Over the past 20 years, the disparity between wealthy Indonesians and the rest of the population in Indonesia has increased exponentially. Special Staff of the Vice President of Indonesia, Bambang Widianto said at a 2021 guest lecture that Indonesia is the fourth most unequal country globally. According to Oxfam, “the four richest men in Indonesia have more wealth than the combined total of the [most impoverished] 100 million people.” This increase in inequality in Indonesia undermines the fight against poverty while slowing the nation’s economic growth.
How Inequality Affects Citizens
Inequality in Indonesia affects the nation’s inhabitants in many ways. Some groups including women face harsher impacts of inequality. Poverty impacts women disproportionately as does low wages and job insecurity. In terms of Indonesia’s Gini coefficient, “a measure of national consumption inequality,” the country notes an increase from 31.1 in 1999 to 38.2 in 2019. This means “income distribution has become much more unequal.” The Asian financial crisis brought impacts mostly affecting the wealthiest, however, “since 2003, Indonesia’s richest 20% have enjoyed much higher growth in incomes and consumption,” thus contributing to inequality in Indonesia. According to the Asian Development Bank (ADB), almost 10% of the nation lived below the national poverty line in 2020.
5 Facts About Inequality in Indonesia
- Geographic Disparities. Indonesia has a complex geographical setting as it comprises about 7,500 islands and more than 43% of the population lives in rural areas. In these areas, access to basic infrastructure and services, such as electricity or decent roads for transportation is rare. In addition, large corporations control some territories and their business activities contribute to increasing inequality by benefiting mostly the wealthy.
- Education Inequalities. The Indonesian education sector suffers from underfunding and there are many barriers to equal access, such as poverty. This is notable in secondary education where net secondary school enrollment rates stood at 78.7% in 2018 while the primary school net enrollment rate was 93% in the same year. Without a complete education, impoverished Indonesians cannot access higher-paying, skilled jobs to break cycles of poverty. In addition, children from wealthier families have the benefits of a high-quality private school education while others attend average schools with lower-quality education standards. Impoverished children are more likely to drop out of school because education in Indonesia is only free until Grade 9. These inequalities are notable within the job market: “High-salary, formal jobs for highly qualified workers on the one hand and informal, low-wage jobs requiring low skills on the other.” The Jakarta Post said that “unequal access to skills and rising wages for the skilled has increased wage inequality.”
- Economic Growth Inequalities. According to a 2016 article by The Jakarta Post based on World Bank findings, just 20% of Indonesians reaped the benefits of the country’s economic growth over the past decade. This means that the economic growth did not benefit 80% of the nation, equating to 205 million people.
- Children Face the Impacts of Inequality. Due to poverty stemming from inequality, inadequate nutrition means that 37% of Indonesian children endured stunting in 2016. Stunting impairs mental and cognitive development, increasing children’s struggles in attaining an education, which limits their skills and thus limits their chances of securing higher-paying jobs.
- The Family Hope Program (PKH). This program provides “conditional social assistance” to impoverished families in Indonesia. It began its operations in 2007 as an initiative of the Ministry of Social Affairs. The program’s assistance improves access to “basic social services in health, education, food and nutrition, care, assistance and other social protection.” In 2019, the Indonesian government provided 10 million households with conditional cash transfers worth $2.21 billion. The program allocated each household “a base benefit” of Rp 550,000 (Indonesian rupiah) with additional benefits “such as an additional Rp 2 million per annum” for every secondary school student in the household. In 2020, a study shows that the PKH program improved by 53% the school re-enrollment rates of unenrolled or drop-out students aged seven to 15 years old from beneficiary families. PKH also decreased by 48% “the number of children engaged in wage work.” In relation to health outcomes, “toddlers of recipient families are now 23% less likely to suffer from stunting.”
The Path Going Forward
There is a desire on the part of the Indonesian government to reduce inequality in Indonesia. President Jokowi’s administration made addressing inequality a priority during 2017. To further reduce inequality in Indonesia, a 2017 report by Oxfam indicates that “a living wage for all workers” is important as is ” increasing spending on public services” and raising the tax obligations of wealthy individuals and companies. With a commitment to reducing inequality in Indonesia, nationwide poverty can simultaneously reduce.
– Ander Moreno