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CNBC Indonesia

12 Sept 202408:13

Summary

TLDRThe Indonesian middle class faces financial pressures due to government plans to increase taxes to combat inflation and a potential reduction in purchasing power. The proposed changes to the KRL subsidy scheme, based on the Population Number (NIK), are expected to burden the middle class further. Additionally, discussions around mandatory pension contributions and third-party liability insurance for vehicles add to their financial woes. The middle class, a significant driver of the national economy, is shrinking, with numbers decreasing from 57.33 million in 2019 to 47.85 million in 2024, reflecting a decline in spending power and an increased risk of downward mobility.

Takeaways

📈 The Indonesian government plans to increase taxes to curb inflation, which is causing concern among the middle class.
🚄 There are plans to change the subsidy scheme for Jakarta's commuter rail (KRL) based on the population identification number (NIK) starting in 2025.
💼 The change in KRL subsidy scheme is expected to burden the middle class as they may have to pay higher tariffs.
🏢 The middle class is already facing a decrease in purchasing power, with four consecutive months of deflation from May to August 2024.
💬 There is a discussion about mandatory pension programs that could lead to wage cuts for workers, adding financial pressure.
🚗 From January 2025, all vehicles must have third-party liability (TPL) insurance, which is expected to be an additional cost for the middle class.
🏡 The Taperan (TAPERA) policy, which requires contributions from the working class, primarily benefits lower-income groups, leaving the middle class contributing without direct benefits.
📉 The number of middle-class citizens in Indonesia has been decreasing over the past few years, dropping from 57.33 million in 2019 to 47.85 million in 2024.
🏭 The lack of job opportunities in the formal sector and the shift of workers to the informal sector post-pandemic are contributing to the decline in the middle class.
💰 The middle class, which is a significant driver of the national economy, is currently struggling with stagnant wages and increasing expenses.

Q & A

What is the government's plan regarding the subsidy scheme for KRL Jabotabek?
-The government plans to change the subsidy scheme for KRL Jabotabek to be based on the Nomor Induk Kependudukan (NIK) starting in 2025, which is expected to encourage those who can afford to pay higher tariffs.
How does the change in the subsidy scheme for PT KAI affect the budget allocation?
-The budget allocation for PT KAI's PSO subsidy is projected to reach 4.8 trillion in 2025, compared to 2.5 trillion in 2023, with 64% or about 1.6 trillion allocated for KRL subsidies.
What is the potential impact of the new subsidy scheme on the middle class?
-The new subsidy scheme based on NIK is expected to burden the middle class more, as it may lead to increased tariffs for those who can afford it, potentially reducing their purchasing power.
How does the discussion of wage cuts for additional pension programs affect the middle class?
-The middle class may face increased financial pressure due to the potential for wage cuts to fund additional mandatory pension programs, which could further strain their purchasing power.
What is the mandatory third-party liability (TPL) insurance for vehicles, and how does it affect the middle class?
-Starting from January 2025, all vehicles must have TPL insurance, which provides compensation for third parties affected by accidents involving the insured vehicle. This new requirement may add to the financial burden of the middle class.
What is the controversy surrounding the Taperan program and how does it affect the middle class?
-The Taperan program requires contributions from workers (2.5%) and employers (0.5%), but the benefits go to low-income households. The middle class contributes through wage deductions but may not directly benefit, potentially adding to their financial stress.
How has the middle class population in Indonesia been trending in recent years?
-The middle class population in Indonesia has been decreasing, from 57.33 million in 2019 to 48.27 million in 2024, indicating a decline of around 9.48 million people in about 5 years.
What is the role of the middle class in Indonesia's economy?
-The middle class is a significant driver of the Indonesian economy as they are major and fast spenders, contributing significantly to household consumption, which is a primary driver of the economy.
What are the factors contributing to the decline in the middle class population?
-The decline is attributed to factors such as a lack of job opportunities in the formal sector, leading many to switch to the informal sector, and the impact of the COVID-19 pandemic, which has caused many new workers to enter the informal sector directly.
How does the government's lack of attention to the middle class potentially threaten Indonesia's economic goals?
-Neglecting the middle class could undermine Indonesia's aspirations for a golden economy by 2045, as this group is crucial for driving economic growth and consumption.
What are the concerns for the middle class in Indonesia regarding their economic stability?
-The middle class in Indonesia is facing concerns about stagnant wages, increasing expenses, and potential future deductions for insurance and pension contributions, which may lead to a decline in their economic stability and overall quality of life.

Outlines

00:00

📈 Economic Challenges for Indonesia's Middle Class

The Indonesian middle class is facing economic pressures due to planned tax increases, inflation, and changes in government subsidies. The government's plan to change the subsidy scheme for Jakarta's commuter rail (KRL) based on the population identification number (NIK) starting in 2025 is expected to burden the middle class further. The potential rise in KRL fares due to the subsidy scheme change, along with the introduction of compulsory third-party liability (TPL) insurance for vehicles from 2025, will increase the financial strain on the middle class. The middle class, which is a significant driver of the national economy, is also concerned about potential wage cuts for additional pension programs and the impact of these changes on their purchasing power, which has been declining due to deflation over the past four months.

05:01

📉 Shrinking Middle Class and Its Economic Impact

The Indonesian middle class, a key economic driver, has been shrinking in recent years. According to data from the Central Statistics Agency (BPS), the middle class population decreased from 57.33 million in 2019 to 47.85 million in 2024, a drop of 9.48 million people. This decline is concerning as the middle class is a significant consumer group, contributing to household consumption, which is a primary driver of the national economy. The lack of job opportunities in the formal sector and the shift of workers to the informal sector post-pandemic have contributed to this decline. The government's attention to the middle class in policy instruments has been insufficient, which could threaten Indonesia's goal of becoming a developed country by 2045. The middle class is currently grappling with stagnant wages and increasing living costs, leading to a precarious economic situation.

