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Jakarta Post

Strengthening fiscal policy to reduce inequality

  • Muhammad Fajar Nugraha and Yanuar Falak Abiyunus


Jakarta   /   Wed, September 11, 2019   /  02:09 pm
Strengthening fiscal policy to reduce inequality Arminah (right), 48, and her husband Qoni, 60, inside their house in a slum located under a highway in Teluk Gong, North Jakarta. Arminah scavenges for a living while Qoni sells coffee and repair light bulbs. (JP/Nea Maryami Ningtyas)

The government has succeeded in reducing the Gini ratio, which is widely used for measuring inequality, to 0.38 in March 2019 from 0.41 in 2014 and has set an ambitious target of reaching 0.37 in 2024. Zero represents perfect equality. Our economy — the largest in Southeast Asia — is growing, and our country is recognized as a member of the Group of 20, but its economic growth is not inclusive. Inequality is the cause of economic and social ills. Inequality is hindering economic growth as a result of lower labor productivity, since inequality deprives lower-income earners of the ability to stay healthy and accumulate physical and human capital. Research shows that inequality also leads to a lost opportunity in driving innovation, which is essential for making high value-added products and services through knowledge-based industries. Eventually inequality will increase s...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.