INDONESIA: A troubling trend has emerged in Indonesia, where the middle-class population is shrinking, raising concerns about the country’s aspirations to achieve developed-nation status and the potential for social unrest.
According to the country’s statistics agency, reported by the South China Morning Post, the middle-class segment has decreased to 47.85 million this year.
Despite this decline, middle-class and aspiring middle-class groups still make up 66.35 per cent of the population, contributing significantly to the economy.
Middle-Class: Driver of domestic consumption no more?
The agency’s acting head, Amalia Adininggar, highlighted that the middle class, predominantly comprising Gen X and millennials with higher education, urban dwellers, and formal sector workers, is a crucial driver of domestic consumption, accounting for 81.49 per cent of Indonesia’s US$1.3 trillion economy.
However, the post-pandemic economic recovery has not been kind to this demographic, with a gradual decrease in numbers and a phenomenon Amalia termed the ‘long Covid’ for the economy.
President Joko Widodo acknowledged the global nature of this trend, yet economists are sounding the alarm. Jahen Fachrul Rezki from the University of Indonesia warns that without structural changes, Indonesia’s goal of becoming a developed nation by 2045 is in jeopardy.
He emphasized the middle class’s role in enhancing human capital and productivity.
Arief Anshory Yusuf, an economics professor at the University of Padjadjaran, cautioned that the financial struggles of the middle class could lead to social unrest, citing Chile as an example.
He pointed out that despite Indonesia’s 5.05 per cent growth last year, the middle class did not experience a corresponding increase in wealth.
Govt. supporting the poor, neglecting the middle class
Prihandita Permata, a human resource professional in Bekasi, echoed these concerns, noting that her monthly income of 8 million rupiah (US$515) is barely enough to cover her expenses, with a significant portion going towards food.
She lamented the economic inequality and the government’s focus on supporting the poor, which inadvertently neglects the middle class.
Economists argue that the decline is due to a lack of high-value jobs and the emergence of low-wage service sector positions post-pandemic.
They call for policies to support the middle class, such as education and health aid, and fundamental economic reforms to ensure broad-based growth and tax the super-rich.
As Indonesia grapples with these challenges, the fate of its middle class remains a critical factor in its economic and social stability.