Mindmap

Keywords

💡Inflation

Inflation refers to the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. In the context of the video, inflation is a concern for the middle class in Indonesia as it erodes their purchasing power, making it harder for them to maintain their standard of living. The script mentions the government's plan to increase taxes to match inflation rates, which directly impacts the middle class's financial stability.

💡Subsidy

A subsidy is a form of financial aid or support given by the government to individuals, organizations, or other groups, usually to promote economic activity or to achieve a social goal. In the video, the government's plan to change the subsidy scheme for KRL (commuter line) based on the National Identity Card (NIK) number is discussed. This change is expected to burden the middle class as they may have to pay higher tariffs, which is a significant concern for their financial well-being.

💡Middle Class

The middle class typically refers to individuals or families who earn a moderate income and have a certain level of financial security. In the video, the middle class in Indonesia is depicted as being squeezed due to various economic pressures, including inflation, tax increases, and changes in subsidy schemes. The script highlights how policies like the KRL subsidy change and the introduction of compulsory pension programs might disproportionately affect this group.

💡Deflation

Deflation is an economic phenomenon where there is a general decline in prices, often associated with a decrease in the volume of money. In the video, deflation is mentioned in the context of Indonesia experiencing a continuous decrease in purchasing power, which is a concern for the middle class as it reflects their deteriorating economic situation. The script points out that this deflation has been ongoing for four consecutive months, exacerbating the financial challenges faced by the middle class.

💡Compulsory Pension Program

A compulsory pension program is a government-mandated retirement savings scheme where contributions are made by both employees and employers. In the video, there is discussion about the potential introduction of such a program in Indonesia, which would require wage deductions. This is a concern for the middle class as it could lead to a decrease in their disposable income and add to their financial burdens.

💡Third-Party Liability Insurance (TPL)

Third-Party Liability Insurance, or TPL, is a type of auto insurance that covers the policyholder against claims made by third parties for bodily injury or property damage. The video discusses the Indonesian government's plan to make TPL mandatory for all vehicle owners starting from January 2025. This policy change is expected to add an additional financial burden to the middle class, who will be required to pay for this insurance, even if they were not previously insured.

💡Tapera

Tapera, or the Housing Savings Program, is a mandatory savings scheme in Indonesia where contributions are made by both employees and employers for the purpose of housing financing. The video script mentions that the middle class may not directly benefit from these contributions, as the benefits are primarily directed towards lower-income groups. This highlights a policy that may not be as effective in supporting the middle class's housing needs.

💡Economic Pressure

Economic pressure refers to the financial strain or stress experienced by individuals or groups due to economic conditions. In the video, the middle class in Indonesia is said to be under increasing economic pressure due to a combination of factors, including inflation, potential wage cuts, and new mandatory financial obligations like TPL and pension contributions. This pressure is seen as a threat to their economic stability and overall quality of life.

💡Socioeconomic Class

Socioeconomic class is a category of individuals within a society that share similar economic, social, and cultural characteristics. The video discusses the middle class and how they are affected by various economic policies. The script highlights a shift in the middle class's economic status, with some members potentially moving down to lower classes due to financial burdens, which underscores the importance of economic policies that support this group.

💡Purchasing Power

Purchasing power is the value of a currency in terms of the goods and services that one unit of the currency can buy. The video script mentions that the middle class in Indonesia is experiencing a decline in purchasing power due to inflation and other economic factors. This decline is significant as it directly impacts their ability to afford goods and services, which is a key indicator of their economic well-being.

💡National Identity Card (NIK)

The National Identity Card, or NIK, is a government-issued identification document in Indonesia that contains personal information. In the video, the government's plan to base subsidies for the KRL on the NIK number is discussed. This change could potentially exclude those without a NIK from receiving subsidies, which is a significant concern as it may limit access to affordable public transportation for certain segments of the population.

Highlights

Government plans to increase income tax to combat inflation, causing middle-class Indonesians to worry.

Subsidy changes for KRL commuters based on population identification numbers (NIK) are set to be implemented in 2025.

The new subsidy scheme is expected to burden the middle class as they will have to pay higher tariffs.

The 2025 state budget allocation for PT KAI's fuel subsidy is projected to reach 4.8 trillion, up from 2.5 trillion in 2023.

The implementation of a NIK-based subsidy for KRL is predicted to increase the financial pressure on the middle class.

The middle class is concerned about the potential rise in KL tariffs if the NIK-based subsidy is applied.

The middle class's purchasing power is already threatened by four consecutive months of deflation from May to August 2024.

Talks of mandatory additional pension programs and wage cuts for workers are adding to the middle class's financial stress.

The new pension program is not mandatory for all workers but only for those with a certain salary threshold.

The middle class is already burdened with existing contributions such as BPJS employment and health insurance.

The number of middle-class citizens has been decreasing, dropping from 57.33 million in 2019 to 47.85 million in 2024.

The middle class is a significant driver of the national economy due to their spending habits.

The lack of job opportunities in the formal sector is cited as a reason for the decline in the middle class.

The middle class, traditionally relied upon to stimulate the national economy, is now struggling with stagnant wages and increased expenses.

The government's lack of attention to the middle class could threaten Indonesia's goal of becoming a developed nation by 2045.

The middle class in Indonesia is facing pressure from stagnant wages and is concerned about future financial burdens such as mandatory vehicle insurance.