Gini Ratio of Indonesia May Improve in 2014 on Stable Commodity Prices
The Gini ratio of Indonesia - the coefficient that measures inequality in income distribution - is expected to improve slightly this year as commodity prices have a stable outlook. Based on data from Statistics Indonesia, the ratio increased significantly since the country's Reformasi period. Between 1999 and 2013, it rose from 0.31 percent to 0.41 percent (a coefficient of zero expresses perfect equality, while one implies perfect inequality). In the last three years (2011- 2013), however, the ratio remained stable at 0.41 percent.
Indonesia's Gini Ratio:
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Gini Ratio | 0.36% | 0.36% | 0.35% | 0.37% | 0.38% | 0.41% | 0.41% | 0.41% |
Sources: Statistics Indonesia
This significantly increased Gini ratio since 1999 implies that Indonesia's society has become more and more unequal in terms of income distribution (by many expressed through the phrase "the rich are getting richer while the poor are getting poorer"). As the poorer segments of Indonesian society seem unable to benefit from robust macroeconomic growth, this social problem can evolve into a political one if not resolved. Indonesia's Finance Minister Chatib Basri said that the higher Gini ratio is not caused by increased poverty but is due to the fact that Indonesia's middle class-up and elite segments feel the fruits of economic growth much more than the country's middle class-down and poor segments. Income of the latter grows three to four percent only, while that of the former grows eight percent (year on year). According to Basri, the higher growth of the richer segment is explained by the recent rebound of several commodity prices. When we take a look at the current 40 richest Indonesians, most of these men assemble their recent wealth through commodity-related businesses.
One important measure to reduce the Gini ratio is to invest more in infrastructure development, particularly basic infrastructure as the poorer segments of society are highly dependent on the availability of infrastructure.
Minister of National Development Planning (Bappenas) Armida Alisjahbana said that, although the government should focus to improve the ratio, the current 0.41 percent Gini ratio is still within safe levels. According to her, one measure to reduce the ratio is by implementing progressive taxes. She also would like to see more rich Indonesians to re-invest their profits in the country in order to stimulate job creation, thus reducing the gap between rich and poor.
Indonesia's Poverty Statistics:
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Relative Poverty (percentage of population) |
17.8 | 16.6 | 15.4 | 14.2 | 13.3 | 12.5 | 11.7 | 11.5 |
| Absolute Poverty (in millions) |
39 | 37 | 35 | 33 | 31 | 30 | 29 | 29 |
Sources: World Bank and Statistics Indonesia
Indonesia's (Un)employment Statistics:
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Unemployment (percentage of total labor force) |
10.3 | 9.1 | 8.4 | 7.9 | 7.1 | 6.6 | 6.1 | 6.3 |
Sources: World Bank and Statistics Indonesia
| 2010 | 2011 | 2012 | 2013¹ | |
| Labor Force | 116,527,546 | 119,399,375 | 118,040,000 | 118,190,000 |
| - Working | 108,207,767 | 111,281,744 | 110,800,000 | 110,800,000 |
| - Unemployed | 8,319,779 | 8,117,631 | 7,240,000 | 7,390,000 |
¹ data from August 2013
Source: Statistics Indonesia
Further Reading:
• Poverty in Indonesia
• Unemployment in Indonesia
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