Triana Rahmawati, a 36-year-old mother of two, once enjoyed the comforts of middle-class life in Indonesia. For nearly a decade, she worked at a publishing company in Jakarta, where she earned a steady income of 6 million rupiah ($400) per month. Casual coffee dates with friends and leisurely outings with her family were routine. However, after losing her job earlier this year, Triana’s life drastically changed.
“My husband still has a job, but we’ve gone from a double-income to a single-income household,” she told . “I have to be prepared for a life of limitations.”
Triana’s experience exemplifies the broader struggles of Indonesia’s middle class, once celebrated as a symbol of the nation’s economic ascent. Indonesia’s middle class, which was growing rapidly before the COVID-19 pandemic, has now significantly shrunk, with alarming implications for the nation’s future.
Decline of Middle Class
In 2019, Indonesia’s middle class was estimated at around 57 million people, accounting for about 21% of the nation’s population. However, as of 2024, that number has dwindled to just under 48 million, or around 17% of the population, according to data from the Central Statistics Agency (BPS). The decline represents a major setback for Southeast Asia’s largest economy, which has long been striving to elevate itself to the ranks of developed nations.
Indonesia defines its middle class as households with monthly expenditures between 2 million and 9.9 million rupiah ($130 to $650). This broad range covers those who can afford basic comforts such as private healthcare and education but are still vulnerable to economic shocks.
The contraction of this crucial demographic, driven by the lingering impacts of the COVID-19 pandemic and subsequent economic challenges, has sounded alarm bells across the country. As the middle class shrinks, so too does the consumer spending power that fuels much of Indonesia’s economy.
The COVID-19 pandemic hit Indonesia hard, causing widespread layoffs across various sectors, from manufacturing and retail to tourism and hospitality. In the aftermath, many Indonesians who were once securely middle class have found themselves struggling to maintain their standard of living.
Economists argue that Indonesia’s sluggish recovery from the pandemic has compounded the problem. Despite the country’s steady annual economic growth of around 5%, much of that growth has been concentrated in low-wage, low-productivity sectors such as retail and the extractive industries. Higher-paying jobs in fields like information technology and manufacturing have remained elusive.
Jahen Fachrul Rezki, a researcher at the University of Indonesia’s Institute for Economic and Social Research, emphasized the importance of the middle class for the country’s long-term economic stability. “The middle class is a cornerstone of the national economy, not just for their purchasing power but because they also represent a highly skilled labor force and contribute significantly to tax revenues,” he said.
Rezki warned that if the middle class continues to shrink, it could create ripple effects across the economy, undermining domestic consumption, the labor market, and government revenue from taxes. “In a country where household consumption drives over 80% of spending, any disruption in middle-class financial security could have widespread ramifications,” he added.
The Struggles of Indonesia’s Workforce
Triana’s experience of job loss is emblematic of a much larger issue plaguing Indonesia’s labor market. Despite being the fourth most populous country in the world, Indonesia has struggled to generate high-value jobs that pay wages sufficient to sustain a middle-class lifestyle.
The rise of the gig economy, characterized by short-term freelance work, has further exacerbated this issue. “The gig economy should serve as supplementary income, but for many Indonesians, it has become their primary source of employment, which is not sustainable,” Rezki explained.
Between January and August 2024 alone, more than 46,000 workers were laid off across multiple sectors, according to data from the Ministry of Manpower. Last year, over 64,000 people lost their jobs, highlighting the instability in the labor market. Many of these workers are now forced to turn to freelance or gig work, often at lower wages than their previous full-time employment.
One such individual is 42-year-old photographer Firdaus Wajidi, who lost his job at a foreign news agency in August 2023. With a family of five to support, Wajidi now relies on freelance work, earning about 7.5 million rupiah ($500) a month, down from the 16 million rupiah ($1,000) he used to make. “Trying to apply for a job at a media company is difficult because I’m over 40,” Wajidi lamented. “Besides, nearly all media companies in Jakarta are facing financial struggles.”
Government Response and Social Safety Nets
Recognizing the gravity of the situation, the Indonesian government has taken steps to expand social safety nets to prevent further economic decline. Coordinating Minister for Human Development and Culture Muhadjir Effendy outlined efforts to provide additional protections, particularly in health and employment, to safeguard vulnerable citizens.
“Our focus now is on providing protections, particularly in health and employment, to safeguard the vulnerable,” Effendy told the state-run Antara news agency. He also noted that the government is enhancing employment-related protections, such as old-age benefits, work accident insurance, pensions, and job loss insurance.
Despite these measures, critics argue that the government’s response has been insufficient to address the underlying structural problems in the economy. According to Yorga Permana, a lecturer at the Bandung Institute of Technology’s School of Business and Management, while there has been a reduction in agricultural employment in recent years, much of the growth in the services sector has been confined to low-skill jobs that do not provide workers with opportunities for upward mobility. “The government has failed to prioritize policies that create decent work,” Permana said. “What we’ve seen instead is the domination of informal labor and gig economy jobs since 2014.”
Middle Class and National Progress
The shrinking of Indonesia’s middle class poses not only an economic threat but also a political one. For decades, Indonesia’s growing middle class has been viewed as a stabilizing force in the country’s democratic system, pushing for better governance, transparency, and social services.
Economists have long argued that a strong and expanding middle class is essential for Indonesia’s ambition to achieve “developed nation” status by 2045, the 100th anniversary of its independence. Without a robust middle class, Indonesia may struggle to reach that goal.
Muhammad Faisal, executive director of the Center of Reform on Economics (CORE), believes that one of the most urgent priorities for the government should be addressing stagnant middle-class wages. “The government must end the era of low wages if it hopes to rebuild a strong middle class,” Faisal said. “We need to focus on making wage growth sustainable through productivity gains.”
Building a Sustainable Economy
Economists and policymakers agree that rebuilding Indonesia’s middle class will require a multifaceted approach. First and foremost, the government needs to prioritize the creation of high-value jobs in sectors such as manufacturing, information technology, and professional services. These sectors offer the best opportunities for wage growth and upward mobility for Indonesia’s working class.
Investment in education and workforce development is also critical. “We need to equip our workers with the skills necessary to thrive in the global economy,” said Permana. “This means investing in vocational training, improving the quality of higher education, and promoting lifelong learning.”
Additionally, economic reforms aimed at boosting productivity and innovation are necessary to ensure that Indonesia’s growth is not only fast but also inclusive. “Growth must translate into real improvements in the living standards of the population,” Faisal emphasized. “Otherwise, we will continue to see a widening gap between the rich and the poor, with the middle class caught in the middle.”
The rise of digital technology and automation also offers both challenges and opportunities. While automation may reduce the demand for certain low-skill jobs, it could create new opportunities in high-tech sectors if the right policies are in place.
The decline of Indonesia’s middle class serves as a stark reminder of the challenges facing the country as it seeks to recover from the economic fallout of the COVID-19 pandemic. Triana Rahmawati and millions of others like her are adjusting to a new reality, one marked by economic insecurity and uncertainty about the future.
For Indonesia to reclaim its position as a rising economic power, it must address the structural problems that have led to the shrinking of its middle class. This will require not only short-term measures to protect the vulnerable but also long-term reforms that create high-quality jobs and ensure that the benefits of growth are shared more equitably.
As Indonesia approaches its centennial anniversary in 2045, the strength and stability of its middle class will be a key determinant of its success in achieving developed-nation status. Whether the country can reverse the current trends and restore confidence in the middle class remains to be seen. For now, families like Triana’s are left hoping for better days ahead.
