Family Matters: Demographic Change and Social Spending in Indonesia

Abstract

Economic growth of only 4.9% in Indonesia in the first quarter of 2016 cast doubt on the previous official target of 5.2%–5.6%. Given the lacklustre internal demand and dampening global outlook, whether the government can generate faster growth in the remaining months will depend on the extent to which its programs champion productive spending. The government’s response to stalling growth has focused on increasing infrastructure and social spending. In the face of budgetary constraints to financing such expenditures, initiatives to raise revenue and to improve targeting on social spending are taking place. On the revenue front, two initiatives are worth noting: the issuance of Law 11/2016 on Tax Amnesty and the amendment of Law 16/2009 on General Provisions and Tax Procedures. To improve the targeting of social spending, the National Team for the Acceleration of Poverty Reduction (TNP2 K) launched an updated Unified Database, which contains information on 24 million of Indonesia’s poorest households. Meanwhile, around 167 million Indonesians have registered for the National Health Insurance scheme. Yet any consolidation of social protection and insurance programs in Indonesia necessitates an understanding of long-run trends in population dynamics. In particular, understanding the trends and drivers of family change is pivotal to mapping key issues and challenges in President Joko Widodo’s continued push towards welfare reform. We outline key features of contemporary family change in Indonesia: a modest decline in average household size, an uncertain trend in age at first marriage, fertility rates that hover just above replacement level, an increasing tendency for women to ‘marry down’ in education, more interethnic marriages, and an upturn in divorce since around 2006. We note the implications of family change on future trends in population and the workforce, and their associated longer-term challenges for current social protection initiatives.