Automation and the Future of Work in Indonesia: Jobs Lost, Jobs Gained, Jobs Changed

Automation and the Future of Work in Indonesia: Jobs Lost, Jobs Gained, Jobs Changed

By Kaushik Das, Phillia Wibowo, Michael Chui, Vishal Agarwal, Viviek Lath

https://www.mckinsey.com/featured-insights/asia-pacific/automation-and-the-future-of-work-in-indonesia

Automation and artificial intelligence (AI) are transforming the world of work by improving productivity, increasing efficiency, and creating opportunities for economic growth. These technologies enable businesses to perform tasks faster, reduce costs, and improve the quality of goods and services. In Indonesia, adopting automation could help accelerate economic growth, increase workers’ incomes, and expand business opportunities. However, these benefits depend on how effectively businesses, workers, educational institutions, and the government prepare for technological change.

Automation will have three main effects on employment: jobs lost, jobs gained, and jobs changed. Some jobs will disappear as machines and software take over repetitive and predictable tasks, particularly in data collection, data processing, and routine physical work. At the same time, new jobs will emerge as technology creates business opportunities and increases demand for goods and services. Many existing jobs will also change because workers will increasingly use digital tools and automated systems to perform their responsibilities. Therefore, automation is more likely to transform many occupations than to eliminate entire occupations altogether.

In Indonesia, automation presents an opportunity to increase employment in the long term, despite the possibility of job displacement. By 2030, as many as 23 million jobs could be displaced by automation, while approximately 27 million to 46 million new jobs could be created. This could result in a net increase of four million to 23 million jobs. These projections depend on the pace of technological adoption and the growth of the economy. New employment opportunities may arise from higher household incomes, investment in infrastructure and buildings, increased spending on healthcare and education, and the expansion of digital businesses. Online commerce and digital platforms also demonstrate how technology can create new forms of employment and support entrepreneurship.

The changing nature of employment will affect different economic sectors and groups of workers in different ways. Construction, manufacturing, accommodation and food services, education, healthcare, and retail and wholesale trade could experience increased demand for workers. In contrast, occupations dominated by repetitive activities may face greater pressure from automation. As employment shifts between sectors and occupations, workers will need to develop new skills and adapt to changing job requirements. Higher levels of education may also become increasingly important as more jobs require advanced knowledge and specialized expertise.

Preparing workers for these changes is essential to ensure that the benefits of automation are widely shared. Future employment will require not only technological knowledge but also social and emotional skills, creativity, critical thinking, problem-solving abilities, communication, and the capacity to manage people. Workers who can apply professional expertise, interact effectively with others, and handle unpredictable situations may be less vulnerable to automation. Education and training systems therefore need to adjust their curricula to reflect changing labor market needs. Businesses should also provide continuous learning opportunities to help employees adapt to new technologies and responsibilities.

Successful adoption of automation requires coordinated action from the government, businesses, educational institutions, and other organizations. The government can support the transition by investing in infrastructure, education, healthcare, and workforce development while encouraging innovation and entrepreneurship. Businesses need to plan for technological changes, invest in employee training, and reorganize work so that people and machines can complement each other. Educational institutions must equip students with relevant knowledge and adaptable skills, while small and medium-sized enterprises and technology start-ups can contribute to job creation and broader economic participation.

Overall, automation offers Indonesia an opportunity to improve productivity, strengthen economic competitiveness, and create new employment opportunities. However, these outcomes are not automatic. The country must address the challenges of job displacement, changing skill requirements, and unequal access to education and economic opportunities. The main lesson is that technological progress should be accompanied by investment in people, continuous learning, and cooperation among public and private institutions. By preparing workers and businesses for changing job demands, Indonesia can better manage the risks of automation while maximizing its economic and social benefits.

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