The Impact of Rising Inequality on Growth and Unemployment in Indonesia: What Does the Evidence Say?

Consumption inequality has been rising in Indonesia over the last decade (see Figure 1). Before the onset of the Asian financal crisis (AFC) in 1997, Indonesia experienced little change in inequality. From 1980 to 1996, the Gini ratio (a standard economic measure of inequality), based on household consumption, fluctuated between 0.32 and 0.36.1 While the impact of the AFC brought down inequality to Indonesia's lowest level since 1980 (0.30 in 2000), this was largely because the crisis hit those who were relatively well-off in urban areas harder than it hit Indonesia's poor in rural areas. However, since recovering from the AFC in the early 2000s, the Gini ratio has increased rapidly and has reached new records of 0.41 in 2011 and 2012. Of course, rising inequality is not restricted to Indonesia; there is growing concern about the current trend of rising inequality across the world.2 Nonetheless, while some argue that inequality in income or consumption is necessary for the accumulation of assets or market incentive for long-term growth investment, our research3 finds that increasing inequality will actually lead to adverse growth. Consumption inequality is usually closely related to other forms of inequality, such as inequality in access to education, health, and public services. This often manifests as inequality of opportunity. These dimensions of inequality have significant detrimental effects on economic growth, and even political and social stability. Thus, in turn, it also poses substantial risk to human development

Expanding Social Security in Indonesia: the Processes and Challenges

This paper reviews the development of social security provision in Indonesia, which has evolved from very little in its early years to the privilege of formal sector workers during the New Order period to universal coverage, at least in principle, in the current period. These changes were in line with and driven by the developments of the Indonesian economy in general, which has gone through various episodes marked by both booms and crises. There are two important milestones in the development of social security in Indonesia. First, after the change in government during the chaotic mid-1960s, the New Order government gradually developed various social security schemes, but limited to formal sector workers only. Second, after the Asian Financial Crisis at the end of 1990s exposed the weaknesses of the social security system in place, successive governments established a stronger social security system by adopting universal coverage. The challenges for implementing it, however, are formidable due to Indonesia's vast geography, huge population and diverse availability and quality of infrastructure

The Relationship Between Chronic Poverty and Household Dynamics: Evidence From Indonesia

The composition of households frequently change due to births, deaths, divorces, marriages, the departure of children from home, and other compositional changes. consequently, a large number of people undergo some fundamental change in household arrangements during relatively short periods of time. however, using data from Indonesia, this study finds that change in household composition is not a major cause of chronic poverty. similarly, it finds no evidence that households change their composition to cope with negative shocks. nevertheless, the study confirms that the larger the number of household members, the higher the probability that a household is chronically poor. comparing different types of household compositions, households with a single female without children have the lowest probability of being either chronically poor or vulnerable, while single male households with or without children have the highest probability of being vulnerable. frequent changes in household compositions imply that the use of household as the unit of analysis for poverty may undermine, or at least complicate, the conceptualization and measurement of chronic poverty. this also implies that the problem of targeting social protection programs not only relates to implementation, but also has some conceptual roots. keywords: household composition, chronic poverty, social protection, Indonesia jel classification: d10, i32, j1

Accelerating Poverty and Vulnerability Reduction: Trends, Opportunities, and Constraints

Despite progress in poverty reduction during the last four decades, Indonesia is still plagued by high rate of multidimensional poverty and deprivation. the 2009 monetary poverty rate of 14.15% is 5.95 percentage points higher than the government's initial target, while in other dimensions of poverty Indonesia lags behind its neighbours. there are opportunities for accelerating poverty reduction in the future by the virtue of globalisation, demographic dividend, adoption of participatory development approach, and support from international commitment on millennium development goals (mdgs). on the other hand, there are critical constraints to reducing poverty and vulnerability in the forms of insufficient productive opportunities, weak human capabilities, and inadequate social protection. the strategy for accelerating poverty and vulnerability reduction is to capitalize on the opportunities and at the same time effectively address the critical constraints. the policy objective is to enhance human and non-human capital accumulation of the poor to empower them to move out of poverty, while at the same time strengthen the capacity of the near poor to avoid falling into poverty

The Socioeconomic and Health Status of Rural–urban Migrants in Indonesia

This paper seeks to answer whether or not rural–urban migrants “make it”, i.e. whether or not they are able to, at least, achieve a socioeconomic and health status similar to that of their nonmigrant counterparts living in the same city. using specifically collected data on rural–urban migration, this study finds that, after controlling for various characteristics, migrants' household incomes are significantly higher than those of nonmigrants. they also have a significantly lower probability to be absolutely poor than nonmigrants. their health performance and that of their children are also no different from the health status of nonmigrants. there is only weak, and not robust, evidence that children of migrants have a higher probability of being significantly underweight. their children's educational performances do not lag behind. in fact, for lifetime migrants, there is evidence that their children's educational attainments are significantly better than those of nonmigrants' children. therefore it can be inferred that the process of rural-to-urban migration in Indonesia is not a harmful process. in fact, it has been found to be beneficial to the socioeconomic condition of the migrants. it is a way to provide a better life for poor rural people. to allow this process to happen naturally, the government needs to reduce unnecessary barriers to rural people who want to move to urban areas. key words: rural–urban migration, Indonesia, socioeconomic status, health, educatio