Middle Class Under Pressure

[marcus]

We saw (at the second reference below) the decrease of the Indonesian middle class, then comparing with the Report below, it looks like a worldwide trend .

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From https://www.oecd.org/en/publications/under-pressure-the-squeezed-middle-class_689afed1-en.html
Title : Under Pressure: The Squeezed Middle Class , May 2019
A Report from the Organisation for Economic Co-operation and Development
Postre's Note : the order of the Report's information was changed a little

[... In many OECD countries, middle incomes have grown less than the average and in some they have not grown at all. Technology has automated several middle-skilled jobs that used to be carried out by middle-class workers a few decades ago. The costs of some goods and services such as housing, which are essential for a middle-class lifestyle, have been growing 3 times faster than household median income over the last two decades... One-in-six current middle‑income jobs face high risk of automation. Faced with this, middle classes have reduced their ability to save and in some cases have fallen into debt...

On average across OECD countries, the share of people in middle‑income households, ... fell from 64% to 61% between the mid‑1980s and mid‑2010s...]

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From https://www.expatindo.org/community/threads/decrease-of-indonesian-middle-class.7814/ , originally from https://ekonomi.republika.co.id/ber...ian-middle-class-dropped-by-10-million-people
Title : In 5 Years, The Number Of The Indonesian Middle Class Dropped By 10 Million People
Rep: Muhammad Nursyamsi/ Red: Budi Raharjo , Aug 2024

[...data on the number of middle classes in Indonesia ...
2019 : 57.33 million people (21.45%),
2021 : 53.83 million people (19.82%
2022 : 49.51 million people (18.06%)
2023 : 48.27 million people (17.44%)
2024 : 47.85 million people (17.13%) ...]

 

[serious_fun]

The means test for Indonesian to be considered "middle class" is based on expenditure rather than income...and there is a huge range. I'd like to see a more accurate way to determine the status.

 

[pantaiema]

The Middle class income in one country is typically based in the purchasing power parity (ppp). It makes sense as $1 in the US is entirely different in Indonesia. That is where they will also use as a main criteria to decide the progressive income tax bracket.

To be more precise, In Indonesia a middle income will also depend on the location where they live. In many cities, it is typically those who earn IDR 60m and IDR 360m annually, approximately $3,900 to $23,400. But in Jakarta, Surabaya, Bali. In these cities to live as a Middle Class the income will typically start at IDR 100m+.

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www.nasdaq.com

There are a lot of recent economic news about Shrinking Indonesian middle class.

 

[Shadrach]

We saw (at the second reference below) the decrease of the Indonesian middle class, then comparing with the Report below, it looks like a worldwide trend .

--------------------------------------------

From https://www.oecd.org/en/publications/under-pressure-the-squeezed-middle-class_689afed1-en.html
Title : Under Pressure: The Squeezed Middle Class , May 2019
A Report from the Organisation for Economic Co-operation and Development
Postre's Note : the order of the Report's information was changed a little

[... In many OECD countries, middle incomes have grown less than the average and in some they have not grown at all. Technology has automated several middle-skilled jobs that used to be carried out by middle-class workers a few decades ago. The costs of some goods and services such as housing, which are essential for a middle-class lifestyle, have been growing 3 times faster than household median income over the last two decades... One-in-six current middle‑income jobs face high risk of automation. Faced with this, middle classes have reduced their ability to save and in some cases have fallen into debt...

On average across OECD countries, the share of people in middle‑income households, ... fell from 64% to 61% between the mid‑1980s and mid‑2010s...]

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From https://www.expatindo.org/community/threads/decrease-of-indonesian-middle-class.7814/ , originally from https://ekonomi.republika.co.id/ber...ian-middle-class-dropped-by-10-million-people
Title : In 5 Years, The Number Of The Indonesian Middle Class Dropped By 10 Million People
Rep: Muhammad Nursyamsi/ Red: Budi Raharjo , Aug 2024

[...data on the number of middle classes in Indonesia ...
2019 : 57.33 million people (21.45%),
2021 : 53.83 million people (19.82%
2022 : 49.51 million people (18.06%)
2023 : 48.27 million people (17.44%)
2024 : 47.85 million people (17.13%) ...]

