JAKARTA, Indonesia (BN24) — The World Bank has sounded the alarm over the growing prevalence of informal and low-productivity jobs across East Asia and the Pacific, cautioning that the shift away from stable employment could erode the region’s economic resilience and threaten long-term development.
The warning came during the release of the October 2025 East Asia and Pacific Economic Update, led by Aaditya Mattoo, the World Bank’s Chief Economist for the region. At the centre of the briefing was a stark message: millions of workers are increasingly employed in insecure, low-wage positions, many within the informal service and gig economy sectors, with few social protections and limited prospects for upward mobility.
“Many people are leaving low-productivity farming, not for high-productivity industries, but for low-productivity service jobs,” Mattoo said during the October 8 press event. This trend, he warned, risks reversing decades of economic progress and expanding inequality across the region.
The report noted a major shift in employment patterns over the past decade, particularly in countries like Indonesia, where the informal labour sector has continued to expand despite the country’s economic recovery from the pandemic. Traditionally, economic development in the region has been supported by migration from low-productivity agriculture to higher-productivity sectors like manufacturing. But the latest data suggests that this structural transformation is stagnating.
In Indonesia, data from the Central Statistics Agency (BPS) illustrates the extent of the challenge. As of February 2025, 86.56 million Indonesians, 59.4% of the total labour force, were working in informal jobs, while formal employment stood at 59.19 million or 40.6%. This marks a rise of 0.23 percentage points in informal employment compared to the same period in 2024, mirroring a simultaneous decline in formal job numbers.
The World Bank’s report highlights that this rising informality undermines productivity, wage growth, and job security, leaving millions of workers without adequate health coverage, retirement plans, or legal protections. Mattoo emphasised that without structural reforms, the situation may deteriorate further: “A large share of people in this region work in informal or low-productivity jobs. The population at risk of falling into poverty now exceeds the size of the middle class in most countries.”
In Indonesia, economists and labour experts have raised concerns about persistent structural weaknesses in the labour market, including limited access to quality employment, over-reliance on low-skill service jobs, weak industrial diversification, and insufficient safety nets. Analysts say the growing number of informal workers is both a symptom and a driver of deeper inequality and stagnating wage growth.
The World Bank urged governments across East Asia to prioritise job creation in high-productivity sectors, invest in workforce training programs, and strengthen formal employment systems to counteract the rise of precarious work. Failing to do so, it warned, could put the region’s growing middle class at risk of sliding back into poverty, eroding the gains of the last two decades.
As East Asian economies look to maintain momentum in an increasingly uncertain global environment, the quality of employment, not just its quantity, is becoming a defining issue for policymakers, businesses, and communities alike.
