The Mixed Effects of Agricultural Technology in Indonesia: Balancing Productivity, Employment and Equity

18 October 2016

Indonesia’s Ministry of Agriculture is modernising the sector with technology. This study analyses its impact on labour dynamics and inequality, and makes recommendations that seek to balance productivity and equity.

The Ministry of Agriculture in Indonesia is actively introducing new technologies in the country’s agriculture sector to increase crop yields, boost farm incomes and increase efficiency in agricultural production. Coincidentally, this move is happening at a time when the labour market is undergoing a significant shift as the percentage of people employed in agriculture has decreased from 45 percent in 2004 to 35 percent in 2014. This report asks whether the agricultural technology initiatives undertaken by the Indonesian government impact the process of structural transformation in a manner that fosters inclusive economic growth while considering the enduring structural disparities within the rural economy.

Drawing on a study conducted in 2014 that focused on the impact of combine harvesters across eight of Indonesia’s rice-producing villages, the report finds that while combine harvesters, which have been promoted by the Ministry of Agriculture since 2012, improved overall income, they also eliminated wage employment for unskilled rural workers, altered income distribution, and exacerbated existing rural inequality.

The report begins by describing the continued reliance of Indonesian workers on agriculture as a significant source of employment, despite the ongoing movement of labour from agriculture to other sectors. It delves into the context and political economy of rural Indonesian communities, emphasising income and power distribution. It proposes policy recommendations to boost agricultural productivity without exacerbating inequality. The author underscores the need for governments in developing economies to consider multiple factors when introducing agricultural technologies, given that conventional methods of agricultural production can also serve other aims, like that of curbing inequality.

This report was featured as a chapter in “Transformations in Technology, Transformations in Work”- a joint report co-authored by the global partners of JustJobs Network.