Office workers walk on a pedestrian bridge over Jl. Sudirman in Jakarta on June 7, 2024. - Photo: Antara file
JAKARTA: Middle-class Indonesians in Jakarta say they are struggling to achieve financial security as the daily necessities associated with urban lifestyles press hard against their monthly income, a perception borne out by new government statistics.
The Jakarta Post has found that food and a roof over one’s head eat up a major chunk of middle-class’s income in the capital, leaving little room for savings and investment and hence keeping many in a delicate position.
Kompas daily reporter Erika Kurnia has about Rp 8 million (US$520) in monthly take-home pay after deductions of taxes and social insurance premiums but has to spare about 15 percent of that on the monthly fee for her office’s cooperative.
That leaves her with less than Rp 7 million per month for other spending, of which “about Rp 5 million to Rp 6 million” go toward regular living expenditures.
Speaking to the Post on Tuesday (Sept 3), she said saving a meaningful amount generally only happened when she raked in extra income from business trip allowances.
Coordinating Economic Minister Airlangga Hartarto announced on Aug 27 that Indonesia’s middle class was worse off today than in 2019, because of the Covid-19 pandemic’s “scarring effect, which hopefully can be resolved”.
In an ad hoc press conference called by Statistics Indonesia (BPS) on Aug 30, the agency’s interim head, Amalia Adininggar Widyasanti, explained the government’s economic stratification.
Using a system created by the World Bank in its 2019 publication, Aspiring Indonesia: Expanding the Middle Class, the government categorises people based on their monthly spending.
Those spending less than Rp 582,932 per month in 2024 are classified as poor, and those who spend between that figure and 1.5 times as much are categorised as vulnerable to poverty, while those spending 1.5 to 3.5 times that figure are called the aspiring middle class.
The middle class is defined as those spending 3.5 to 17 times that same figure of Rp 582,932, or around Rp 2.04 million to Rp 9.91 million.
Anything above that monthly spending puts people in the upper class, says Amalia.
Referring to that classification, 17.13 percent of the archipelago’s 2024 population falls into the middle-class category, far below the share of 21.45 percent in 2019.
The share of the aspiring middle class, meanwhile has grown slightly over the same five-year period to 49.22 percent.
Combined, those two groups make up 66.35 percent of the population in 2024 and account for more than 80 percent of the population’s consumer spending — the largest contributor to Indonesia’s gross domestic product (GDP).
“The middle class has a crucial role as an economic cushion of a country. When the proportion of the middle class is relatively thin, an economy becomes less resilient to shocks,” says Amalia.
The BPS data reveal that more than two thirds of middle-class spending goes toward food and housing and that middle class Indonesians today spend a greater share of their income on those primary necessities and less on entertainment and durable goods like cars.
Jakarta is notorious for comparatively high rents, and Erika has to set aside Rp 1.25 million every month for a room, excluding utility bills, and about twice as much for food.
Aji Dwi Septian, a freelance geographic information system (GIS) analyst, spends nothing for rent, as he opts to live with his mother in Bogor, West Java, which cuts his monthly spending to a mere Rp 2 million to Rp 3 million.
Given the nature of freelancing, Aji’s monthly income is uncertain, but it usually falls within the range of Rp 7 million to Rp 11 million, many times above his routine spending, which mostly goes toward food, much like everyone else’s.
Aji told the Post on Tuesday that he pushed down his expenditures to just “critical consumption” so that he could save and invest to prepare for times of unemployment, which are common in freelancing.
Gery, an engineer at a multinational company, is categorised as upper class in BPS’s matrix, since his monthly expenditure always exceeds Rp 10 million.
However, he does not associate himself with the upper-class label and does not feel he belongs in that category, noting that some unforeseen event could quickly land him in “financial ruin”.
When his father died earlier this year, he had to spend a hefty amount to cover the elaborate burial ceremony expected in his cultural tradition, an expense he could handle thanks to a freshly disbursed holiday bonus.
Out of his monthly income, which varies between Rp 15 million and more than Rp 20 million, Gery says he can barely save up, since he has to spend on his younger brother’s education and help with his mother’s household expenditures.
“But I have to admit that I can still easily have fun,” Gery said on Thursday.
Bank Permata chief economist Josua Pardede told the Post on Friday that using spending as the variable for economic classification was “less than ideal”, since income was more reflective of people’s purchasing power.
However, he acknowledged that getting such data was difficult, given the high number of informal sector workers in Indonesia who might declare less than their true earnings for the purpose of avoiding taxes.
Josua also noted that the financial burden of the “sandwich generation” of Indonesians who have to shoulder expenses for their children as well as their parents could distort assumptions of affluence.
“My opinion is that the government can help carry the sandwich generation’s burden by providing free schools [and] health care,” says Josua.
Concurring, Bhima Yudhistira, executive director of the Center of Economic and Law Studies (CELIOS), pointed out that Indonesia’s social safety net ratio was only 2.5 percent of its GDP, among the lowest in South-East Asia.
“This is not only a problem of middle-class incomes seeing little raise, but also how the state is not yet capable of providing affordable education as well as social security for the old,” Bhima told the Post on Friday. - The Jakarta Post/ANN
