A doctoral study from the UGM Faculty of Economics and Business has found that social protection and education are vital to reducing poverty and inequality in Indonesia.
The study, conducted by Asih Murwiati, a lecturer at the Faculty of Economics and Business, University of Lampung, used data from the Indonesian Family Life Survey (IFLS) from 1997, 2000, 2007, and 2014.
In 2022, Indonesia recorded 26,161.19 thousand impoverished people, with almost half residing in East Java, West Java, and Central Java.
Additionally, the income inequality rate in Indonesia, measured by the Gini ratio, experienced a slight increase from 0.381 in September 2021 to 0.384 in March 2022.
Efforts to reduce poverty and inequality in Indonesia face various issues and challenges. One of these challenges is the changing poverty indicators, which have caused Indonesia’s poverty rate to increase according to international standards.
“Another challenge is to maintain the trend of decreasing poverty rates in Indonesia in case of economic shocks due to the COVID-19 pandemic, which resulted in a decrease in the well-being of most households in Indonesia,” said Murwiati during her public doctoral dissertation defense on Friday (September 8).
The study found that the composite variable of social protection is statistically significant, indicating that social protection programs are crucial in reducing inequality.
Furthermore, educational inequality had the highest value, indicating that addressing educational inequality is crucial and requires effective policy solutions.
Other findings indicate that the moderate deprivation group is the largest group suffering from deprivation. This pattern is consistent across all survey periods.
However, the shift pattern in the low and high groups has not consistently decreased. The deprivation patterns based on age groups suggest inconsistent upward or downward movements in each group, particularly among the oldest children.
“Household expenditures in the four survey periods underwent gradual changes due to gradual changes in household characteristics,” she explained.
“Gradual independent variables had a significant impact in each period. Regarding extreme poverty, the education and gender of the household head determine extreme poverty status.”
Murwiati further recommended routine evaluations of social protection schemes, as they can significantly contribute to poverty reduction and inequality through spatial analysis that captures regional characteristics.
In formulating anti-poverty policies, it is essential to focus on improving the welfare of children, given that children are a vulnerable group. Deprivations experienced during childhood can have long-term effects on their lives.
“When it comes to reducing extreme poverty, a series of approaches is needed, including financial inclusion and accessibility to basic services,” she said.
“This policy cannot work in isolation but requires the cooperation of multiple units because social protection alone is insufficient to provide a rapid response to reducing extreme poverty.”