Poor people are people who live below the poverty line. In Indonesia, as of March 2024, there were 25.22 million poor people or 9.03 percent of the total population. They are people whose monthly expenses are below the poverty line, namely IDR 582,932 per capita (head).
The poverty line is an indicator used to measure the level of poverty. The indicator represents the minimum expenditure that must be spent by an individual to fulfill basic needs (food and non-food).
Every year, the poverty line increases as the cost of living increases. The latest Central Statistics Agency (BPS) data shows that the poverty line as of March 2024 has reached IDR 582,932 per capita per month. This figure is an increase of 5.9 percent compared to the March 2023 poverty line of IDR 550,458 per capita per month.
Also read: Rice and Poverty
If seen in the past decade, the poverty line has experienced a much more significant increase of 92.5 percent. For comparison, the poverty line in March 2014 was still at the level of Rp 302,735 per capita per month.
This means that ten years ago, someone was considered poor if the money they spent in a month to meet their basic needs was below Rp 302,735. Now, as of March 2024, someone is already classified as poor if their expenses are below Rp 582,932 per month.
Social Statistics Deputy of BPS Ateng Hartono stated on Tuesday (2/7/2024) that the poverty line will continue to rise because it is greatly affected by the soaring prices of basic commodities from year to year. The significant increase in the poverty line over the past ten years reflects the rising cost of living.
The majority of the increase in the poverty line was triggered by the food component which is the main expenditure of society with a share reaching 74.44 percent, followed by the non-food component which only had an influence of 25.56 percent.
The poverty line which increased by 5.9 percent in March 2024, for example, was driven by the increase in basic foodstuffs such as rice (20.07 percent), red chili (46 percent), granulated sugar (18.41 percent), and commercial chicken eggs (11.6 percent) on an annual basis.
In the midst of a high increase in the poverty line in that decade, the poverty rate fell slightly.
Without any effort, the increase of the poverty line will inevitably increase the number of poor people statistically. This is because those who were previously not considered poor are now included in the category of poverty.
According to Ateng, the impact of the rise in the poverty line on the increasing poverty rate can be reduced by the social assistance (bansos) provided by the government. “One of the driving factors that can offset the increase in the poverty line is the bansos, which are ultimately used by the community for consumption,” he said when contacted.
He gave an example, in March 2024, when the poverty line in urban areas rose by 5.72 percent and in rural areas rose by 6.06 percent, the average expenditure of the lower class population (decile 1) also rose by 6.50 percent (city) and 6.60 percent (decile 1). percent (village). “So, even though the poverty line rises, some of the people in the bottom decile are shifting to become less poor,” he said.
Amidst the high increase in poverty rates during the decade, the poverty rate has slightly decreased. Referring to BPS data, over the past ten years, the number of poor people in Indonesia has only decreased by 3.06 million people or a 2.2 percent reduction.
As a comparison, in March 2014, the poverty rate in Indonesia was 11.25 percent of the total population or 28.28 million people. Ten years later, in March 2024, the poverty rate dropped to 9.03 percent of the total population or 25.22 million people.
Also read: Four Years on, Poverty in Cities is Still Higher than Pre-Pandemic
The achievement is still far below the target set by President Joko Widodo. In 2015, when he first took office, the government targeted poverty reduction to 8.5 percent. This year, at the end of his term, poverty is targeted to decrease to 7.5 percent. Both are “failing to meet the mark”.
The decrease in poverty rates also fell below the achievement of the Susilo Bambang Yudhoyono (SBY) regime. From 2004-2014, the SBY administration reduced the poverty rate from 16.66 percent (36.15 million people) to 11.25 percent (28.28 million people), or a decrease of 5.41 percent (7.87 million people) in a decade.
On one hand, the government is facing tough challenges during the Covid-19 pandemic that hit in 2020 and 2021. As a result, efforts to reduce poverty that had been consistently progressing from 2014-2019 were disrupted.
The number of people living in poverty, which had dropped to 25.14 million (in March 2019), has risen again to 27.54 million (in March 2021). This increase almost brings the poverty rate back to the level it was when President Jokowi first took office.
In the same period, as reflected by the drastic increase in the poverty line, the cost of living continued to increase, mainly driven by volatile food price inflation.
The increase in the cost of living and food inflation is not a problem if it can be balanced by an increase in people’s income.
The issue of food inflation has become the largest contributor to national inflation figures in recent years. In fact, the increase in food inflation over the past 3-4 years has exceeded the average increase in regional minimum wage and civil servant salaries.
Bank Indonesia has recorded that from 2020 to 2023, the average inflation rate of food prices will be volatile at 5.2 percent. This is already higher than the average increase in the minimum wage rate from 2020 to 2024, which is 4.9 percent, and is approaching the average increase in civil servant salaries from 2019 to 2024, which is 6.5 percent.
The Executive Director of the Center of Reform on Economics (CORE) Indonesia, Mohammad Faisal, believes that the increase in the cost of living is inevitable. It all depends on the policies issued by the government to reduce the impact of the cost of living spikes.
However, instead of encouraging an increase in people’s income to offset the rising cost of living, the government tends to rely on providing social assistance.
Employment policies issued over the last decade, such as the Job Creation Law, have actually suppressed people’s incomes. The trend of increasing minimum wage for workers during 2015-2025 continues to decline due to manipulated wage formulas.
Also read: One Decade, the Trend of Increasing Minimum Wages for Workers Continues to Decline
Faisal believes that if the increase in income can balance the increase in living costs, then the decrease in poverty rates in the last decade should be more significant than 2.2 percent.
“The increase in the cost of living and food inflation is not a problem if it can be balanced by an increase in people’s income, so what happens is demand-pull inflation or inflation due to an increase in demand or increased purchasing power,” said Faisal.
According to him, social assistance is indeed needed during a crisis. However, the government tends to make social assistance the main solution to overcome post-pandemic poverty. As a result, the budget spent becomes larger, but the rate of poverty reduction becomes slower.
“The costs involved in reducing the number of poor people per one poor person are becoming more expensive, making poverty alleviation efforts increasingly inefficient,” he said.
The Head of Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, stated that the government will commit to maintaining inflation stability in order to encourage the improvement of people’s purchasing power and accelerate poverty reduction.
He assessed that various strategic government policies have successfully supported the national economic resilience, leading to a decrease in poverty rates as of March 2024, which is at its lowest in the past decade.
“The decrease in poverty rates is supported by the solid domestic economic activities and various government social assistance programs, particularly in response to the rise in food inflation at the beginning of the year,” said Febrio.
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