The World Bank has raised concerns over worsening employment quality across East Asia and the Pacific, warning that the growing shift towards informal and low-productivity jobs threatens the region’s economic resilience, CNBC Indonesia reports. The findings were presented by Aaditya Mattoo, the World Bank’s Chief Economist for East Asia and the Pacific, during the October 2025 East Asia and Pacific Economic Update press briefing.

Mattoo explained that over the past decade, countries across the region have undergone a structural shift in employment, moving away from productive sectors such as agriculture and manufacturing toward the informal service sector. “Many people are leaving low-productivity farming, not for high-productivity industries, but for low-productivity service jobs, including those in the gig economy,” he said on October 8.

The World Bank cited Indonesia as a key example, noting a significant rise in informal employment within the services sector. Mattoo highlighted that this shift represents a worrying trend, as fewer workers are entering stable, high-value industries such as manufacturing, which traditionally drive economic growth and wage improvements.

According to the World Bank’s report, the expansion of the informal economy could increase vulnerability among the middle class, making them more prone to slipping into poverty. “A large share of people in this region work in informal or low-productivity jobs. The population at risk of falling into poverty now exceeds the size of the middle class in most countries,” the report noted.

Supporting this view, Indonesia’s Central Statistics Agency (BPS) reported that informal workers continue to dominate the national labour market. As of February 2025, there were 86.56mn informal workers, accounting for 59.4% of the total workforce, while formal employment stood at 59.19mn people, or 40.6%.

Compared with February 2024, the share of informal workers increased by 0.23 percentage points, while the proportion of formal workers declined by the same margin. Analysts say this indicates that structural issues within Indonesia’s labour market, such as limited access to quality jobs, slow industrial diversification, and weak social protection, remain unresolved.

The World Bank’s findings underscore the urgency for governments in the region to strengthen job creation, skill development, and formal sector growth to prevent long-term productivity stagnation and growing inequality.