Asrian Hendi Caya Researcher of Pusiban
THE Indonesian economy experienced a contraction of -5.32% in the second quarter of 2020. This condition was predicted since the government has determined the Covid-19 as a pandemic in March. In some countries, the contraction has happened since the end of 2019 and it is tremendous. During the first semester of 2020 (first and second quarters), the Indonesian economy had contracted -1.26%, while the worst-case scenario had announced by -0.4%.
President Jokowi was angry with the ministers because they were deemed not having responded to the emergency. Thus, the hard work has not been seen particularly. This reaction arose because the condition of the Indonesian economy was worse than expected. There are concerns that contraction will still occur in the third quarter, causing Indonesia’s economy to enter a recession.
Many countries have experienced contraction for two quarters and entered the recession. If we look at the economic performance in the second quarter, one of the sources of contraction is government consumption expenditure.
In the second quarter, the government consumption expenditure grew negatively (contracted) by -6.90% or already contracted -2.39% in the first semester of 2020.
The government is expected to provide a solution in a difficult economic situation by increasing spending. The business sector has experienced a decline in activity and some have temporarily closed their businesses, especially the hotel, entertainment venues, tourism and transportation.
That is why President Jokowi was furious. The absorption of funds to deal with the impact of the Covid-19, which reached 695.2 trillion Rupiah, is still low. In the third quarter there were major efforts to increase government consumption expenditure through various social and economic activities.
There is social assistance for food, health, and income. There is also economic assistance, either for capital, loan relaxation, or low-interest loans. It is hoped that with the government expenditure, there will be demand for goods and services that drive production and distribution, the purchasing power of the assisted community increase so the demand for goods and services will also increase.
Then there is loan relaxation, which reduces the burden on the company and restores production and distribution activities. So the company can continue to work.
One of the government assistance in order to increase purchasing power is giving the wage subsidy to the workers. Currently, some workers have been laid off, not working as full time workers, and their income is cut.
All have been implicated in reducing income and purchasing power also decreases. As a result, economic activity has also decreased, both in production and distribution. These are among the causes of economic contraction.
The Wage Subsidy
The wage subsidy provides to restore the welfare of workers who lose purchasing power and to create markets to increase the purchasing power. The government hopes that this policy can move the economy. The workers get Rp 600.000 over four months, so each worker will receive the subsidy of Rp 2.400.000 which will be distributed in two stages.
The government is targeting 15,700,000 workers will receive the subsidy. Thus, there will be around 37.68 trillion Rupiah of additional revolving funds. Through the multiplier effect mechanism in the economy, at least the impact will be equivalent to around IDR 100 trillion.
The subsidy will be very helpful in moving the economy. Moreover, many other policies have been made to stimulate the economy at the same time as helping the recovery of people’s welfare.
There is also assistance and facilitation for the ultra, macro, and micro-businesses as well as SMEs. If all these policies, both social and economic move simultaneously, it is hoped that the third-quarter economy will no longer contract.
Based on the policy of the wage subsidy, those who are entitled to receive are workers with wages below 5 million and still active as BPJS Ketenagakerjaan participants by paying contributions until June 2020.
The poverty line of March 2020 is Rp 454.652 per capita per month. The number of family members is 4.66, so the poverty line per household is Rp 2.118.678 per month. It means the wage criteria are far above the family poverty line. Hopefully, the assistance will provide a lot of access to the workers and has an impact on reducing poverty.
The target number of beneficiaries is 15,700,000 workers. Meanwhile, the number of national workers in February 2020 reached 129.36 million, and 50.62 million (39.13%) of them are workers/laborers/employees. Thus, the coverage of the wage subsidy policy, which around 34.57% is relatively adequate in helping workers affected by Covid-19. Hopefully, there will be solutions for other workers through other government policies as well.
Based on their employment status, 74.08 million (57.27%) work in the informal sector. Free workers in agriculture are 4.70 million (3.63%), free non-agricultural workers are 5.88 million (4.55%), and unpaid workers (family) are 17.76 million (13.73%).
Based on working hours, there are 38.86 million workers (<35 hours per week) who are not a full time worker (30.94%). They are almost certainly not registered as BPJS Ketenagakerjaan participants. The income tends to be lower and uncertain.
The impact of the Covid-19 pandemic is relatively large for the workers. The benefits will be greater if government policies at the same time can stimulate the economy, and restore the welfare of the community, especially groups of poor families.*
