Employment, living standards and poverty: Trends, policies and interactions

By international standards, Indonesia has a credible record on poverty reduction and improvements in living standards in the first decade of the twenty-first century. This is particularly true with regard to the monetary measurement of poverty. Measured in this way, poverty has fallen significantly since the Asian financial crisis of 1997–98 despite only moderate rates of economic growth by regional standards. As the above comment by Boediono – now the vice president – suggests, the government takes poverty alleviation seriously, based not only on economic but also political considerations. Nevertheless, unlike in the Suharto era, Indonesia can no longer rely on creating better jobs for workers in low-productivity agriculture and services to achieve significant declines in poverty and vulnerability. Nor is such a strategy a viable option politically. Post-Lreformasi, elected leaders now stand accountable for their record on poverty alleviation. This has encouraged governments to become more proactive in seeking to improve the living standards of the poor. The more direct approach to poverty reduction has brought with it a myriad of problems and challenges. Many of the shortcomings in government policies have been the butt of criticism in the political arena, especially since Susilo Bambang Yudhoyono was elected president in 2004. Unemployment remains high, the quality of education has been identified as a major problem, and many of the poor are unable to access free or subsided health care. While Indonesia is on track to meet several of its Millennium Development Goals by 2015, on current trends it is unlikely to meet others. These include reductions in child malnutrition and maternal mortality rates and improvements in access to clean water and sanitation. Reaching the poor through education and health programs, and through special cash grants, has been more difficult to achieve than most government office holders had anticipated. This book sets out to provide a picture of Indonesia's progress in improving living standards, and to detail the government's policy approaches, successes and failures.1 In this introductory chapter we provide an overview of these developments, indicating the contribution that the other chapters make to the subject.