Decline of Middle Class in Indonesian Society

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The Middle class in Indonesia is declining because the increase in the wage rate could not catch up with the increase of Indonesia’s inflation rate as shown by the bar chart above. Other reasons why they would still decline is because of Tax. Every income that we earned, they need to pay tax at a rate of 5% this means that people would lose their purchasing power, and their disposable income would decrease as they are using their salaries to pay tax instead on spending them on their needs and wants. Also, it is unfair as people who earn more than them to a maximum of 50 million would also pay the same tax rate of 5%. The improvement of technology could also be one of the reasonsas they are replaced with it. People who earn a minimum wage rate in Indonesia do not have soft skill and hard skill, which means that they are not teachable and can’t develop new skills. Usually they do not have any good work experiences throughout their life. Like lack of social skills, character traits and employment qualities. Based on Marxism theory, there would be less chance that people would fall to the Middle-class category as people who are successful would be known as bourgeoisie, and the unsuccessful one would fall to the category called the proletariat.

Because the GDP of Indonesia is not stable, firms would unemployed workers as they can’t afford to pay their salaries and wages would lead to a fall in consumer spending. There is also a disparity between the middle class and the higher class where is would show that the rich is getting richer in a higher rate than the middle class. Lastly, as our terms of trades is declining meaning the price of exports falls relatively to imports where imports would become more expensive. That result to a lower living standards and less ability to import. However, there might be a chance that they could rise. One of the factors could be the improvement of infrastructure. As in the old days, people sell and buy things using wagons. But nowadays, it is said that Indonesia’s president Jokowi administration’s plan for 2015-2019 is to increase in infrastructure funding compared to the previous period by nearly 10 billion dollars per year. The priority projects include revitalization of 10 airports, number of thermal and hydropower plants, toll roads, mass rapid transit, construction of new and upgrading of existing ports. By an increase in infrastructure, President Jokowi said that it is expected to boost the economic growth of the country, which means export of the country would increase as products could be transported easily that resulted to a BOP surplus. Therefore, sellers can spend their profits on goods, or investing on shares, assets such as land or properties.

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