Public Lecture Series of MPKP FEB UI Indonesian Development Forum: Poverty and Income Equity
Rifdah Khalisha – Public Relations FEB UI
DEPOK – (21/9/2021) On Tuesday (21/9),
Prof. Bambang P. S. Brodjonegoro, Ph.D. (Professor of FEB UI) was a speaker in the Public Lecture Series of the Indonesian Development Forum, Master of Economic Planning and Development Policy (MPKP) FEB UI with the theme “Poverty and Income Equity”.
The World Bank (2001) defines poverty as a state of not achieving a decent standard of living. A person can be considered poor if there are indications of insufficient clothing, food, and housing; inability to access health care; and difficulties in accessing education.
Bambang explained, “Basically, poverty is divided into absolute and relative. Absolute poverty means the difference between a person’s level of income and the level of income to meet basic needs. A person is categorized as poor if his income is not able to meet the minimum basic needs, such as food, clothing, housing, health, and education, to live properly and work optimally.
“Meanwhile, relative poverty depends on community agreement regarding the poorest community groups. For example, the bottom 20 percent of society is based on the order of income or expenditure,” he said.
Furthermore, he introduced the concept of multidimensional poverty. The Oxford Poverty and Human Development Initiative (ODHI) and the United Nations Development Program (UNDP) developed the concept of multidimensional poverty to find out the steps of various countries in the world in meeting the Millennium Development Goals (MDGs). In addition, this concept is a correction for the criticism of the measurement of poverty that uses a monetary approach that is considered less comprehensive.
The indicators consist of living standards, in the form of cooking fuel, sanitation, drinking water sources, electricity, housing, and asset ownership; education, in the form of
schooling and length of schooling; and health, in the form of nutrition and child mortality.
He also explained several factors causing poverty, including the rate of population growth, unemployment, natural events, low education, poor nutrition, and inequality in income distribution and development.
According to research by the World Bank (2016), 159 million children experience malnutrition worldwide and 9 million of them live in Indonesia. The Global Nutrition Report (2014) states that Indonesia is included in 17 countries that experience a double burden of nutritional problems.
Furthermore, BPS released a report that in March 2021 10.14% or 27.54 million Indonesians were poor. The poverty rate has decreased slightly from September 2020. However, it is still higher than pre-pandemic conditions in September 2019.
Since September 2019 (Indonesia’s lowest poverty), the number of poor people has increased by 1.12 million individuals. The largest increase was in urban areas as many as 1 million people and in rural areas 120 thousand people.
During the pandemic, the National Socio-Economic Survey (Susenas) noted that, on average, all households experienced a decline in expenditure of -2.3%. However, not all households experienced the same changes.
“Based on welfare class, households in the 5th percentile range and below experienced a fairly large decrease in average expenditure, namely -1% to -1.6%. The 40th percentile range down fell -0.4% and the 41–95th percentile range by -4%. In contrast, households at the 95th percentile and above actually experience an increase in welfare by 2 percent to 5 percent,” said Bambang.
During a crisis, households generally meet their daily needs by selling or pawning goods, reducing non-food expenditures, borrowing money from relatives, reducing food expenditures, and other mechanisms. In fact, only 15% of households report that their basic needs have been met.
Therefore, the government also distributes regular and non-regular social assistance. Regular social assistance, including pre-employment cards for 5.6 million people, expansion of the basic food program from 15.2 million KPM to 20 million KPM, and a family of hope program for 10 million families.
Non-regular social assistance includes presidential assistance for Jabodetabek basic necessities for 1.3 million families (DKI Jakarta) and 600 thousand families (Bogor, Depok, and Bekasi); cash social assistance for 9 million families; direct village cash assistance for 12.3 million families; and electricity subsidies for 24 million households with 450 VA customers and 7.2 million households with 900 VA customers.
“The government program is quite successful. The Household Survey (2020) shows that 85% of households receive at least one assistance program from the government,” he said.
Bambang explained the trend of the urban and rural Gini ratio in Indonesia during 2013 – 2021. During the pandemic, inequality in urban areas has increased. However, in rural areas it decreased from September 2020 to March 2021.
In total, inequality in urban and rural areas has decreased as we enter March 2021. Possibly, the National Economic Recovery (PEN) program for rural communities is the driving factor.
In an effort to equalize income, the government sets several fiscal policies. First, delegating fiscal authority to local governments (fiscal decentralization), for example general allocation funds, special allocation funds, and profit sharing funds. This policy has an effect on reducing inequality, especially in coastal and inland areas in each province.
Second, increasing revenue by expanding the income tax base and reducing income tax facilities because the impact of taxation is realized more quickly in reducing income inequality.
Finally, allocate spending through infrastructure development to improve welfare and reduce inequality or poverty. Of course, the aid policy must be reviewed so that the distribution is right on target, both for individuals and organizations.
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