Impact of Migration Policy on Income Disitribution in Indonesia

Abstract

Migration has become an important livelihood strategy for the Indonesian people to seek better economic opportunities. Indonesian workers who work abroad ( TKI ) migrate with several reasons including the lack of employment opportunities, poverty and wage differentials between Indonesia and destination countries. Statistics Indonesia data show that income inequality in Indonesia is high. Gini ratio as a measure of income inequality has increased from 0.36 in 2007 to 0.41 in 2012. This is an indication that poverty which is reflected by the higher income inequality is one of economic development problem in Indonesia, besides unemployment. The unemployment rate in all sectors of the Indonesian economy is high, but the most work abroad is low-skilled labor. Globally, Indonesian labor migration driven by the domestic sector employment opportunities in destination countries such as domestic, agriculture, construction, manufacturing and service sectors. Domestic sector (informal) often are not covered by labor law and industrial relations legislation in the destination country. This causes the low-skilled labor mainly female worker (TKW) is in a vulnerableposition to exploitation. In June 2009, the government imposed a moratorium (restrictions) placement of informal sector workers for Malaysia. Restrictions also apply to Saudi Arabia which effect from August 1st, 2011. The moratorium aims to protect and ensure the safety of migrant workers mainly informal worker sector. Informal restrictions on the placement of migrant workers would have an impact on the welfare of labor and increase the inequality of income due to fewer opportunities to earn a better income for low-skilled labor. Regulation changes in the destination country that more accepting skilled labor migrants, requires the Indonesian government to improve the placement of skilled labor migrants. In addition, within the framework of the ASEAN Economic Community (AEC), the mobility workers regulations only regulate skilled labor mobility. Therefore, in 2013 the government through BNP2TKI set a target of 600 thousand migrant workers placement, an increase of 21% compared to 2012 while imposing a moratorium and still prefer the placement of migrant workers in the formal sector. The government also set long-term targets to stop informal sector workers placement and just place the formal worker sector in 2017. Any economic or social policies that affect the real income of the people of a country are directly or indirectly will ultimately affect the migration process of a country. The migration process itself, in turn, tends to influence or even change the patterns of economic activity, both sectorally and geographically as well as changing patterns of income distribution. The purpose of this study was to analyze the impact of the government's migration policies on income distribution and to identify the most effective policies that affect income distribution in Indonesia. The analysis in this study using the National Social Accounting Matrix (SAM) of Indonesia in 2008 , the descriptive analysis and Theil Index analysis. SAM is one of the data collection systems and analysis tools that are important to monitor and analyze the various problems of poverty and income distribution . Descriptive analysis is used to provide a general overview of labor migration abroad, remittances and income inequality in Indonesia . Meanwhile, Theil index analysis is used to see the impact of migration policy on income inequality, both among groups of households or groups of households inequality in itself. The results showed that the moratorium resulted in declining household income and increase inequality. Placement policy of formal sector workers and skills training programs can increase household income, but does not affect the inequality. Meanwhile, lending policy and skills training for retired workers, and a package of policy can increase household incomes while lowering inequality . Therefore, policy recommendations can be suggested that the government is expected to impose a policy package consisting of an informal moratorium on migrant workers and improve the formal sector deployment, provide skills training for migrant low-skilled labor, as well as entrepreneurial training and business lending for retired workers. Training programs should be adjusted to the available job order indestination countries, so that migrant workers can obtain jobs in the formal sector with a higher salary as well as better security and welfare.