LIVING BEYOND $2 A DAY: HOW INDONESIA HAS PROGRESSED

Abstract

Using data from a long-term series of household surveys and more information on regional variations in the living costs of the poor, and on inflation, we estimated the proportion of people living on less than $2 a day (2005 PPP). We found that for the period from 1990 to 2012, the incidence of poverty, that is, for those who subsist on less than $2 a day, has been declining at an average rate of 2.2 per cent per year and were down to 36.5 per cent in 2012. The rate of the decline over ten years from 2002 to 2012 (the Reformasi era) has been faster (2.9 per cent a year) than during the pre-Reformasi era, that is, from 1990 to 1996 (1.4 per cent a year). This is in contrast to a rather slower rate of the decline in the incidence of poverty shown by the national poverty line during the Reformasi era, when it was only 0.65 per cent a year. We also found that poverty, using the $2 poverty standard, has been more prevalent among informal labor and agricultural workers. The difference between the rates of poverty, using the $2 a day measure, between formal and informal labor was larger during the Reformasi era, a sign that the welfare of informal labor has lagged. During Reformasi, economic growth led to more inequality of income compared with the years before Reformasi and this economic growth did not advance the lot of the poor. This conclusion applies to the poor defined as those living below national poverty line and to those living on less than $2 a day.