Higher Gini Ratio Shows Indonesia's Widening Income Distribution Inequality
The Indonesian government should take more action to reverse the country's widening income distribution inequality. Indonesia's Gini ratio, the coefficient that measures inequality among income distribution, has risen in 2013 according to economist Lana Soelistianingsih. The Gini coefficient rose from 0.37 in 2012 to 0.41 in 2013 (a coefficient of zero expresses perfect equality, while one implies maximal inequality). The growth not only shows that the Indonesian government fails to tackle this problem but also implies social risks.
According to Soelistianingsih, one of the measures the government can implement to combat the growing Gini ratio is through a tax reform. Taxes should not be the same for those that are (relatively) rich and those that are (relatively) poor. Or fuel subsidies can be fully erased (as the poorer segments of society do not feel the benefits of this policy, and instead spend these funds to education and health. For example, those families that live on less than IDR 20,000 (USD $1.67) per day should get free education and health services. Lastly, the government should do more to stimulate job creation so Indonesia's large workforce can be absorbed by employment opportunities, thus pushing down the country's unemployment rate. Although the unemployment rate of Indonesia has shown a good steady downward trend in recent years, there has been an increase in unemployment in 2013 due to the country's slowing economic growth.
Indonesia's Poverty Statistics:
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Relative Poverty (percentage of population) |
16.0 | 17.8 | 16.6 | 15.4 | 14.2 | 13.3 | 12.5 | 11.7 |
| Absolute Poverty (in millions) |
35 | 39 | 37 | 35 | 33 | 31 | 30 | 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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