Aspiring Indonesia—Expanding the Middle Class
Indonesia has seen tremendous progress in poverty reduction over the past couple of decades and, as a result, has made a successful transition from low-income to middle-income country status. As millions have moved out of poverty and extreme povert...
| Main Author: | |
|---|---|
| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/519991580138621024/Aspiring-Indonesia-Expanding-the-Middle-Class http://hdl.handle.net/10986/33237 |
| Summary: | Indonesia has seen tremendous progress
in poverty reduction over the past couple of decades and, as
a result, has made a successful transition from low-income
to middle-income country status. As millions have moved out
of poverty and extreme poverty, we have also witnessed the
rise of Indonesia’s middle class, which now accounts for 20
percent of the total population, or 52 million Indonesians.
This group important for Indonesia’s upward trajectory, but
it still too small for the ambitions of Indonesia. Expanding
the middle class will boost economic growth, strengthen an
influential constituency for better governance, and widen
and deepen the tax base. An expansion of the middle class,
if accompanied by continued growth in the incomes of the
poor and vulnerable, will also help to decrease inequality
and prevent polarization of the country. One of the key
development questions that Indonesia faces is how to expand
the middle class. What will be required to bring the 115
million people who are no longer in poverty and
vulnerability into the middle class? The future of Indonesia
lies partly in the fate of this aspiring middle class, 45
percent of the population, so that they can both share in
and help to drive the country’s growing prosperity.
Government policy can play an instrumental role in expanding
the middle class. This can be done by increasing the level
and quality of education, and the skills of the population,
and making sure there are well-paid jobs waiting for those
in the aspiring middle class. It also means ensuring access
to social protection to help lift these aspirers into the
middle class and keep them there once they arrive, as well
as improving the quality of the public services upon which
they currently depend. Resolve to expand the middle class
will place greater stress on government budgets. The
government will need increasingly rely on the middle class,
whose income taxes will finance much of the investment that
a growing Indonesia will need. This will require a new
social contract with the current – and future – middle class
so that they will embrace the policies that both benefit
themselves while also helping to expand their ranks, rather
than closing off opportunities for others, and creating
political polarization—as has occurred in some countries in
the region in recent years. |
|---|