The Rise of Middle-Class Workers in the Informal Sector

Economics & Macro

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Adi Ahdiat 02/09/2024 16:57 WIB

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According to BPS data, the proportion of Indonesia's middle class employed in the formal sector has shrunk over the past decade, accompanied by a rise in the proportion of informal workers.

Proportion of Indonesia's Middle Class Employed in the Formal and Informal Sectors (2014-2024)

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Proportion of Indonesia's Middle Class Employed in the Formal and Informal Sectors (2014-2024)

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The proportion of Indonesia's middle class employed in the formal sector has shrunk over the past decade, accompanied by a rise in the proportion of informal workers.

This is evident from data presented by the Acting Head of the Central Statistics Agency (BPS), Amalia Adininggar Widyasanti, in a meeting with Commission XI of the DPR (House of Representatives) on Wednesday, August 28, 2024.

According to Amalia's presentation, in 2014, 62.76% of Indonesia's middle class were formally employed. However, this proportion decreased to 59.36% in 2024.

On the other hand, the proportion of the middle class employed informally increased from 37.24% in 2014 to 40.64% in 2024, as shown in the graph.

In its report on *Indonesia's Labor Market Indicators*, BPS defines formal workers as individuals who operate businesses with the assistance of permanent/paid employees, as well as those working as laborers/employees/staff.

Informal workers, on the other hand, are defined as individuals who run businesses alone, operate businesses with the assistance of non-permanent/unpaid employees, freelance workers, and family workers/unpaid workers.

According to A. A. Gde Sutrisna WP from the Indonesian Planners Association (IAP) Bali, the informal sector has several strengths, such as:

* Resilience during crises;
* Providing employment for low-skilled individuals;
* Labor-intensive with relatively low wages;
* Producing simple products that do not require specialized skills.

However, the informal sector also has several weaknesses, such as:

* Limited capital;
* Limited market reach;
* Low business development;
* Low technology utilization;
* Vulnerability to extortion;
* Unregulated existence can detract from urban aesthetics.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."