Demographic Bonus: A story from Indonesia

Age structure of the population is a vital aspect in analyzing its linkages with the economy. Indonesia is estimated to reach demographic bonus in 2020-2030. However, Indonesia's labor force has not been optimally absorbed in the job market. How big the economy must be driven to utilize the economic potential requiring in-depth study on the development of the workforce and its impact on economic growth that becomes the purpose of this study. Some demographic and economic variables are used in series during 1960-2012. Descriptive and inferential analysis using Cobb Douglas production function are methods of analysis used in this study. The analysis aims to portray the result both at national and provincial level. The result confirms that demographic bonus in Indonesia will occur in 2025 with its lowest dependency rate at 44.2. In Java-Bali provinces, Jakarta is currently enjoying the bonus and others are closely approaching. The increase in the number of workers has little impact on gross domestic product growth and an increase in the number of workers is not necessarily accompanied by an increase in total factor productivity nationally. Based on these findings, several thoughts are proposed for valuable Government’s insight in formulating appropriate policy.