Author: Pierre Bernando Ballo
Editor: Aria W. Yudhistira
SUMMARY (This summary was generated using AI)
- Despite the euphoria of the demographic dividend, Indonesia faces the threat of an aging population, with the number of non-productive-age people surpassing the productive-age population. This will place a significant burden on the productive generation, which must support more people.
- Old-age protection is very minimal, as evidenced by low public participation in pension programs, particularly among informal workers and women. This problem is exacerbated by the absence of a dedicated institution advocating for elderly-related issues following the dissolution of the National Commission on Aging.
- Policy reforms are needed to expand the coverage of old-age security with more flexible and gender-sensitive schemes. Furthermore, the government is being urged to revive a dedicated institution focused on designing and overseeing protection policies for the elderly.
Indonesia recently celebrated its 80th anniversary. Eight decades have passed, and each year we celebrate the collective, intergenerational memory of our aging nation. As a nation ages, so does its population. The question is, who will celebrate when we reach old age?
According to the Indonesian Population Profile Analysis conducted by the Central Statistics Agency (BPS), Indonesia will enter a "demographic bonus" period from 2012 to 2035, with a peak expected in 2020-2030. By 2030, it is projected that 68,5% of the total population, or approximately 203,5 million people, will be of productive age. This figure is significantly higher than the number of non-productive age population. During this phase, the economy is projected to grow rapidly, and productivity will increase—at least on paper.
Undeniably, this narrative pervades every government presentation, seminar, and even serves as the basis for various cross-sectoral policies. However, hidden beneath the euphoria lies a ticking time bomb that is often overlooked. There's a simple question to defuse: "What will happen after this 'glory' period ends?"
Starting in 2030, projections show that the proportion of the non-productive age population will increase and surpass those of productive age. The dependency ratio (DR) is estimated to reach 51%. This means that out of every 100 people, 51 will depend on the 49 productive age people who support them. Over time, there will slowly but surely be more mouths to feed than working hands.
This is what is now popularly known as the sandwich generation, a productive-age generation "squeezed" and having to bear the burden of both ends of the demographic pyramid simultaneously. However, an often-overlooked fact is that this generation was not born solely from the failure of individual financial planning, but rather from a policy structure that fails to provide adequate protection for all layers of the demographic pyramid. Therefore, reform is needed, and its urgency has never been greater.
Various existing policies already recognize the importance of preparing the lower layers of the demographic pyramid. Flagship programs like the Free Nutritious Meal Program and the People's School program are aimed at providing basic needs for those aged 0-15. But what about those in their senior years, and the productive-age population heading there?
By 2045, it is projected that 20% of Indonesia's population, or around 63 million people, will be over 65. As Indonesia enters its aging phase, many seniors will be left without protection. PRAKARSA (2024) shows that currently only 4% of the elderly population has and enjoys the benefits of the Pension Scheme (Pension Guarantee/JP). The low participation rate in the BPJS Employment program is also evident among productive working age, the Wage-Earning Workers (PPU) category, where their participation rate in the two old-age protection programs, JP and Old Age Security (JHT), is only 8% and 10%, respectively.
Participation rates are even lower for informal workers (Non-Wage Earners/BPU), with only 0,2% currently enrolled in JHT. For them, affordability is the biggest issue, with 58,33% of survey respondents only able to pay Rp 60-Rp 100 per month for the BPJS Kesehatan and Ketenagakerjaan programs. Another issue is that participation in JP and JHT is not mandatory for BPU. As a result, when there is an increase in layoffs, as has happened recently, BPU are forced to withdraw their JHT savings for daily needs, leaving them without a source of income when they reach old age.
Gender disparities are also evident in the implementation of old-age protection programs. PRAKARSA (2024) showed that 97% of female respondents stated that preparing for retirement was important, but they did not have sufficient income to do so. This is because female workers, especially informal workers, are generally paid much less than men, and a large portion of their income is spent on care work.
Without adequate old-age protection, our population becomes increasingly poor as we age. This is further evidenced by data from the National Socioeconomic Survey (Susenas), which shows that the highest poverty prevalence is among the 60-74 age group and those over 75.
Poverty Percentage by Age
Note: Determination of poverty based on the district/city poverty line
Indonesia also lacks a dedicated agency responsible for elderly issues. Through Presidential Regulation No. 112/2020, the government disbanded the National Commission on Elderly (Komnas Lansia). Previously, Komnas Lansia was a non-structural institution coordinated by the Ministry of Social Affairs, directly reporting to the President, and played a crucial role in overseeing cross-sectoral policy planning and formulating regulations related to elderly issues.
The dissolution sparked public criticism, given the National Commission on Elderly's strong involvement in various cross-sectoral policies and regulations concerning the elderly. Its dissolution also marked a setback in national advocacy for old-age security and clearly had a significant impact on the demographic challenges we face today.
Policy Reform for Old Age Security
Indonesia is entering a period of aging. Therefore, it is crucial that social policy designs incorporate the perspectives of older people. Now is the time for the government to reform the current old-age protection system through several policy options.
FirstThe government should expand coverage and require participation in the JP and JHT programs for informal workers (BPU), and develop a tripartite cost-sharing scheme between the government, the private sector, and workers to finance insurance premiums. The government could emulate the successful model recently implemented by providing discounts on Work Accident Insurance (JKK) and Death Insurance (JKM) contributions. However, this option would require a significant budget allocation from the state budget to BPJS Ketenagakerjaan, as well as regulatory changes to Law No. 40/2004 concerning the National Social Security System (SJSN), which would take time.
Secondly,, introducing insurance premiums with flat rates but flexible payment terms, specifically to accommodate informal workers (BPU) with uncertain incomes. This scheme can apply to both JHT and JP. One good example from another country is the Bangladesh Universal Pension Scheme (UPS), which implements a flexible payment mechanism and is not tied to a specific time.
Third, introducing gender-sensitive pension schemes to help female workers plan for retirement. One way is by introducing a means-tested Contribution Assistance Recipient (PBI) scheme that prioritizes female workers in paying their insurance premiums.
Fourth, reviving the National Commission for the Elderly and expanding its role not only as a supervisor, but also involved in cross-sector policy planning related to elderly issues.
Conclusion
As we celebrate our nation's eighth anniversary, it is important to ensure that the nation also celebrates us as we turn 80. Policy reforms are needed to ensure that we also achieve "independence" at that age, without burdening the generations that come after us.
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This article has appeared on Katadata.co.id with the title "The Fate of the Elderly after the Demographic Bonus Ends," Read more here: Katadata.co.id