Summary
Indonesia Emas 2045, a once faraway dream, has now arrived at Indonesia's doorway. RPJPN 2025 – 2045’s first vision shows Indonesia’s ambition of stepping into the position of a high-income country. However, Indonesia still faces persistent challenges in poverty, vulnerability, and labor informality. Despite progress, nearly 20% of the population remains constrained to economic mobility and 59% of the workforce—staffed by informal workers—still lack sufficient social protection. This is an unfortunate condition, considering their vulnerable source of income elevates their risks in the face of economic shocks, climate risks, and socio-political tensions. For now, implementation gaps in existing programs still persist due to issues of coverage, adequacy, and sustainability. The upcoming 2025-2029 RPJMN aims to address this issue by prioritising Adaptive Social Protection (ASP), focusing on integrating social protection with disaster risk reduction and climate adaptation. The establishment of ASP is hoped to serve as a tool to help Indonesia empower its informal sector-dominated workforce, strengthen the population’s resilience, and avoid the middle-income trap—ultimately leading to securing a prosperous future under the Indonesia Emas 2045 vision.
Keywords: Informality, Adaptive Social Protection, The Missing Middle, Indonesia Emas 2045, Economic Mobility, Vulnerable Population
The Indonesia Emas 2045 Ambition
In just 20 years, Indonesia will celebrate its hundred years of independence. History has witnessed countless achievements, shortcomings, and recoveries, reflecting Indonesia’s resilience through 79 years of independence. Yet one question lingers: What lies ahead for Indonesia?
The National Long-Term Development Plan (Rencana Pembangunan Jangka Panjang Nasional/RPJPN) 2025–2045 sets a clear goal for Indonesia to become a high-income country, with a USD 23,000–30,300 GNI per capita. Indonesia’s position remains in the upper-middle-income country bracket with USD 4,870 GNI per capita (World Bank, 2023). Though much catching-up remains, this agenda is possible. Indonesia is entering a demographic bonus window, where the dependency ratio will be at its lowest point until 2035 (Kuntjoro-Jakti, 2012). However, Indonesia’s ambition to chase the high-income status can not distract from what truly matters: the people’s well-being—from access to a decent life, education, healthcare, and other aspects that guarantee well-being.
Poverty, Vulnerability, and Informality
Figure 1. Poverty headcount ratio at $2.15/day (2017 PPP, %) and Consumption Poverty (national poverty line) 2010 – 2023
Source: LPEM FEB UI (2023), UN Statistics (2023), & World Bank (2022)
Over the past decade, Indonesia has freed about 2–3 million of its population from extreme poverty yearly, from 14.5% in 2010 to 2.88% in 2023 (World Bank, 2023), as shown in Figure 1. Despite progress, the number of vulnerable populations—those living below the poverty line and 1.5 times the poverty line—remains high at 20%. The Gini coefficient, reflecting inequality, increased to 36.1 points in 2023 from 29.3 points just 20 years prior (World Bank, 2023). As of today, Indonesia’s economic growth remains unevenly distributed. Dartanto and Can (2023) noted that during President Joko Widodo's second term, economic growth exhibited characteristic of non-inclusivity, with developmental benefits accruing to the lowest 20% and the highest 10% of the population, thereby marginalising the middle 40% to 80%. This trend is further corroborated by Figure 2, indicating economic rigidity among households, which are increasingly susceptible to remaining entrenched within the middle class (Dartanto, 2020).
Figure 2. Indonesia's Household Economic Mobility from 1993 to 2014
Source: Dartanto et al. (2020)
Above all, the core of this problem lies in the dominance of informal workers in Indonesia, which accounts for 59% of total employment (BPS, 2023). In the last decade, most job creation in Indonesia was in sectors with high informality and low wages, characterised by its low-productivity and non-skilled intensive nature. The major drawback is that workers in these sectors often face ineligibility for social protection coverage. Although the Government of Indonesia (GoI) has made social protection a core element of its inclusive growth strategy as stated in RPJMN 2020-2024, informal workers are still often deemed unqualified for poverty-targeted social assistance while also excluded from employment-based contributory schemes (OECD, 2019; Holmemo et al., 2020). In fact, informality is linked to increased vulnerability to various risks, where life events (such as workplace accidents, death, and so on) could result in the loss of the primary household financial source.
From a macroeconomic perspective, the middle-class—dominated by informal workers—is prominent for driving consumption growth and expanding the tax base, which will eventually enhance domestic resource mobilisation (World Bank, 2018). However, with exposed risks and insufficient social protection, middle-class households will have a harder time moving to higher income brackets. This condition will, in turn, put Indonesia at risk of stagnation in the middle-income trap since rigidity in a household's economic mobility will create difficulties for the entire country (Dartanto & Can, 2023).