This is exactly what is happening in America Also. Trump creates in his Head, this fantasy, that if he puts all the Tariffs on foreign goods, then all the overseas work will come back to America, and create jobs! But like here, the reality is, if these factories get built, which will takes ( Years) to construct. The work will be done by Robots, and Automation, not create more Jobs! But more unemployment! He is living in his fantasy world of America 60 years ago!
So here and there, the Middle Class lifestyle is becoming a fading Dream! The only work that will be done by People, will be for the ones that build, maintain, and operate the Machines, and Robotics! Good luck!

 

[pantaiema]

This is exactly what is happening in America Also. Trump creates in his Head, this fantasy, that if he puts all the Tariffs on foreign goods, then all the overseas work will come back to America, and create jobs! But like here, the reality is, if these factories get built, which will takes ( Years) to construct. The work will be done by Robots, and Automation, not create more Jobs! But more unemployment! He is living in his fantasy world of America 60 years ago!
So here and there, the Middle Class lifestyle is becoming a fading Dream! The only work that will be done by People, will be for the ones that build, maintain, and operate the Machines, and Robotics! Good luck!

Machines, IT, and now robotics, machine learning, AI technologies are constantly evolving. As these technologies advance, humans must continuously acquire new skills to adapt or risk becoming obsolete. This idea was already hinted at by Darwin back in the 1800s. Charles Darwin theory is about biological evolution and natural selection, not technology or job markets. But in the modern world it could also be adapted to other areas such as job markets with relation to human skill and knowledge.

Looking back at history, starting from the First Industrial Revolution around 1760 up to today's Fourth Industrial Revolution, the digital/AI technologies; we have seen waves of change. But how many jobs have been lost throughout these transitions? Are job losses increasing, or do they simply fluctuate in response to global economic trends?

This is unemployment rate in the US over a longer period is it much to do with economic cycle (e.g boom, bust, recession, depression, expansion, peak, contraction, trough, etc) or due to technological advancement replacing human job with machines?

Job displacement has occurred with each industrial revolution, but new jobs have also been created. You just need to see what the Nomad, content creators in Bali are doing they could earn US$50k. Those people including local people who do not adapt their knowledge earn much less.

 

[marcus]

... To be more precise, In Indonesia a middle income will also depend on the location where they live. In many cities, it is typically those who earn IDR 60m and IDR 360m annually, ... But in Jakarta, Surabaya, Bali ... to live as a Middle Class the income will typically start at IDR 100m+.

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www.nasdaq.com

To interested people , be careful , the above analysis by Rafaela Stalbalk Klose and the conclusion from pantaiema define Indonesian medium class very differently from how the Indonesian Government defines the Indonesian medium class (as mentioned in my post no.1 above) .

 

[pantaiema]

To interested people , be careful , the above analysis by Rafaela Stalbalk Klose and the conclusion from pantaiema define Indonesian medium class very differently from how the Indonesian Government defines the Indonesian medium class (as mentioned in my post no.1 above) .

I never claimed that the figure in my post #3 is an official statistic from the Indonesian government. Since it was written in NASDAQ, the figure is meant to provide a general idea of the purchasing power in the countries mentioned. So the article on NASDAQ is primarily intended for trading and financial contexts, where purchasing power parity plays an important role.

When it comes to economic and financial data, I don't place much trust in figures released by the Indonesian government. I tend to rely more on data from sources like the World Bank, IMF or OECD.

Many recent articles indicate that the middle class in Indonesia is currently under pressure.

 

[centurion]

I never claimed that the figure in my post #3 is an official statistic from the Indonesian government. Since it was written in NASDAQ, the figure is meant to provide a general idea of the purchasing power in the countries mentioned. So the article on NASDAQ is primarily intended for trading and financial contexts, where purchasing power parity plays an important role.

When it comes to economic and financial data, I don't place much trust in figures released by the Indonesian government. I tend to rely more on data from sources like the World Bank, IMF or OECD.

Many recent articles indicate that the middle class in Indonesia is currently under pressure.

Middle class in Indonesia starts from salary of around 2 million Rp/person by Government's definition. So all these guys working in parkings are middle class.

 

[marcus]

From https://www.thestar.com.my/aseanplu...dle-class-struggles-with-financial-insecurity
Title : Indonesia's middle class struggles with financial insecurity
By Deni Ghifari/The Jakarta Post , Sept 2024
Middle-class Indonesians in Jakarta say they are struggling to achieve financial security as the daily necessities associated with urban lifestyles press hard against their monthly income, a perception borne out by new government statistics.

The Jakarta Post has found that food and a roof over one’s head eat up a major chunk of middle-class’s income in the capital, ...

