In 2024, Indonesia’s gross domestic product grew by 5.03 percent, and labor force participation continued on a gradual upward trajectory. However, early 2025 brought mixed signs. The Manufacturing Purchasing Managers' Index (PMI) slipped below the 50-point threshold, indicating a contraction in industrial activity. Yet job vacancy postings in the first quarter of 2025 surged by 121.9 percent year-on-year—according to HR firm Persolkelly—signaling strong hiring interest despite underlying economic caution. 

Behind this paradox is a shift in the composition and expectations of Indonesia’s workforce. Both local and multinational employers are prioritizing digital skillsets and specialized capabilities, such as language and eco-competencies. Firms are investing in HR systems and organizational restructuring to maintain long-term competitiveness. 

Accelerated Demand for HR Tech and Policy Support 

The Indonesian HR tech market, valued at USD 6.01 billion in 2024, has grown in tandem with broader digital transformation efforts across industries. The rise in cloud-based HR platforms for payroll, recruitment, and engagement reflects how Indonesian firms are adapting to more flexible and digitally managed workforce models—particularly in response to hybrid work, project-based hiring, and operational scaling. This trend has been further supported by government incentives, such as tax deductions for companies implementing digital HR systems, as well as ongoing shifts in how enterprises structure and manage talent.

Major urban centers like Jakarta, Surabaya, and Bandung have led adoption, propelled by a combination of tech-savvy enterprises and skilled labor demand. Global vendors such as SAP and Oracle continue to dominate the enterprise segment, while local firms including PT Talenta Digital Indonesia and Linov HR provide tailored solutions for SMEs. 

Despite this strong trajectory, barriers remain. While some reports cite implementation costs ranging from USD 100,000 to 300,000, a 2025 survey by U.S.-based HR solutions provider Arcoro, conducted among 300 professionals in the construction sector, identified a broader range of obstacles: 

• 32 percent reported difficulty integrating new systems with existing tools 

• 29 percent cited employee resistance to change 

• 28 percent pointed to implementation cost 

• 24 percent noted lack of internal expertise 

• 14 percent mentioned insufficient vendor support 

These findings underscore the operational challenges businesses face in digitalizing HR processes, particularly among small and mid-sized firms. 

Nevertheless, long-term prospects remain strong. Policies such as Making Indonesia 4.0, the Indonesia Digital Roadmap and the Pre-Employment Card Program supports digital literacy training for millions of workers. The Ministry of Communications and Informatics projects that more than 12 million Indonesians will require upskilling to stay relevant to labor market needs in the next five years. 

Green Capabilities and the Just Transition Agenda 

Alongside digital transformation, green upskilling has emerged as a core component of Indonesia’s workforce strategy. The national labor roadmap outlines the certification of 20,000 workers in green economy roles by 2029 and the development of at least 10 new occupational standards. These include competencies in renewable energy system maintenance, electric vehicle (EV) servicing, sustainable agriculture, waste management, and energy efficiency auditing. 

This push coincides with Indonesia’s broader energy transition commitments, which include reducing reliance on coal, electrifying the transport sector, and meeting emission targets under its Nationally Determined Contributions (NDCs). As industrial policy focuses increasingly on value-added sectors—particularly nickel and EV battery manufacturing—labor development programs are being designed to supply technically trained workers for green infrastructure projects. 

National Strategic Employment Programs, 2025–2029 

Source: Ministry of Manpower

Efforts toward a “just transition” are also gaining relevance in regions impacted by industrial policy shifts. In Morowali and North Morowali, Central Sulawesi, for example, smelting operations have fueled local GDP growth but left many residents excluded from higher-skilled, better-paying roles due to limited training access. Public employment services are working to align local training centers with green industry standards, enabling more equitable participation in the energy transition. 

While the green workforce segment is still emerging, its growth has implications for the broader labor ecosystem. HR tech platforms are increasingly used to track worker certifications, enroll employees in green training modules, and manage compliance for sustainability-linked labor goals. This reflects a rising awareness of climate-linked operational risks and ESG reporting obligations. 

The Policy Gap in Human Capital Development 

Despite these initiatives, concerns persist over the lack of alignment between industrial growth and workforce readiness. According to a February 2024 Kompas report, Indonesia still lacks a clearly articulated, long-term human capital strategy. While policymakers have emphasized the 2045 vision of becoming a developed country, experts warn that education and training frameworks remain fragmented and slow to respond to sectoral needs. 

Teguh Dartanto, Dean of the Faculty of Economics and Business at the University of Indonesia, noted that the government remains focused on schooling rather than learning outcomes. “There is no serious orchestration to develop superior human resources,” he said. “The government is still focused on schooling, but not learning.” 

This disconnect is especially apparent in areas where resource downstreaming has been promoted. Although nickel smelters have generated thousands of jobs, many local workers are employed only in low-skill, low-wage roles, while skilled positions are filled by workers from other regions or abroad. Field reports indicate that up to 80 percent of skilled labor in these locations is non-local, exacerbating inequality despite local GDP growth. 

Experts argue that a national framework for labor forecasting and regional skills planning is needed. In particular, the current education system does not adequately prepare high school graduates for technical roles. “Not everyone should have to pursue a degree just to be eligible for a job,” Dartanto said. “A quality high school graduate should be equipped with the skills to meet industrial needs.” 

Government data supports this concern. As of 2025, over half of Indonesia’s workforce still holds only a primary or lower secondary education. Tertiary education coverage is projected to reach just 13.5 percent in 2025, growing to only 14.4 percent by 2029. 

Workforce Participation – Education Level Development

Source: Ministry of Manpower

Outlook 

Indonesia’s employment outlook in 2025 reflects a transition economy working to balance global pressures with domestic transformation. While macroeconomic indicators remain steady, sustaining job creation will depend on stronger alignment between workforce development and industrial strategy. With continued investment in human capital—especially in digital skills and green capabilities—Indonesia has the potential to build a more inclusive, competitive, and resilient labor force for the future.