Economic Inequality
An Overview
Growing economic inequality is one important problem for a developing country and Indonesia is no exception.
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Recently becoming one of the government’s main concerns especially with the current President Joko Widodo whose policies to tackle economic inequality are already starting to produce results.
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Indonesia's poverty rate has drastically decreased since 1999 due to the rapid economic growth the country experienced over the past few decades. Although this is a great achievement, countering this would be the rising income inequality rates. According to the World Bank Organization: "Growth over the past decade has primarily benefited the richest 20% and left the remaining 80% of the population - about 205 million people - behind."
According to many studies done by many different reputable organisations such as the Asian Development Bank Institute, the World Bank. They have concluded that the main causes of income inequality in Indonesia are
Where we see the impact
The pandemic’s effect on economic inequality:
Over the past 3 years of the pandemic, the income inequality
in Indonesia has actually dropped. During the first year of the
pandemic, wealth inequality had dropped as the rich earned
less from the stock market and the wealth share of both
middle and lower class people expanded due to the shrinking
of debts.
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According to the latest global wealth report by Swiss
investment bank Credit Suisse, the richest 10% held around 66% of the wealth in 2020, down from 74.1% in 2019. Meanwhile, the wealth share of adults in both middle and lower classes expanded to 2.2% from 1.5% in the previous year. The portion of the poorest 40% also slightly expanding.
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The gini ratio for wealth inequality in Indonesia was 0.777 in 2020 compared to the 0.833 in 2019 (a gini ratio between 0.7 is considered low and one above 0.8 is high). Meanwhile, the gini ratio for expenditure inequality was much lower at 0.385. This is because expenditure does not account for savings which rich people have a lot of and the poor barely have any.