In an ad hoc press conference called by Statistics Indonesia (BPS) on Aug 30, the agency’s interim head, Amalia Adininggar Widyasanti, explained the government’s economic stratification.

... the government categorises people based on their monthly spending.

Those spending less than Rp 582,932 per month in 2024 are classified as poor, ...

The middle class is defined as those spending 3.5 to 17 times that same figure of Rp 582,932, or around Rp 2.04 million to Rp 9.91 million.

Anything above that monthly spending puts people in the upper class, says Amalia.

Referring to that classification, 17.13% of the archipelago’s 2024 population falls into the middle-class category, far below the share of 21.45% in 2019.

The share of the aspiring middle class, meanwhile has grown slightly over the same five-year period to 49.22%.

Combined, those two groups make up 66.35% of the population in 2024 and account for more than 80% of the population’s consumer spending — the largest contributor to Indonesia’s gross domestic product (GDP)...

Gery, an engineer at a multinational company, is categorised as upper class in BPS’s matrix, since his monthly expenditure always exceeds Rp 10 million.

However, he does not associate himself with the upper-class label and does not feel he belongs in that category, noting that some unforeseen event could quickly land him in “financial ruin”.

Out of his monthly income, which varies between Rp 15 million and more than Rp 20 million, Gery says he can barely save up, since he has to spend on his younger brother’s education and help with his mother’s household expenditures.

Concurring, Bhima Yudhistira, executive director of the Center of Economic and Law Studies (CELIOS), pointed out that Indonesia’s social safety net ratio was only 2.5% of its GDP, among the lowest in South-East Asia.

“This is not only a problem of middle-class incomes seeing little raise, but also how the state is not yet capable of providing affordable education as well as social security for the old,” Bhima told the Post on Friday. - The Jakarta Post/ANN

 

[marcus]

Middle class in Indonesia starts from salary of around 2 million Rp/person by Government's definition. So all these guys working in parkings are middle class.

Unfortunately it is the Indonesian reality .

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From https://www.bps.go.id/en/statistics-table/2/MTUyMSMy/rata-rata-upah-gaji.html (BPS is an Indonesian Government Agency)
Title : Average of Net Wage/Salary

values from Aug 2024 , per month :
Total Average Net Wage : Rp3.27 million (around US$206)
Minimum Average Net Wage (Other Service Activities) : Rp1.99 million (around US$126)
Maximum Average Net Wage (Mining and Quarrying sector) : Rp5.23 million (around US$330)

Net wage = wage + allowances

Poster's Note : As far as I heard , in Indonesia it is not uncommon that employees also get car/motorcycle to use for free or free food or free place to stay + ..

 

[centurion]

Poster's Note : As far as I heard , in Indonesia it is not uncommon that employees also get car/motorcycle to use for free + free food + free place to stay + ..

It is not common. But the salary is sometimes divided in low basic salary +food allowance + transport allowance, so if you are non performing employee they will put ypu to the low basic salary before being laid off.

 

[Balifrog]

An interesting video that covers mismanagement, corruption and lack of middle class.
Some data is a bit old, but globally the trend nowadays is still same.


The comments are interesting also.

BTW : I looked up "Dutch disease", interesting, I learned something.

https://corporatefinanceinstitute.com/resources/economics/dutch-disease/

 

[pantaiema]

Poster's Note : As far as I heard , in Indonesia it is not uncommon that employees also get car/motorcycle to use for free + free food + free place to stay + ..

It is not common. But the salary is sometimes divided in low basic salary +food allowance + transport allowance, so if you are non performing employee they will put ypu to the low basic salary before being laid off.

I agree with @

Those who are telling you this " in Indonesia, it is not uncommon that employees also get car/motorcycle to use for free + free food + free place to stay +" are feeding you porky pies 'marcus'

I agree with @centurion allowances like these, especially free vehicles or accommodation aren't that common and often depend on the type of job. For labourers working in industrial zones, especially in rural areas or smaller towns far from major cities, it makes sense that they might be provided with full or half boarding. Since they live nearby, transportation allowances (like free cars or motorcycles) aren’t really necessary. Domestic helpers 'pembantu' who live in often receive free meals and accommodation too. But under current classification systems from the Indonesian government, they are still considered part of the middle class aren't they ? You don’t need a sophisticated survey to see this; general observation and regularly following the news is usually enough to form a reasonable conclusion.

