Statistics Indonesia (BPS) reported in 2023 that Yogyakarta City had the highest inequality in the Special Region of Yogyakarta (DIY), with a Gini Index of 0.519 in 2022 and 0.454 in 2023.
High inequality indicates that economic resources within society have minimal potential to be enjoyed by families with the lowest income levels. This condition results in long-term negative impacts on social and economic development.
Addressing this issue, a team of UGM students involved in the Student Creativity Program in Social Sciences and Humanities Research (PKM-RSH) researched the implementation of a people’s economy in Yogyakarta City, its relationship with income inequality, and strategies for strengthening to achieve better economic equity.
The PKM-RSH team consists of Muhammad Nur Maulana (Accounting 2022), Muammar Ilham Hanafi Tarwaca (Accounting 2022), Aushaaf Rafif Keane Pribadi (Economics 2022), Ilham Prasetiyo (Social Development and Welfare 2022), and Laksita Balinda Anabela Darayanti (Economics 2022).
This research was conducted under Dr. Hempri Suyatna, a Social Development and Welfare Department lecturer at the UGM Faculty of Social and Political Science (Fisipol UGM).
In this research, the students used the People’s Economy Index, often called the economic democracy index, measured using the Indonesian Economic Democracy Index (IDEI), comprising three dimensions and 21 indicators.
The average IDEI score for Yogyakarta City from 2007 to 2022 was 0.5195 out of a maximum of 1. This result indicates that implementing a people’s economy in Yogyakarta City falls into the medium category.
The research results showed that a 1% increase in the IDEI value reduces inequality by 6.03 percentage points. This indicates that implementing a people’s economy can reduce income inequality in Yogyakarta City, with the effect mechanism occurring in the medium term.
However, due to a lack of identified cointegration, the relationship can dissipate or change in the long term.
“The index in the medium category indicates that the implementation of a people’s economy is quite good but not yet efficient,” said Maulana on Thursday (Jul. 25).
Field research also revealed that the people’s economy has long been implemented in Yogyakarta City, but no concrete steps or specific monitoring from the various actors involved have been taken.
Using a participatory rural appraisal (PRA) approach through community empowerment, the UGM People’s Economy (Ekora) team assessed that there is an opportunity to improve economic equity in Yogyakarta City by strengthening the people’s economy.
The PRA approach empowers communities to independently identify, plan, and manage development.
“PRA makes the general public the object and part of the development. This creates sustainability impacts with strong community resilience even after the development program is completed,” Maulana said.
Ilham Prasetiyo stated that four strategic steps are offered to support the people’s economy through participatory rural assessment (PRA): formulating and measuring people’s economy indicators in local government programs, essential for designing, implementing, accounting for, and evaluating programs. Without clear indicators, implementing the people’s economy will be directionless and challenging to assess for success.
Secondly, collaborative spaces should be provided between the community, expert groups, and government staff. This team will develop and implement the people’s economy, enhance public understanding, and monitor and evaluate program implementation.
Thirdly, the government should integrate the mission to strengthen the people’s economy through the independent cultural village program, a community empowerment program promoted by DIY.
“This opens up opportunities for implementing the people’s economy from the perspective of cooperatives, entrepreneurs, and consumers,” he said.
Fourthly, they should encourage local entrepreneurs to contribute to the people’s economy. Strengthening the people’s economy can be part of corporate social responsibility (CSR) and the company’s responsibility to the surrounding community.
“With this strategy, it is hoped that economic equity in society will increase,” he explained.
Dr. Hempri Suyatna stated that understanding the people’s economy in society is still limited to humanitarian aspects. Yet, the people’s economy concept offers sustainable solutions by emphasizing family values, social justice, and economic inclusion.
“This research is expected to be a renewal because, in the study of the people’s economy, there is no empirical research discussing the resilience of the people’s economy concept in society as a basis for improving the quality of life in terms of reducing income inequality,” he concluded.
Author: Gusti Grehenson