22.6
24.0
22.4
21.9

48.0
60.6
64.8
64.3
58.4
50.6

Maluku
North Maluku

62.0
-

11.4
-

31.3
-

6.6
18.2

17.3
15.7

76.1
66.1

West Papua
14.6
24.1
Papua
71.9
6.9
21.2
9.9
21.8
Source: *BPS, 1992, Population of Indonesia: Result of Census 1990, Jakarta, Seri S2, p.312
**BPS, 2011, Laborer Situation in Indonesia, August 2011, Jakarta, p.92

61.3
68.3

proportion employed in industry. Abundant of labor, good infrastructures and close to

market, Java is favorable for investing in industry. The phenomenon of labors
transformation in some provinces since 1990 was shifted from agriculture to service
sector. As we know that the last 10 years many job opportunities have increased along
the spread out of modern market such as super market, mini market and modern
service such as laundry, cell phone and accessories, car and motor bike services,
restaurants, hotels, houses, and other luxury goods (see Basri, 2012: 33). This has
been stimulating by increasing of middle class as an implication of bonus demography

18

as indicated in the previous discussion. The World Bank reports that the proportion of
the Indonesian population with per capita expenditure of between $2 and $20 per day
increased from 37.7 per cent in 2003 to 56.5 per cent in 2010 (quote in Basri, 201: 32).
These groups by the World Bank define as middle incomes. This has positive effect on
business activities and in turn will effects on purchasing power of the society.
CONCLUSIONS
Demography data and information could contribution for helping the business
person to develop planning in their business activities. It is important to bear in mind that
the relationship between demographic variables and business is not linear relationships.
Their relationships only could happen in a normal condition. One important to do before
we are analyzing demographic variables for business activities we need a set of latest,
validity and accurate data demography. It is also need to check what instrument and the
method were using in data collecting.

19

REFERENCES

Basri. M.Chatib, 2012, Indonesias Role in The World Economy: Sitting on The Fence, in
Anthony Reid (eds), Indonesia Rising: The Repositioning of Asias Third Giant,
Singapore, Institute of Southeast Asian Studies, p.28-48
BPS, 1992, Population of Indonesia: Result of Census 1990, Jakarta, Seri S2
BPS, 2011, Laborer Situation in Indonesia, August 2011, Jakarta
BPS, 2011, Welfare Indicators 2010, Jakarta
BPS, 2011, Welfare Statistics 2010, Jakarta
BPS, Bappenas, UNDP, 2004, National Human Development Report 2004, The Economic of
Democracy: Financing Human Development in Indonesia, Jakarta
ILO, 1998, Employment Challenges of the Indonesian Economic Crisis, Jakarta, UNDP
Hugo, Graeme, 1991, What population Studies Can Do For Business, Journal Of The
Australian Population Association, Vol. 8, No 1, p. 1-22
Johnson, Colin, 1997, The Indonesian Economy: Survey Recent Development, BIES, 33 (2)
Manning, Chris, 1998, Indonesian Labor in Transition: An East Asian Success Story,
Melbourne and Cambridge University Press
World Bank, 1995, Workers in an integrating World, New York, Oxford University Press

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