For people working in big cities, the situation varies. Depending on the nature of the job, some might get benefits like a company vehicle or lunch allowances, if they are not working regularly in the office. A notable example for this is salesmen. But many employees working regularly in the office don’t receive these perks either. Typically they could find canteen nearby, with reasonable price. If you want proof, just head to areas with a high concentration of office workers like Sudirman, Kuningan or Rasuna Said in Jakarta during lunchtime. You’ll see plenty of employees lining up at canteens in the basements of office buildings. As for free transportation, just take a look after office hours, public transport in Jakarta, it is packed with workers heading home.

 

[marcus]

Those who are telling you this " in Indonesia, it is not uncommon that employees also get car/motorcycle to use for free + free food + free place to stay +" are feeding you porky pies 'marcus.

[From beyondthebooksenglish: porky pies: It is used in Britain and in Australia and perhaps other parts of the world but if you hear 'porky pies' it means lies.]

Well I should have said "or" instead of "+" , but I don't think they lied . My wife's brother got a job as an office driver and got free accommodation , my wife's niece got free lunch at her office (sometimes even brought rest of food for her dinner) , my ex-wife's relative told that her boyfriend had a car from the office to use , my first girlfriend got a motorcycle from the office to use , ..

But under current classification systems from the Indonesian government, they are still considered part of the middle class aren't they ?

I mentioned this subject in my post no.10 , which is about Indonesians' salary , not about middle class .

You don’t need a sophisticated survey to see this; general observation and regularly following the news is usually enough to form a reasonable conclusion....

As far as possible , I try to add an article or regulation/law to support my point of view , to make it more credible . Sorry if it bothers you , but I hope many other readers (who don't live in Indonesia and/or don't read Indonesian news much) find it useful or interesting .

 

[pantaiema]

There is a good documentary, about the Shrinking Indonesian Middle Class from CNA Insider

If the so called a middle class takes out a loan for a motorbike, which is very common in Indonesia, they could end up paying over Rp500,000 per month, depending on the model and loan term. In addition to this, there are other significant expenses like food, eating out, fuel, housing, maintenance for both the house and motorbike, entertainment, BPJS contributions, asset depreciation, and more. I believe these regular cost alone already exceeding Rp2.1m

 

[harryopal1]

Balifrog's video link and information about "Dutch Disease" were most interesting.
Elsewhere Pantaiema suggests that AI will create more jobs and much of the concern about employment is really to do with adaptability. I have no doubt that AI will create jobs and those who adapt will benefit. But in totality I feel sure that AI and robotization will result in a nett reduction of jobs and thus increased unemployment and a further decline of the middle class.
Analysing all this is made more difficult due to the rubbery nature of statistics. In Australia, for example, governments regard anyone with a part time job as employed. Where there is a trend towards more part time employment it may mean that many more people are struggling but the government can congratulate itself for a decline in the unemployment rate. People who find they just can't get a job often just give up and fall back on social welfare but as these people are no longer counted as job seekers the statistics suggest less unemployed.

Returning to the issue of negative economic impact with resource rich countries, the value of the resources is much reduced by the ability of multi national extractors to hide profits under costs of extraction. Australia has a sovereign wealth fund but the amounts garnered are pathetic when volume and taxes gained from say LPG are compared with other LPG exporting countries who get much higher returns for less volume. Australia is currently wrestling with foreign owned LPG producers to try and ensure there is adequate supply for the domestic market as better profits are made by the multi nationals in exporting.

These are certainly volatile times and our US friend, Mr Trump has certainly added to that volatility. What with tariff turmoil, AI and robotizationthe ultimate outcome seems probable that the seriously rich will get richer, the middle class wil shrink and the poor will get poorer.

 

[Shadrach]

Balifrog's video link and information about "Dutch Disease" were most interesting.
Elsewhere Pantaiema suggests that AI will create more jobs and much of the concern about employment is really to do with adaptability. I have no doubt that AI will create jobs and those who adapt will benefit. But in totality I feel sure that AI and robotization will result in a nett reduction of jobs and thus increased unemployment and a further decline of the middle class.
Analysing all this is made more difficult due to the rubbery nature of statistics. In Australia, for example, governments regard anyone with a part time job as employed. Where there is a trend towards more part time employment it may mean that many more people are struggling but the government can congratulate itself for a decline in the unemployment rate. People who find they just can't get a job often just give up and fall back on social welfare but as these people are no longer counted as job seekers the statistics suggest less unemployed.

