The Role of Co-Operatives in Labor Absorption in Indonesia

M. Shabri Abd.Majid, Azhari Azhari, Faisal Faisal, Heru Fahlevi


Indonesia is known as the country with the largest number of co-operatives in the world with a total membership of 15% of the total population of Indonesia. This study aims to descriptively evaluate the existence and role of cooperatives in labor absorption in  Indonesia. Of 21,135 units of the co-operatives in the country in 2017, 30% of them have been inactive for various reasons. Lacking professional management, capital inadequacy, inefficiency, and business competitiveness have been among the crucial factors determining the sustainability of the co-operative in Indonesia. The co-operatives have not been fully successful to become the backbone and pillar of the national economy,  as mandated by the Article  33,  the  1945 Constitution of Indonesia. The labor absorption of the co-operatives nationwide only amounted to 0.5% of the labor force in Indonesia. Thus, it is importance to strengthen  the   position   of   the   co-operatives  by:   (i)   increasing  the participation of cooperative members, (ii) providing a conducive climate for cooperatives, access to finance, and business development, (iii) improving management skills of managers, supervisors, and members of the  co-operatives  through  regular  and  continuous  trainings,  and  (iv) encouraging  Micro,  Small  and  Medium  Enterprises  (MSMEs)  to  expand their business entity such as by opening the secondary cooperatives.

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