Jakarta, 1 September 2025 – The PRAKARSA, Center of Reform on Economics (CORE) Indonesia, and Institute for Development of Economics and Finance (INDEF) as economic and public policy think tanks have seriously observed the social, economic, and political developments in the past few days, and assess that the wave of demonstrations that have occurred reflects a fundamental failure in equitable economic management in Indonesia.
Mohammad Faisal – Executive Director of CORE Indonesia expressed deep concern over the demonstrations that led to chaos, which were rooted in the accumulation of public disappointment over economic injustice, as reflected in the widening gap between rich and poor, the still high unemployment and poverty rates, the declining purchasing power of the lower middle class and limited opportunities to obtain decent employment.
"Although the number of poor people is declining, according to the latest data from the Statistics Indonesia (BPS) as of March 2025, the number still stands at 24 million. However, if we look at the population living around the poverty line, with per capita expenditure below IDR 1 million per month, the number is no less than 100 million. That's equivalent to more than a third of Indonesia's total population," Faisal explained.
Furthermore, Faisal added that the open unemployment rate has indeed decreased, but the percentage of informal workers is approaching 60 percent. The number of part-time and underemployed workers has also increased significantly. Meanwhile, the number of layoffs (PHK) has soared sharply. Ministry of Manpower data shows that from January to July 2025, there were 43.500 layoffs, a 1,5 percent increase compared to the same period in 2024. The number of layoffs this year is even higher, according to APINDO (Indonesian Employers Association).
In response to this situation, Faisal emphasized the need for a swift response from the government and political elite through concrete corrective measures. These include: revoking tax policies that burden the public; revising the Regional Transfer (TKD) policy that triggers excessive local tax collection; and halting unproductive spending, such as the creation of new institutions, excessive incentives, and financing housing loans for members of the House of Representatives.
Instead, the state budget should be focused on creating massive jobs in labor-intensive sectors, integrated poverty alleviation programs (not just social assistance that is prone to politicization), and anticipatory measures against external pressures, such as the United States' reciprocal tariff policy that has the potential to worsen imports and weaken the domestic sector.
In his closing statement, Faisal emphasized that he respected the demonstrations as a way of expressing the people's aspirations. However, he urged the public to refrain from looting and vandalism. He also asked the government to prioritize a persuasive approach, rather than a repressive one, to defuse the situation.
Roby Rushandie – Research and Knowledge Manager The PRAKARSA highlighted Indonesia's decent work crisis as the root of the tragedy of recent demonstrations. This is ironic given the government's euphoria over poverty reduction and rising economic growth. Meanwhile, the reality on the ground shows the opposite. Despite declining unemployment, the informal sector dominates, with 86,58 million workers in February 2025, an increase from the previous year. While formal employment has stagnated over the past four to five years, this is evident in workers Portal such as online motorcycle taxis which increased from 3,62 million in 2019 to 4,22 million in 2024.
The Survey PRAKARSA A survey of 213 respondents revealed that 60 percent consider online motorcycle taxis their primary job, and 26 percent work more than 48 hours per week. Furthermore, only 12 percent of the platform's 4,6 million workers are registered with the Social Security Agency (BPJS Ketenagakerjaan). This is despite the fact that the average income of online motorcycle taxi drivers, as quoted from the IDEAS survey, fell from Rp 309.000/day before the pandemic (2018-2019) to Rp 175.000/day (2022-2023).
The main causes of the high rate of informal workers are early deindustrialization over the past 10 to 20 years, the decline of the manufacturing sector, and slowing labor absorption. This situation creates vulnerability, as illustrated by the Affan Kurniawan tragedy. "The tragedy that befell Affan Kurniawan demonstrates how informal workers, who have long been the backbone of the urban economy, lack job security, decent wages, social security, and minimal government attention," said Roby.
Roby recommended urgent reforms for equitable social protection, namely developing a decent work framework that includes humane wages and working hours as well as safety guarantees; establishing a tripartite law that regulates workers; and Portal digital; integrating 4,6 million workers Portal into the BPJS Employment and Health with proportional contributions; implement a massive cash-intensive labor program for layoffs and the unemployed; and accelerate legal certainty regarding the integration of business, human rights, and environmental standards to attract sustainable investment. Furthermore, strengthening the Pre-Employment Card (Kartu Prakerja) is needed, which not only provides online training but also internship programs, job training, and clear employment contracts. Fiscal reform is also needed by implementing a wealth tax for the super-rich, postponing the increase in PBB-P2 (land tax), and stopping PPh21 subsidies for members of the House of Representatives (DPR) and state officials. "The government needs to implement a wealth tax on the super-rich to carry out its redistributive function," he stressed.
Esther Sri Astuti – Executive Director of INDEF highlighted fiscal injustice as one of the main triggers for the demonstrations. "This is a gut issue. Land and Building Tax has increased drastically, while House of Representatives (DPR) allowances are extraordinary. The average worker's wage is only around IDR 5 million per month, while DPR members earn 20 times that," he said. He also emphasized the weak protection of workers, the rampant layoffs, and low wages that have resulted in a decline in the middle class. This situation is exacerbated by the increasingly dominant informal sector in Indonesia's labor structure.
Esther's analysis of the APBN spending trend further indicates that capital expenditure growth is lower than routine expenditure, with employee expenditure, goods expenditure, and debt interest increasing, while subsidies and social assistance are decreasing. On the other hand, tax revenue is slowing, reaching Rp2025 trillion in April 657, compared to Rp2024 trillion in April 719,9. Meanwhile, "Debt obligations maturing this year are Rp800,33 trillion, plus interest totaling Rp1.353,18 trillion. Extraordinary! Meanwhile, tax revenue is slowing, and routine expenditure exceeds capital expenditure," Esther said. She continued, explaining that the need to finance priority programs in the 2026 RAPBN is very high.
Esther recommends urgent fiscal reforms to promote transparency and fairness, including a moratorium on additional tax burdens such as VAT and PBB amidst weak purchasing power; implementing a super-rich wealth tax for redistribution; revising regional tax cuts that have caused regional taxes to soar; and implementing participatory budgeting by involving vulnerable communities; reallocating unproductive budgets such as incentives for officials/DPR and military spending to the real sector, creating jobs, and stimulating public consumption; evaluating the increase in the defense budget; prioritizing the education budget with a focus on improving the quality and welfare of teachers; allocating priority program budgets in stages according to fiscal capacity and conducting regular evaluations; as well as revitalizing the manufacturing industry, strengthening the domestic supply chain, and transforming MSMEs to a medium scale to reduce the informal sector and increase quality employment to prevent further economic contraction.