Employment Mobility in East Java During the COVID-19 Pandemic

Abstract

The study examines the mobility of workers between the formal and informal sectors in East Java, Indonesia. The potential mobilities of workers are examined, not only from the formal to informal sector and from informal to formal sector, but also the movement of new entrants (who do not have a job in the past) to the formal-informal sector jobs. Using the 2021 National Labor Force Survey (SAKERNAS), the study contributes to the literature by examining the mobilities in the case of developing countries during an economic downturn during the COVID-19 pandemic. The study is essential in supporting the policies in the region with the existence of a large informal sector in the labor market. Using probit regression, the study found that workers who have previously worked in the formal sector are more likely to enter (re-enter) formal sector employment when the economy starts recovering in 2021. In contrast, workers previously employed in the informal sector have a lower probability of moving to the formal sector. The study continues examining the implications of the different income levels of formal and informal sector workers. The results using Heckman’s bias correction selection show that new entrants (workers who have no job previously or freshly graduated) earn more earnings than workers who have previously been employed in the formal-informal sector. One possible reason is the role of digitalization and working-from-home activities that might support, particularly young educated people, to work productively during the pandemic.