The Fate of the Middle Class in Indonesia: Concerns, Challenges and Solutions

The middle social class in Indonesia continues to be a topic of discussion. Many economists and social analysts fear that the middle class will go down in class, despite its important role in supporting national economic growth. They are often relied upon as the backbone, driver and propeller of the national economy, the main consumers who drive domestic demand, small and medium investors, and drivers of innovation and entrepreneurship. Today, Indonesia's middle class is deeply troubled by soaring prices of basic commodities and the threat of layoffs. As a result, purchasing power is weak and the country's economy is in danger of collapsing. 

According to World Bank data, the middle class is considered to spend between Rp 1.2 million and Rp 6 million per person per month. This class occupies a position between the poor (spending below IDR 500,000 per person per month) and the upper class (spending above IDR 6 million per person per month). This class is dominated by the productive-age population living in urban areas. In its report, the World Bank explained that the number of Indonesia's middle class was recorded at 53.6 million people and the middle class group was vulnerable to poverty 114.7 million people or 64.48 per cent of the total population of Indonesia. In addition, the Central Statistics Agency (BPS) noted that 40 per cent of the middle class in March 2024 contributed 37 per cent to national consumption, so that one-third of the nation's economy depends on the middle class.

Although the number of the middle class in Indonesia has continued to increase in the last 20 years, on the other hand, this majority population has not fully enjoyed the right to basic human development needs. They are also still facing the possibility of being downgraded. Despite growing in the last two decades, the middle class is still vulnerable to various economic shocks. Challenges such as rising living costs, income instability, and the risk of layoffs. This phenomenon creates great uncertainty for the middle class, especially in big cities where the cost of living continues to skyrocket.

They are in a difficult position due to their lack of access to social security. Not poor enough to receive social assistance, but not rich enough to feel financially secure. They have to pay BPJS Health contributions without subsidies because they are not part of the beneficiaries. Also, basic needs are rising, making the burden of living even heavier. The government's focus is usually on the poor, so the middle class is stuck in a position of ‘responsibility’. Policies that favour the poor are often irrelevant to them, while the middle class receives no special attention. 

Policies that favour the middle class need to be implemented immediately so that their position is not vulnerable to decline. Firstly, the government needs to expand their access to low-interest credit and other business support such as training and mentoring. This can help them to grow their businesses and maintain financial stability. Second, skills upgrading through education and vocational training is an important solution. Quality education and technology-based training can help the middle class compete in an increasingly competitive labour market. Third, the need to expand social protection for the middle class is not only about financial support, but also good quality bureaucracy, public services, education and health services, as well as justice and democracy that have an impact on the economy and politics. Not just financial support, but improvements in the bureaucracy, public services, education and healthcare, as well as justice and democracy that have an impact on the economy and politics. This will reduce the risk of ‘downgrading’ due to job or income loss. 

Fourth, the government should issue policies that support labour-intensive sectors that create quality jobs for the middle class. Policies provide incentives to labour-intensive sector companies to avoid layoffs and be able to recruit new employees. Fifth, to strengthen the purchasing power of the middle class, Indonesia must become a competitive production base in the global market, by encouraging FDI to enter the export sector. MSMEs must also be assisted to engage in the global value chain through technology support, training, and wider market access, and other support, not just credit. Thus, MSMEs are able to create middle class jobs.

The fate of Indonesia's middle class is crucial to the future of the national economy. If this class is increasingly depressed and its numbers decline, the impact can be felt directly on economic growth. Therefore, the government needs to pay more attention to the middle class with targeted policies. By establishing policies that support the sustainability of the middle class, such as social protection, access to credit, and quality education, Indonesia's middle class can continue to act as the driving force of the economy. As they grow, the national economy will also become stronger and more stable. As a result, the risk of social inequality will be reduced in the future.