Redefining Indonesia's socio-economic strata

Debnath Guharoy, Debnath.Guharoy@roymorgan.com

The commonly used term "middle class" has never really been defined and, if it has, this writer hasn't seen it. In 1997, an economic crisis redefined the value of the rupiah and its buying power at the pasar.

Yet, marketers and academics alike continue using the old nomenclature in 9 cities of Indonesia, regardless of economic crises or steep inflationary spikes, although this is now gradually being corrected. Even now, however, last year's fuel price hikes are still having a prolonged effect on Indonesian society.

This report dwells on how the Individual Income of Indonesians, as outlined in last week's edition, relates to Household Expenditure.

The information is based on Roy Morgan Single Source, a national survey with 25,000 respondents annually, covering 90 percent of Indonesia's population over the age of 14.

For Individual Income Strata (IIS) to work in tandem with the new and improved Household Expenditure, the groupings need to be similar. While savings are not mandatory and we are all free to spend everything we earn each month, even the most modest of homes have bills to pay.

Extended families and more than one breadwinner come to the rescue of many homes, particularly at the lower end of the socio-economic ladder.

The average monthly household expenditure (SES) data given below represents 90 percent of Indonesia's population over the age of 14 in urban and rural areas. Marketers and academics alike, who are used to the old SES data, will find Roy Morgan SES data different because they are used to SES data that only represents 9 major cities in Indonesia.

SES Monthly household expenditure Total Urban Rural

A1 More than Rp 4,250,000 0.3% 0.3% 0.2%
A2 Rp 3,250,001-Rp 4,250,000 0.2% 0.5% 0.1%
A3 Rp 2,250,001-Rp 3,250,000 1.1% 1.8% 0.4%
B1 Rp 1,750,001-Rp 2,250,000 3.4% 5.7% 1.3%
B2 Rp 1,250,001-Rp 1,750,000 9.6% 13.2% 6.3%
C Rp 800,001-Rp 1,250,000 21.2% 25.8% 17.0%
D Rp 600,001-Rp 800,000 29.4% 27.9% 30.8%
E1 Rp 400,001-Rp 600,000 26.5% 20.3% 32.8%
E2 Rp 400,000 or less 8.3% 4.5% 11.7%

Base: Indonesians of 14+
Sample Size: n=25,232
Time Period: July 2005-June 2006

So, how big is the middle class as defined by this new architecture in the chart? Add B and C together and you have 34.2 percent of all households in the country, spending between Rp 800,000 and Rp 2.25 million each month.

These monthly expenses include the usual, like groceries, clothes, utility bills and transportation, but exclude rent, mortgage payments and purchases of major appliances. The lower end starts with D households spending between Rp 600,001 and Rp 800,000, comprising 29.4 percent.

Group E, with expenses of Rp 600,000 or less per month, accounting for 34.8 percent of households, brings up the very heavy bottom of the updated SES in Indonesia. The definition of E is in line with the US$2 a day globally accepted minimum for subsistence living.

In sharp contrast is the 1.6 percent of the population at the top in A, who spend over Rp 2.25 million per month. Within A, there is A1 at the very top, accounting for a mere 0.3 percent of society with household expenditures of over Rp 4.25 million per month.

Next week, we'll be taking a look at who's managing their money, and how, with insights on consumer banking.

The contributor is an advertising professional turned researcher and consultant, based in Melbourne. He has lived and worked across the Asia Pacific region, including Indonesia, and remains a regular visitor to this country.
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