Indonesia's Middle Class Squeeze Puts Income, Jobs and Growth in Focus

75 Million People at the Centre of a Spending Problem

Indonesia's lower middle class includes about 75 million people but contributes only around 17 percent of national consumption, according to figures presented by Aviliani, the Indonesian Chamber of Commerce and Industry's deputy chair for macroeconomic and microeconomic policy analysis. Speaking in Jakarta on January 15, 2026, she said their incomes were tending to fall, putting pressure on a major source of economic growth.

Her warning points to a gap between Indonesia's economic performance and the experience of many households. Growth has held around 5 percent, while families in the middle of the income distribution face declining earnings and, in her assessment, little government assistance.

Aviliani urged the government and businesses to concentrate on raising incomes, particularly through employment and stronger links between large companies and small and medium enterprises. Her argument connects household finances with Indonesia's ambition to achieve economic growth of 8 percent: businesses need customers with money to spend, and households need reliable ways to earn it.

The pressure follows an earlier decline in middle class numbers, from more than 57 million people in 2019 to just under 48 million in 2024. Figures cited in her subsequent presentation put the middle class at 46.7 million people in 2025, or about 16.6 percent of the population.

Those figures describe different parts of the income distribution. The broader lower middle group at the centre of her warning includes people whose financial position is less secure than the narrower middle class category.

Who Falls Between Assistance and Financial Security?

Aviliani divided households into three groups using income deciles. A decile is one of ten groups formed by ranking people from the lowest income to the highest, with each group representing a tenth of the population being measured.

• Deciles 1 to 3: the lower income group, shown in red in her presentation.
• Deciles 4 to 7: the lower middle group, shown in yellow.
• Deciles 8 to 10: the upper middle group, shown in blue.

Households in the lowest group generally receive support such as BLT, or direct cash assistance, and assistance associated with BPJS, Indonesia's social insurance system, Aviliani said. Her concern centred on the households above them: people whose earnings were falling but who were outside the assistance she described.

For these families, the immediate problem is the money left after essential expenses. When earnings shrink, spending on other goods and services becomes harder to sustain. Aviliani's proposal focuses on increasing that income rather than relying primarily on a larger social assistance budget.

Why Growth Near 5 Percent Can Feel Uneven

Indonesia's higher income households account for a large share of spending. In the presentation organised around deciles, Aviliani put the contribution of the upper three groups at about 53 percent of total household expenditure.

That concentration helps explain how spending can continue to support national growth while other households lose purchasing power. Purchases by people with stronger finances carry considerable weight in the national total.

At the January 15 Kadin: Global & Domestic Economic Outlook 2026 event, Aviliani used another breakdown. She said upper and upper middle groups contributed about 70 percent of national consumption, compared with 17 percent from the lower middle group and 13 percent from around 25 million people in the lower group.

Using those January figures, the upper groups accounted for roughly four times the consumption share of the lower middle group: 70 percent compared with 17 percent. The comparison shows why the spending strength of more affluent households matters so much to the national result.

Aviliani's concern is how widely the benefits of growth reach. A family experiencing declining income has less capacity to spend even while total economic output rises.

Reading the Numbers and Dates Carefully

Aviliani's presentations contain several measures of the middle of Indonesian society: 46.7 million people classified as middle class in 2025, 75 million described as lower middle class in January 2026, and a group she put at about 33 percent of the population in her decile presentation.

The January consumption shares of 70 percent for the upper groups and 17 percent for the lower middle group also sit alongside the 53 percent figure for the upper three deciles in the other presentation. The descriptions cover differently labelled groups, and the underlying definitions and calculation tables were not specified. Four complete population deciles would ordinarily represent 40 percent, so the relationship between deciles 4 to 7 and the cited 33 percent also needs clarification.

The event chronology contains a further unresolved detail. The remarks about the coloured decile groups are dated February 20, 2026, in descriptions of a Katadata Insight presentation, while fuller descriptions place them at an Outlook Ekonomi 2027 policy dialogue in Jakarta on October 20, without specifying the year.

The sequence that can be set out is:

• 2019 to 2024: Indonesia's middle class fell from more than 57 million people to just under 48 million.
• 2025: Aviliani's presentation put the middle class at 46.7 million people, or around 16.6 percent of the population.
• January 15, 2026: At Kadin's economic outlook event in Jakarta, she highlighted declining incomes among 75 million people in the lower middle group.
• February 20, 2026, and October 20: Descriptions of the decile remarks give these different event dates; the October year is unspecified.

Why Household Income Matters to National Output

Consumption accounts for about 57 percent of Indonesia's gross domestic product, Aviliani said in January. GDP measures the value of goods and services produced in an economy. Household purchases therefore make up more than half of the country's economic activity.