Most importantly, from a welfare standpoint, the informal workers’ vulnerability could be reinforced by the current political tensions, climate change risks, natural-induced disaster hazards, and geopolitical disputes (UNDP, 2024). Without proper access to quality healthcare, education, or pensions to support them, their ability to contribute to the workforce will be further hindered.
Protecting the Workforce: What has Indonesia done for the informal workers?
In 2004, Law Number 40 of 2004 on the National Social Security System (Sistem Jaminan Sosial Nasional/SJSN) was passed as a redefinition of the previously fragmented social security system (Holmemo et al., 2020). Social security systems such Social Health Insurance (Jaminan Kesehatan Nasional/JKN)), Work Accident Insurance (Jaminan Kecelakaan Kerja/JKK), Death Insurance (Jaminan Kematian/JKM), Old-Age Insurance (Jaminan Hari Tua/JHT), and Pension Insurance (Jaminan Pensiun/JP) are mandated to be made accessible to workers in the informal sector, not just those in the formal sectors, civil servants, and military personnel. However, when put into practice, most non-wage recipient (Bukan Penerima Upah/BPU) workers face difficulties in paying the determined premium. This results in low coverage, where only 2.8% of households with a business-owning head have at least one member covered by JKM, 2.4% by JKK, 2.3% by JP, and 1.9% by JHT. Their setback does not stop here, as they still face substantial risks even in their non-productive years due to the absence of a safety net for old age—reflected by the low participation of JHT among BPU workers (Hanri et al., 2023; Dartanto & Can, 2023).
This law was refined by Law Number 24 of 2011 on the Social Security Agency (Badan Penyelenggara Jaminan Sosial/BPJS), which laid the institutional foundation through BPJS Kesehatan and BPJS Ketenagakerjaan to direct programmes such as JKN, JKK, JHT, JP, and JKM. The problem, once again, is contingent upon these three dimensions: coverage, adequacy, and sustainability (Holmemo et al., 2020).
This prevailing condition is unfortunate because the provision of JKK and JKM to informal workers could prevent approximately 13,000–32,000 people from falling into poverty and help 40,000–76,000 poor individuals avoid further poverty caused by work accidents. In other words, the current gaps in coverage are not just technical shortcomings, they also represent missed opportunities to shield thousands of vulnerable workers from economic shocks. Especially now, social protection schemes for informal workers are more crucial than ever due to the scarring and habituation effects created by COVID-19, which led many workers to permanently exit the formal sector and the labor force altogether due to their struggles to bounce back and return (Dartanto et al., 2018; Dartanto et al., 2023).
Addressing informality requires a deeper reform of employment legislation in Indonesia (OECD, 2019). Employment social security is the key to ensuring that informal workers have adequate social protection (Hanri et al., 2023). With the elevated risks in the national and global landscape, informal workers’ resilience can no longer be ignored. Aligned with Indonesia’s 2045 vision, the 2025-2029 RPJMN Draft highlighted the social transformation strategy through Adaptive Social Protection (ASP). ASP emerged as a restructuring of the existing social protection schemes, undertaken to more effectively address the needs of vulnerable and historically marginalised populations amid the evolving social and economic dynamics.
Adaptive Social Protection for Informal Workers in Indonesia
The resilience of informal workers is trialled through the vulnerability of their income source. When encountering external shocks, they are prone to losing their primary means of livelihood, leaving them and their whole family with excess burden and risk of falling back into poverty. ASP provides help by extending their capacity to withstand these unpredictable disruptions. By integrating social protection, disaster risk reduction (DRR), and climate change adaptation (CCA), informal workers are protected by a more responsive and inclusive system. An adaptive system will ensure premature support before crises while also preparing long-term adaptation for the ever-changing conditions. This adaptability is integrated with the mitigation of natural-induced disasters and other relevant external turbulence, hoping that the government could anticipatorily identify vulnerable populations and react accordingly when a crisis strikes. DRR holds particular salience in Indonesia, a country situated within the Ring of Fire, where it experiences regular occurrences of floods, droughts, earthquakes, and other hazards. Furthermore, the system incorporates policy and behavioral adaptations aimed at supporting communities’ long-term viability in changing ecological conditions. CCA is done through enhancing agricultural resilience, broadening income streams, and investing in climate-resilient infrastructure (UNDP, 2024).
Regarding ASP implementation, the GoI has laid the groundwork of policy directions in the 2025-2029 RPJMN draft. There are five notable strategies, starting from an integrated socio-economic registration system. The second strategy involves the active incorporation of different social protections, social security, and adaptive programs. This is followed by the reform of the SJSN to a more inclusive, flexible, and change-responsive path. Then, a care economy is developed to increase society’s access to high-quality care services. The last and arguably most important strategy is the social inclusion of the “missing middle”, which includes informal workers, people with disabilities, the older population, and other vulnerable groups. These strategies collectively aim for a refined social protection framework, ensuring no one is left behind in Indonesia’s vision (Bappenas, 2024).
