Older People’s Capacity to Work in Indonesia

Abstract

This study aimed to estimate the work capacity of older Indonesians based on their health condition and other characteristics. Two analytic methods were used in this analysis—the Milligan–Wise method and the Cutler–Meara–Richards-Shubik method—and they found relatively small and substantial additional work capacities, respectively. The results showed that mortality alone may not be able to explain the additional work capacity due to only small improvements in the health conditions of older people. The effect of poverty, the dominance of the informal sector, low educational attainment and skills, and inadequate government social protection and assistance were also responsible for the continued employment of older people until serious health conditions halted their economic activities. Thus, several features were highlighted in this study: (i) the feasibility of extending the pensionable age, (ii) flexible terms for a pension scheme for informal workers, (iii) improved health conditions by expanding the noncontributory health insurance, and (iv) upgraded skills for older workers.