Returning to the issue of negative economic impact with resource rich countries, the value of the resources is much reduced by the ability of multi national extractors to hide profits under costs of extraction. Australia has a sovereign wealth fund but the amounts garnered are pathetic when volume and taxes gained from say LPG are compared with other LPG exporting countries who get much higher returns for less volume. Australia is currently wrestling with foreign owned LPG producers to try and ensure there is adequate supply for the domestic market as better profits are made by the multi nationals in exporting.

These are certainly volatile times and our US friend, Mr Trump has certainly added to that volatility. What with tariff turmoil, AI and robotizationthe ultimate outcome seems probable that the seriously rich will get richer, the middle class wil shrink and the poor will get poorer.

I agree about AI, and Robotization will only be accessible to a few, that are intelligent enough to understand this new technology. It is also in my opinion, to judge a countries wealth, by how much it sells its natural resources, a foolish way to go. Those Natural resources will eventually run out, especially LPG, Coal, Oil, Timber, Etc.
These countries need to develop cash flow resources, that can be produced by the People working, without draining the Natural resources! If everyone is employed, then there is no need for Government assistance, and all that money will be spent within the country, being shared amongst All its Citizens!
What is happening in the US is Madness, based on Lies, that the tariffs will be payed by foreign countries, and manufacturing will return to the country, and create jobs. This is ridiculous, because World wide trade has already been established, and its working! To build these factories will take years and they will be mostly run by Automation! Which means only a very few will be employed to maintain these machines, thus will create a huge unemployment situation! As was said, only the Rich CEO's, will prosper. The middle class will shrink, and the poor become poorer.
Also to top that off, The T-rump regime is kicking out all the Migrant workers, who Do almost all the Manual Labor! So Who is going to do this work, and only be paid below a Living Wage? Now The Regime is out of control and disobeying even The Supreme Court! This is Fascism, and if not Stopped, T-rump will become an unstoppable Dictator!

 

[pantaiema]

Elsewhere Pantaiema suggests that AI will create more jobs and much of the concern about employment is really to do with adaptability. I have no doubt that AI will create jobs and those who adapt will benefit. But in totality I feel sure that AI and robotization will result in a nett reduction of jobs and thus increased unemployment and a further decline of the middle class.

Take a look at the graphics in post #5. We've experienced four industrial revolutions where the machines have taken over the jobs normally done by humans gradually. Has the unemployment rate continuously risen as a result? The fact is that unemployment tends to fluctuate more closely tied to the economic cycle.

While the statistics referenced are from the U.S., they generally reflect trends seen in other countries as well. In Indonesia for instance, the unemployment rate is fluctuating below 5%. Unemployment typically spikes during periods of recession or depression, but eventually it declines and reverses as the economy recovers.

And here is an example, the correlation between economic growth vs unemployment rate of one Country, they are mirroring each other, don't they.

Humans are widely considered the most adaptable species on Earth. Natural selection is an evolutionary process and noone on this earth could stop it. Adaptability is the key element for survival, as theorised by Darwins's theory of evolution by natural selection.

 

[harryopal1]

Take a look at the graphics in post #5. We've experienced four industrial revolutions where the machines have taken over the jobs normally done by humans gradually. Has the unemployment rate continuously risen as a result? The fact is that unemployment tends is fluctuating more closely tied to the economic cycle.

While the statistics referenced are from the U.S., they generally reflect trends seen in other countries as well. In Indonesia for instance, the unemployment rate is fluctuating below 5%. Unemployment typically spikes during periods of recession or depression, but eventually it declines and reverses as the economy recovers.

View attachment 4833

Humans are widely considered the most adaptable species on Earth. Natural selection is an evolutionary process and noone on this earth could stop it. Adaptability is the key element for survival, as theorised by Darwin.

Adaptable, Yes. But it seems a bit glib to just suggest everything evens out for the good. The levels of povery and suffering of those who lost jobs has been enormous and I daresay that we are looking at another cycle of "adaptability" but with huge numbers of people struggling to survive.

 

[marcus]

From https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/
Title : Trends in income and wealth inequality , Jan 2020
By Juliana Menasce Horowitz, Ruth Igielnik and Rakesh Kochhar

... the U.S. middle class, which once comprised the clear majority of Americans, is shrinking ...

From 1971 to 2019, the share of American adults who live in middle-income households has decreased from 61% to 51% ...

adults in the upper-income tier increased from 14% to 20% ...

in the lower-income tier increased from 25% to 29% ...