Human capital mismanagement slows Industry 4.0Indonesians in general and many bureaucrats particularly do not see highly educated or skilled employees as assets of the institution.
At a discussion themed increasing efficiency in managing state finances in the era 4.0 toward a ‘golden Indonesia’ in June, Deputy Finance Minister Mardiasmo raised the very interesting and provocative issue that accounting standards have not considered human capital as an asset of an organisation.
Yet if employees are acknowledged as a vital resource to contribute to a company’s competitive advantage, especially in the era of Industry 4.0, arguably they should be measured and recorded as an intangible asset.
The dynamic movements of Industry 4.0 consistently show that lesser but high value intangible assets can perform better than companies with luxurious physical assets. For instance, large stores, like Giant, have closed several outlets in 2019 because of competition from smaller and online retailers.
Mardiasmo suggested stakeholders start designing accounting standards for evaluating human capital as part of an entity’s assets, not as a liability. His idea is in line with business research findings.
The National Center for Education Statistics in the United States revealed that states with the most educated people also have the highest incomes.
Moreover, Jonathan Knowles, the founder and CEO of Type 2 Consulting revealed that in the 90s, the three largest sectors in the S&P 500 were industrials, consumer discretionary and energy that rely heavily on physical assets. However, currently, the three largest sectors of the S&P 500 are technology, finance and health care, which rely mainly on intellectual property.
Recently, the government made an ambitious plan to accelerate the realisation of becoming a developed country, with one of the main focuses being on human capital. Through the Master Plan for Acceleration and Expansion of Indonesia’s Economic Development, the government has a target to produce 4,000 new doctorates each year. Accumulatively by 2025, the national target is expected to achieve 52,000 doctorate holders.
The government’s budget allocation for the educational sector is already 20 percent of the state budget at Rp 492.5 trillion (US$34 billion) and the government also provides scholarships.
According to official data, as of 2016, the number of public officials was around 4.5 million, but only 2 percent of them had a doctorate degree. The target this year is 5 percent. However, the question is how many of doctorate holders have been placed in good fit jobs for benefitting the organisation and society?
Arguably, Indonesians in general and many bureaucrats particularly do not see highly educated or skilled employees as assets of the institution.
By the end of 2018, according to Manpower Minister Hanif Dhakiri, 63 percent of employees were placed not in the jobs that fit their education or training. Another survey in 2018 showed that only 60 percent of individuals obtained higher managerial positions upon returning from overseas studies, and only 51 percent of them obtained a higher salary.
Media stories also revealed that many educated civil servants were not employed in the right jobs or in low ladder positions. For instance, a bachelor of agriculture was placed in a regional public hospital and a bachelor of religion was placed at a health department.
Several master and doctorate holders were under-utilised as data entry staff, IT technicians and straight-news writers.
Of the 230,633 lecturers surveyed in 2017, only 26,199 had doctoral degrees (around 20 percent) and 134,522 had master degree (around 58 percent). With 5.9 million students, at least an additional of 150,000 lecturers with a master and doctoral degree is needed.
Indonesia only has 9,200 researchers, or only 40 researchers per 1 million inhabitants, far away from the 8,000 researchers per 1 million inhabitants as the country’s target.
Moreover, the number of available public policy analysts is still very few (350 active public policy analysts) compared to the needs at the national level in 2020 (6,000). Bad occupational positions creates huge opportunity costs. Investment in a master or doctoral degree needs a lot of time, efforts and funding. The knowledge that has been studied by the individuals in school for years will not optimally be used. Worse, their research skills will deteriorate. What a waste of money, time and human potential.
In 2015, a government scholarship recipient said that the amount of money allocated for one overseas PhD student was around Rp 2.5 billion. Rather than the money being used for under-utilised highly educated employees, it could create more than 60 new businesses.
A multiplier effect could instead be created for economic growth, social development and poverty reduction. Scholarships should be utilised optimally by recipients and not instead waste taxes. As Finance Minister Sri Mulyani Indrawati often says, the problem is not how much the government has allocated, but how we use the money.
Finally, each government institution should be more transparent about what the career path opportunities will be for their employees after finishing their studies. If there are too many master and doctoral degree employees, there will never be enough jobs to accommodate the numbers. If the employees feel like they are not appreciated, they are going to start looking for other jobs.