Leave, Return, or Reform?

A Long-Overdue Challenge in Indonesia’s Labor Economy

Student demonstration in front of Polda Metro Jaya, August 2025. Photograph by Farhan Syuja’i, edited by Author.

It has been some time since #KaburAjaDulu captured the Indonesia’s digital conversation, yet the frustrations it represents remain unresolved. Instead of calming the discontent, the Indonesian government now faces even more and fiercer headlines. The recent wave of demonstrations, first ignited by labor unions last August, has escalated into deadly clashes that left public property destroyed and, far worse, lives lost. The urgent question in this long-overdue issue is not merely why people wish to leave, but what their desire to leave reveals about the deeper structural fault lines in Indonesia’s economy.

This phenomenon is rooted in a fundamental failure of labor economics: the critical scarcity of stable, well-paying formal jobs. The proliferation of informal and outsourced employment, exacerbated by political uncertainty, encourages more people to seek dollars abroad over rupiah at home. This necessitates a critical reform of the job market through substantial regulatory change. Instead of judging those who leave, it is an important remedy for Indonesia to reform its labor landscape to retain talent, facilitate skilled returnees, and secure its demographic dividend.

Why Leaving is Somehow Necessary

Current issue extends beyond the classic “brain drain” of high-skilled engineers and tech workers. It is also one of “brain waste” situation, where skills atrophy in an economy that cannot absorb them. Nearly 60% of Indonesian workers remain in informal employment according to Statistics Indonesia, often in roles well below their qualifications.

We may see this similar situation as this is not uniquely for Indonesian. Major economies like India and China face similar pressures. In 2021, over 110,000 Indians renounced their citizenship out of lucrative benefits, with 2.9 million residing in the U.S. by 2023. In China, youth increasingly seek opportunities abroad, often disguised as education, to escape the lingering domestic unemployment.

For Indonesia, the result is an asymmetrical exodus. In 2024 alone, Indonesia deployed approximately 297,000 migrant workers, or an 8.4% annual increase. Their remittances, amounting to US$15.7 billion, constitute a major pillar of household welfare. A Bank Indonesia survey found 68% of these wages are sent home, primarily covering daily necessities. Far from being an act of disloyalty, we may understand now why leaving is somehow necessary.

Who’s Returning?

The positive (or negative?) side is that leaving is not always permanent. Indonesia’s exodus case exodus is asymmetric. Not only top talent leaves for startups in Singapore or high-paying C-level jobs in East Asia, but many low- and medium-skilled Indonesians also migrate to richer countries like Japan or the U.S. They initially acquire hard and demanding skills abroad, which make them more resilient and globally competitive in ways they could not achieve at home. Some eventually return, not because of patriotism that often gauged by our countrymen, but simply because they feel financially secure enough to live a better life in Indonesia.

Lesson from our neighbor Vietnam, they have experienced rising return migration as its economy grows and living standards improve. Many Vietnamese who once left now find better opportunities back home than when they departed. This “rising returnee” trend is fueled by both personal sentiment and the perception of better opportunities at home, driven by the nation’s rapid economic growth and improving living standards.

Meanwhile, in destination countries like Denmark, the dynamic is shifting. An expat survey found that while 43% of respondents plan to extend their stay, their overall time in the country is shortening. After five years, half have returned home. This highlights the need for long-term strategies to retain international talent.

Now, the quest for Indonesia is not simply to restrict movement, but to create an environment that is compelling for both current domestic talent and international talent to return.

How Exactly to Reform?

The remedy lies in deliberate, multi-faceted reform that we can explore:

1. First, transform key informal job sectors into formal ones, supported by fundamentally stronger policies.

This has long been a challenge for Indonesia. Easy to say, hard to do, but it is undoubtedly necessary.

In traditional economic theory, Kuznets expected labor to gradually move from informal agriculture into more productive and higher-paying formal jobs in manufacturing and eventually services. Yet Indonesia continues to struggle in creating an environment that fosters formal employment. The logic is straightforward: fixing regulations to meet workers’ fundamental needs will create safer, less conflict-prone conditions. A stable environment then attracts investment, which in turn creates more formal jobs. To achieve this, Indonesia needs stronger regulatory institutions and new policies that directly support the creation of formal jobs, including revisiting the Labor Law (UU Ketenagakerjaan) outside the Omnibus Law scheme, as labor unions have suggested. A better investment climate will allow more businesses to open, generating sustainable, regulated employment.

2. Second, actively promoting better opportunities for returning Indonesians.

Many Indonesians abroad hesitate to return because they often put an image of undervalued at home. As argued earlier, with no certainty nor guarantee of better live in Indonesia, many professionals will simply stay outside the country. Sadly, in this era, patriotism alone cannot satisfy one tummy. Very understandable, as Adam Smith famously noted, individuals pursue their own gain first.

One interesting suggestion is to provide incentives, such as zero or low-interest credit, for repatriate that are considered as “returnee entrepreneurs” who want to start their own businesses in the country. Equipped with international expertise and networks, they can drive country’s innovation and create more formal jobs.

3. Third, strengthen education-to-employment pathways.

Indonesia needs a stronger mechanism to match Indonesian-born international graduates with domestic opportunities. In classical signaling theory, an internationally recognized degree signals high a potential individual; these graduates demonstrate global competitiveness, multilingual ability, as well as adaptability. Companies in Indonesia should respond by offering attractive salaries and career prospects, while the government can facilitate through a transparent, unbiased platform connecting returnees with top employers, ensuring their skills are not wasted.

4. Lastly, fix the investment climate through political stability and regulatory certainty.

As mentioned earlier, stability is the key to harness our labor potential. To be truthful, public trust bear in Indonesian government is currently at their lowest point and it might need lot of efforts. Restoring it will require more than cosmetic fixes; it demands serious reforms. While this deserves an entire discussion on its own, one thing is clear: if the government can establish political stability and keep true with the regulations, Indonesia will be far better positioned to retain top talent and harness it for national development.

The recent massive demonstrations have significantly amplified the #KaburAjaDulu sentiment, but they also serve as a reminder of the government’s unfinished economic outstanding.

The real choice does not lie with citizens, but with the government to finally confront its longstanding and difficult challenge of building a sustainable job market, establishing a more rigorous and trustworthy governance system, and strengthening the social fabric so that leaving is no longer an act of desperation, but a decision worth reconsidering.