INDONESIA’S economy remains resilient. Based on Bank Indonesia’s projections, growth is expected to hold within the 4.7% to 5.5% range for 2025 and rise to 5.1% to 5.9% by 2027.
While these numbers signal strength amid global uncertainty, growth does not automatically translate into better jobs.
A disconnect occurs when expansion is driven by capital-intensive investment and efficiency gains while formal job creation lags behind the labour force’s growth.
In plain terms, the economy can look healthy on paper while the quality of work and the opportunities for upward mobility remain uneven.
This gap is now being reshaped by artificial intelligence (AI). A 2025 AWS study suggests that Indonesian firms deploy AI primarily to cut costs through process improvements and to boost revenues.
This is unsurprising, as businesses invest to protect the bottom line, but these areas point to two very different futures.
AI can be used to automate tasks and reduce head count, or it can be used to augment workers by raising productivity and enabling them to take on higher-value work. In an augmentation model, AI serves as a tool while humans retain the decisive roles of judgment, accountability and responsibility. Technology does not impact all jobs equally.
David Autor, an economist at the Massachusetts Institute of Technology or MIT, describes a “barbell” pattern in the labour market where demand grows at both ends while the middle thins out.
High-skill, high-wage jobs expand and low-skill manual roles remain necessary, but middle-skill routine jobs, which are easily standardised and digitised, shrink.
In Indonesia, this vulnerable middle includes administrative roles, back office functions and routine information processing. As AI automates these tasks, this group faces a double risk of failing to move up and being pushed down into lower-skill roles or informal work.
This is not merely a labour statistic.
It erodes the tax base and weakens economic resilience. The signs are already visible, with youth unemployment hovering around 17% and educated unemployment exceeding one million.
If the barbell effect deepens while transitions remain blocked, the challenge will not only be the number of jobs, but also the quality of work and the durability of growth itself. To prevent this hollowing out, the policy focus must shift from simply reducing the impact of automation to building a proactive transition pathway.
This requires three levers to move in unison, starting with a push for demand that goes beyond mere efficiency. If firms use AI only to cut costs, the result is efficiency without better jobs.
Incentives should instead encourage AI adoption that guides workers into higher-value functions, such as data stewardship, process redesign and roles that blend business intuition with technical literacy.
Clear rules and well-targeted financing can help steer investment toward outcomes that strengthen both national competitiveness and job quality.
The second lever involves moving the labour market toward skills-based hiring.
Employers must increasingly prioritise demonstrable competence (portfolios and projects) over mere credentials.
Indonesia can accelerate this shift by strengthening skill standards so that firms and training providers speak the same language. This is where modular credentials can help, provided they are credible. — The Jakarta Post/ANN
FX Tyas Prasaja is an economist at Bank Indonesia. The views expressed here are the writer’s own.
