The labor-intensive industrial sector is currently in the most vulnerable position regarding Layoffs (PHK). This condition is triggered by an ongoing contraction in the manufacturing sector that is projected to continue in the coming months unless there is significant policy intervention.
Core Indonesia economist Yusuf Rendy Manilet revealed that the textile, garment, and footwear industries are under the greatest pressure. This is due to thin profit margins and high reliance on imported raw materials. Companies in this sector face a severe dilemma, as the room to raise selling prices is extremely limited amidst surging production costs.
The Manufacturing Purchasing Managers' Index (PMI) data, which remains below the 50 level, serves as a serious warning signal. Declines in output, new orders, and reduced raw material inventories are early indicators of weakening that are typically followed by workforce efficiency measures. Before resorting to permanent layoffs, companies usually take the route of reducing working hours or not renewing employee contracts.
Pressure on business actors is further compounded by the weakening of the rupiah exchange rate, rising energy prices, and intense competition with imported products. Yusuf emphasized that the phase of layoff realizations is now starting to be felt in several industrial areas, particularly in Java, carrying the risk of creating a negative cycle that depresses overall public purchasing power.
To mitigate worse impacts, the government is urged to immediately distribute targeted incentives directly aimed at reducing production costs, such as providing more affordable energy and ensuring raw material supplies. In addition, providing incentives for industries that manage to retain their workforce is considered a crucial step to maintain national labor market stability in the short term.