Investment contributes about 30 percent, while she put the contribution associated with the state budget at around 8.7 percent. Her central message was that consumers and private businesses have a much larger role than direct government spending alone.

A sustained income squeeze can spread beyond the families first affected. When households reduce purchases, businesses serving them receive less revenue. Those businesses may then have less room to hire workers or expand, making stronger household incomes a practical concern for employers as well as policymakers.

Aviliani called for private businesses and Kadin members to expand employment so the lower middle group could move into a more secure financial position and contribute more to consumption. Her proposal links the quality of growth to the ability of households to participate in it.

More Jobs, but What Kind of Work?

Aviliani also questioned the quality of the jobs being created. At the Outlook Ekonomi 2027 discussion, she said much of the increase in employment was occurring in informal work, pointing to the growing number of motorcycle taxi drivers using online platforms.

Informal work generally takes place outside standard employment arrangements. Earnings can vary, and workers may have fewer benefits or protections than people in formal jobs. For a household, finding work and gaining dependable income are closely related but different steps toward financial security.

Indonesia's earlier employment figures show the context for that concern. Informal employment rose from 57 percent of jobs in 2018 to 59 percent in 2023, an increase of two percentage points. Aviliani's comments connect the pressure on middle incomes with that longer shift in the labour market.

Her warning also extended to social tensions. She said prolonged pressure on households in the middle could contribute to protests and unrest. She framed improving incomes and employment opportunities as part of the government's response to their vulnerability.

A Business Route to Higher Incomes

Kadin's proposed response would give large companies incentives to bring small and medium enterprises into their supply chains. A supply chain is the network of businesses that provides the materials, services and products needed to make and sell something.

A smaller company entering that network could supply a larger buyer with components, packaging, transport or other services. Aviliani's argument is that stronger commercial relationships would generate business activity and raise incomes.

She suggested tax deductions or other tax incentives for large companies that work with smaller enterprises. A tax deduction reduces the amount of income on which a company calculates its tax, subject to the rules of the scheme.

Aviliani presented this as an alternative to making social spending an increasingly large part of the national budget. The proposal would use the tax system to encourage business relationships, with private activity providing the route to higher earnings.

Her January remarks also connected private sector activity with the financing of assistance. She said better tax collection from that activity could help sustain social programmes, linking business expansion, public revenue and support for vulnerable households.

The Private Sector and the 8 Percent Target

Aviliani said the private sector accounts for about 80 percent of Indonesia's economy. Reaching the government's growth ambition of 8 percent would therefore require a larger role for private enterprise, alongside state owned businesses and cooperatives.

She called for balanced opportunities among those groups. Her comments addressed perceptions that economic activity was becoming increasingly concentrated around state owned companies and Danantara, the body managing state assets.

Aviliani, Kadin's deputy chair responsible for macroeconomic and microeconomic policy analysis, described the state budget as a catalyst rather than the main economic actor:

APBN itu hanya sebagai katalisator, bukan sebagai pemeran utama. Jadi kalau semuanya mau dipakai melalui APBN, enggak akan mungkin,

Her point was that the national budget can help set activity in motion, but private businesses must carry much of the work of investment, production and employment. Raising household incomes is part of that process because stronger customer spending supports business demand.

Fiscal Discipline and a Broader Measure of Resilience

Aviliani paired her call for private sector participation with a warning about fiscal discipline. Fiscal space means the government's capacity to spend or reduce taxes while keeping its finances manageable. She said that room needed to be protected and the budget deficit kept within the applicable rules.

Investors buying government bonds consider the state's ability to manage its finances and repay debt, she said. That makes the way growth is financed relevant to the cost and sustainability of public borrowing.

Coordinating Economic Affairs Minister Airlangga Hartarto separately described Indonesia's economy as resilient, with a relatively low recession risk compared with the United States, China and Japan. He cited a risk assessment while discussing slowing global growth and rising geopolitical tensions.

Airlangga's assessment concerns the economy's ability to withstand external pressure. Aviliani focused on how income and spending are distributed within it. Together, those issues give policymakers two concrete tasks: maintain national stability and improve the earnings of households whose financial position is weakening.

For the lower middle group, Kadin's priority is a route to stronger income through employment and business activity. For the growth target, the same households represent a substantial pool of potential demand, provided their capacity to spend improves.

Key Points

• Aviliani said about 75 million people in Indonesia's lower middle group contributed around 17 percent of national consumption and faced declining incomes.
• She warned that households above the poorest income groups could face pressure without receiving the assistance available to lower income families.
• Consumption accounts for about 57 percent of GDP, making household earnings central to Indonesia's growth prospects.
• Kadin proposed tax incentives for large companies that bring small and medium enterprises into their supply chains.
• Aviliani called for stronger employment, greater private sector participation and continued fiscal discipline to support faster growth.
• The presentations use different income groupings, and descriptions of the decile remarks give conflicting event dates.