2017年-世界发展银行全球_The_Economics_of_Kretek_Rolling_in_Indonesia_56页_817kb

Summary of The Economics of Kretek Rolling in Indonesia

Core Content

This report examines the socioeconomic and labor market characteristics of kretek workers and their households in Indonesia, with a focus on the potential impacts of tobacco tax reforms on employment and income. It is part of the Indonesia Tobacco Employment Studies, conducted by the World Bank and the American Cancer Society.

Key Findings

Smoking Prevalence and Health Impact

• Indonesia has one of the highest rates of cigarette consumption globally, with an estimated 73.6 million smokers in 2015 (around 40% of the adult population).
• Smoking prevalence among working-age individuals has exceeded 30% since 2001.
• If current trends continue, the smoking population could grow to 95 million by 2025.
• Adopting the UN General Assembly’s 2011 target for reducing smoking prevalence by 30% could lower the smoking population share from 35.7% in 2010 to 25% in 2025, significantly reducing premature deaths from NCDs like cancer, diabetes, lung disease, and cardiovascular disease.

Kretek Industry Overview

• Kretek is a major form of combustible tobacco in Indonesia, with 93% of workers employed in hand-rolled (SKT) factories.
• The industry is highly concentrated in Central Java, East Java, and West Nusa Tenggara, with Kudus and Malang being two of the largest producing districts.
• The industry is labor-intensive, with 94% of workers being female, and an average age of 40 years.
• Most kretek workers have only elementary or junior high school education, and only a third work full-time.

Employment and Income Patterns

• The majority (65%) of kretek workers have unwritten contracts with their firms.
• Contract workers are more likely to receive non-wage benefits such as sick leave, maternity leave, and paid holidays.
• Kretek workers are often engaged in multiple tasks (46%) and work less than full-time due to non-market responsibilities like child care and household chores.
• Full-time workers work approximately 2,568 hours annually, while part-time workers work about 1,426 hours annually.

Social Safety Nets

• About 60.84% of kretek households received at least one form of social benefit in the past year.
• These include cash assistance, rice for the poor (raskin), health assistance, and education support.
• 11.9% of kretek households own a Social Protection Card (KPS or KKS), which provides a monthly cash assistance of Rp 200,000 (US$15).
• Female-headed households are more likely to receive social benefits.

Economic Impact of Tax Reform

• A proposed tax increase is estimated to reduce employment in the handmade kretek industry by 8.25%.
• This would lead to a 38% drop in household resources and a 41% drop in household income, with wage income falling by 49%.
• However, the total income loss is only 1.4% of the revenue gain from the tax increase.
• The report argues that this is a win-win scenario, as the tax increase can reduce tobacco use and related health costs, while generating revenue that can offset the income loss for displaced workers.

Job Creation and Substitution

• The report notes that the gross employment effect of tax increases may be offset by job creation in other sectors due to consumer substitution.
• Historical evidence shows that job losses in the tobacco sector are often compensated by job creation elsewhere in the economy.
• Ahsan and Wiyono (2007) estimated that a 25% tax increase could create 84,340–281,135 jobs in other sectors.

Policy Recommendations

1. Immediate Income Support: Provide targeted income support to the most vulnerable groups, such as less-educated, older workers and female-headed households, with less than 2% of the revenue gained from tax increases.
2. Reskilling and Redeployment: Allocate the remaining 98% of the additional revenue for reskilling and redeployment programs to help displaced workers transition to alternative employment in the short to medium term.

Methodology

• The analysis is based on data from a sample survey of 720 kretek workers' households in Kudus and Malang.
• The survey includes focus group discussions (FGDs) and a specific module on livelihood options.
• The report also references national-level data and previous studies on other segments of the tobacco sector, including tobacco farmers and clove farmers.

Conclusion

The report highlights the importance of understanding the socioeconomic and labor market characteristics of kretek workers to design effective tax reform policies that balance public health goals with the economic well-being of workers in the industry. It concludes that while tax increases may lead to employment losses in the kretek sector, the overall impact is manageable and can be mitigated through appropriate social support and reskilling initiatives.