A decline of 1.2 million people in Indonesia’s middle class within a year may seem minor. Yet behind this figure lie millions of difficult stories from families across the country. Many have had to postpone long-held plans. Some have delayed purchasing a home, while others hesitate to send their children to their dream universities.
A report by the Mandiri Institute shows that Indonesia’s middle class shrank from 47.9 million in 2024 to 46.7 million in 2025. Its proportion of the total population fell from 17.1 percent to 16.6 percent. At the same time, the aspiring middle class (AMC) increased by 4.5 million people and now accounts for 50.4 percent of the population.
This means that more than half of Indonesians live just below the middle-class threshold. They are considered close to moving up, yet remain highly vulnerable to falling back.
UGM economist Dr. Wisnu Setiadi Nugroho stated that the issue is not merely about statistics but about a sense of security. He explained that the middle class typically feels financially secure, earning enough to save, plan for the future, and dream of achieving more than their parents did.
“When their numbers shrink, what is truly eroded is the belief that hard work will lead to progress,” he said at UGM on Wednesday (Feb. 18).
Dr. Nugroho noted that Indonesia’s middle class is relatively thin, with many positioned in the lower middle class. This means its foundation is fragile, and even minor shocks, such as layoffs, rising school fees, or increasing loan installments, can push families downward.
“The expansion of the AMC today reflects how many families are standing at the edge of uncertainty,” he added.
According to Dr. Nugroho, the decline in the middle class is partly driven by the nature of available jobs, which increasingly fail to offer upward mobility. Many new employment opportunities are survival-based, sufficient to get by, but not enough to move up the social ladder.
“The gig economy, informal work, and low-productivity jobs do absorb labor. However, such jobs rarely provide income stability, social security, or clear career paths. People work hard, but the social ladder does not become any longer,” he explained.
In addition, purchasing power has gradually eroded. Real wages for the lower middle class have remained relatively stagnant, while housing, education, and transportation costs continue to rise.
This is not a dramatic collapse, but rather a silent squeeze on income that steadily undermines families’ ability to save and plan for the future. Many households may still appear stable, but their fiscal and financial breathing space is narrowing.
There is also the rise of vulnerable household-based employment. Such jobs are not equipped with social security protections. When illness strikes, or demand weakens, there is no buffer, and a single shock can undo years of hard-earned stability.
“We do not yet have adequate shock absorbers for the near-middle group. Social policies remain focused on people with low incomes, who must certainly continue to be protected. However, the AMC, now the majority of the population, occupies a gray area. They are not poor enough to receive assistance, yet not secure enough to be fully self-reliant. In many cases, they stand alone when risks arise. If this trend continues, the impact will not only be economic but also social,” he stated.
Dr. Nugroho identified the greatest risk as aspiration without mobility. Public aspirations remain high; children want to live better lives than their parents, but the structural ladder is not available to them. If the AMC continues to grow without clear upward pathways, he warned, Indonesia may face a mobility trap.
In the long term, this could weaken the foundation of consumption and the tax base, undermining the transformation toward a developed nation.
“Economic growth is important, but growth without job quality is fragile growth. Gross Domestic Product (GDP) may increase, but if mobility stalls, social hope freezes as well,” he remarked.
To address these challenges, Dr. Nugroho emphasized the need for bold measures to create jobs that genuinely enable upward mobility, value-added manufacturing, modern services, and high-productivity sectors. Vocational education must be closely aligned with industry needs, rather than merely fulfilling curricular formalities. Another crucial step is building risk buffers for the aspiring middle class.
“Unemployment insurance and social protection must reach non-formal workers, and housing and education financing schemes should be designed to prevent near-middle families from slipping due to a single shock,” he said.
Dr. Nugroho also stressed that the government must ensure policies are designed to promote mobility, not merely short-term redistribution. Social assistance programs need evaluation to prevent a cliff effect, where a slight increase in income results in the complete loss of protection. According to him, the current contraction of the middle class could signal the early stages of deeper structural stagnation.
“The middle class is not merely a statistical category. It is a pillar of stability, a source of consumption, a taxpayer base, and, most importantly, a guardian of social optimism. If the engine of social mobility continues to slow, what is lost will not merely be 1.2 million people,” he concluded.
Author: Agung Nugroho
Photograph: Kompas Money
Post-editor: Zabrina Kumara Putri