It is evident that a strategic framework without concrete action will remain theoretical. Systemic issues such as inclusion-exclusion error, institutional complexity, and fiscal constraints still require attention. Consequently, the question arises: What approach should the GoI adopt moving forward?
The Way Forward: Recommendation for Indonesia
Learning from international experience, the coverage expansion of social protection—especially for the informal sector—is not impossible, even in low-income countries (ILO, 2022). Countries like Brunei Darussalam, Nepal, Vietnam, Mexico, and Chile have successfully expanded social protection coverage to informal workers funded by public taxes or state revenue, targeting specific groups such as the elderly, disabled, and women (ADB, 2016; ILO, 2019; United Nations ECLAC, 2023; Hanri et al., 2023).
For Indonesia, the expansion of social protection for informal workers should begin with the root cause—the inclusion-exclusion error itself. Within this regard, a modern delivery system is crucial. Identifying and supporting informal workers requires expanding National Socioeconomic Single Data (Data Tunggal Sosial Ekonomi Nasional/DTSEN) coverage to 80% of the population, extension of social assistance programmes like the Family Hope Programme (Program Keluarga Harapan/PKH), Non-Cash Food Assistance (Bantuan Pangan Non-Tunai/BPNT), and Unconditional Cash Assistance (Bantuan Langsung Tunai/BLT) to informal workers, and development of real-time social registries. Digital technology advances—such as cloud-based social registries and AI-driven data analytics—can also lessen the government’s reliance on formal sector wages and more effectively target informal workers who are at risk of disaster impacts. Furthermore, BPJS Ketenagakerjaan should acknowledge that a major part of coverage discrepancy also stems from the informal workers' inability to afford payments. Therefore, there should be more voluntary, flexible schemes for informal workers, such as daily or weekly premium options.
Coverage is not the only area that matters. To establish an adaptive scheme, the GoI needs to assemble a shock-responsive and climate-resilient system. There should be automatic triggers for aid expansion or index-based insurance, both calling for a system that automatically provides cash transfer and payouts in times of economic or climate shocks. Public employment programs similar to India’s MGNREGA could also be implemented; Indonesia could expand Labour-intensive Cash (Padat Karya Tunai/PKT), focusing on climate-resilient infrastructure for informal workers. For long-term adaptability, the GoI can establish job diversification through reskilling programmes for informal workers in green jobs, climate-smart agriculture, and renewable energy sectors. These programmes can be accompanied by floating markets, adaptive housing, and waste-to-energy projects in flood-prone areas like Jakarta and Semarang.
Ultimately, restructuring Indonesia’s social protection system requires increased funding, which can be sourced through budget reallocation from subsidies and enhanced revenue collection. In order to achieve this objective, reforms in both the ASP establishment and the general revenue system must be aligned to ensure equitable household welfare (Holmemo et al., 2020). However, reforms in the revenue system must be done gradually. Thus, to finance ASP sustainably, Indonesia must consider alternative approaches, starting from strengthening the disaster pooling fund to allow quick disbursement of social assistance. Then, sovereign insurance and risk pools can also be explored—especially within the scope of ASEAN-wide climate insurance. As a final strategy, Indonesia can initiate Public-Private Partnerships (PPPs) to leverage impact investment from ESG-focused companies to support ASP programmes for those working in the informal sector (UNDP, 2024).
Conclusion
Indonesia is on a ticking clock, with only 20 years towards 2045 and a shorter demographic bonus window, our golden chance. The middle class becomes a crucial populations to drive Indonesia’s economic growth, yet their position and welfare are often left behind. Addressing informality requires a deeper restructuring of job market regulations. For now, establishing an inclusive ASP system is the most viable option to support informal workers and foster long-term economic resilience. Without acknowledging informality and its vulnerability, Indonesia risks economic stagnation and social disparity—hindering its transition to a high-income nation and putting more at risk of falling back into poverty. ASP lays the groundwork for a more inclusive system that safeguards informal workers from shocks, climate risks, and uncertainties. This sense of safety will empower them to contribute more effectively to the labor market and national development. Thus, Indonesia still has a chance to unlock its workforce’s full potential by (1) expanding social protection coverage, (2) strengthening coordination between programs and ministries, (3) building shock-responsive and climate-resilient employment programs, and (4) setting up sustainable financing mechanisms. Achieving Indonesia Emas 2045 is not an easy ambition, but we still have hope. Without dreams, nothing will ever come to be. Shared imagination is merely the first step toward a future—and we still have time to make it real.
Written by: Grace Reinhardinanti Dee Caksono
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