Jokowi’s Welfare Program
In Indonesia, the welfare policies and programs of an administration have not been given any “title”.
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Each administration or government regime has its own economic policies or programs, as seen in terms like Thatchernomics, Clintonomics, and Habibienomics, as well as the current Jokowinomics.
In referring to welfare policies and programs, there have been terms like the “milestone welfare regime”. We have also heard of the Bismarckian, Beveridge and the Scandinavian/Nordic welfare systems.
In Indonesia, the welfare policies and programs – whether social security, social assistance, or social insurance – of an administration have not been given any “title”. This piece intends to talk about the social policies of the present administration and to name it Jokowilfare, a combination of Jokowi and welfare.
Beginning of social security
If we track social security since independence, it was first implemented in 1963 for government officials (Aspinall, 2014). At the beginning of the New Order era, the government issued Law No. 6 of 1974 on Social Welfare under a social security framework. The Social Affairs Ministry (now Home Ministry) was tasked with managing and distributing the social assistance program. Workers and health welfare began to be developed much later, in the 1980s.
The welfare policy again received attention in connection with the 1998 financial crisis. The government of BJ Habibie launched its Social Safety Net program, which incorporated cash assistance, rice/basic commodities distribution, educational assistance and affordable health services for poor and “near poor” people. The social security scheme was later developed into the Health Services for Poor Families (JPK Gakin) program during the era of president Megawati Soekarnoputri.
The amendment to Article 28H, Paragraph 3 of the 1945 Constitution stresses that the state guarantees social welfare for each citizen. The “new” constitution became a stepping stone for the Megawati administration to form the Social Welfare Working System Committee in early 2001. The committee was tasked with drafting a new social security system, which later became Law No. 40/2004 on the National Social Security System (Aspinall, 2014; Wisnu, 2012).
The government of president Susilo Bambang Yudhoyono (SBY) continued the program that had been running since the 1998 crisis. During this period, the welfare program was split into a social assistance program, the Public Health Security (Jamkesmas), and the Direct Cash Assistance (BLT) program.
The BLT program provided cash to poor families as compensation for the abolition of the fuel subsidy. However, the program became controversial because cash assistance was viewed by certain circles as an effort to influence the recipients’ electoral vote (Sumarto, 2014). During SBY’s leadership, Law No. 24/2011 on the Social Security Management Agency (BPJS) was enacted after it had been delayed several years.
Social equality
The history of welfare regimes in Scandinavian countries or South Korea is different from that in Indonesia. Their social welfare policies are products of disagreements as well as compromises among social strata (Croissant, 2004; Esping-Anderson, 1980; Moene, 2017).
The welfare policies in those countries lie within a framework of social equality that integrates social security with inclusive development. This means that the welfare programs do not simply consist of assistance/provisions, whether cash or in-kind, but absorb the new workforce and encourage sustainable socioeconomic growth.
In Scandinavian countries, the welfare system is the foundation for inclusive economic growth. Therefore, the states protect their citizens from birth to death (cradle-to-grave welfare state). How does this work?
One of the measures Scandinavian states and South Korea have applied is wage compression, a policy to minimize differences in wage among blue-collar and white-collar workers. In Scandinavia, labor unions collectively set the white-collar incomes so they are not excessively unfair, as well as the minimum income for laborers and informal sector workers (Moene, 2017).
Competitive effort
The formula is simple: If the incomes of the middle and upper level of workers are restricted, the prices of products and services become relatively lower than those of foreign competitors. Therefore, their products become competitive on the world market. With such an advantage, companies can invest in technology and operational management so their production process becomes more productive and efficient.
The wage compression strategy in South Korea is different. In the post-Korean war period, the administration in power proved subsidies and access to education through to the university level so that in the 1960s and 1970s, South Korea had a surplus in the skilled workforce. With a relatively equal education level, companies were able to recruit workers at relatively the same salaries that were not too high. As a result, industrialization developed rapidly in South Korea (Moene, 2017).
The wage compression policy was able to encourage inclusive development because industry developed, thereby increasing its capacity to absorb more workers and reduce the informal sector. With the decline in unemployment and the informal sector, state revenues automatically increased and fund injections to the welfare program increased, while the social security programs became more varied and comprehensive.
Toward solidarity
Of course, there will be those who say, “Don’t compare Indonesia with Scandinavian countries and South Korea, because it is like heaven and earth.” But wait just a moment. When the wage compression was applied in Sweden and Finland in the 1930s or in South Korea in the 1960s-1970s, their socioeconomic status was below the present level of Indonesia. Moreover, the economic magnitude of their informal sector and their numbers of unemployed were no better, either.
Why then, when those countries were not categorized as developed (rich) countries, did they build the welfare system? The key was solidarity and social equality. Their political (and also economic) leaders were aware that by realizing a welfare state in advance, inclusive development would follow.
The Jokowi government has developed various social assistance and security programs. However, the programs are not been integrated and still resemble charity, such as the Smart card program, the planned social assistance program (similar to BLT), subsidies for farmers and fishermen in the form handouts or goods. The formulation of the Jokowi administration’s welfare platform needs to transformed from charitable assistance into social equality and be integrated with inclusive development. This can only be realized if community groups of the middle and upper social strata feel empathy and solidarity with lower-class groups.
If this could be realized, social welfare and inclusive development would define Jokowilfare; and Jokowilfare is the key to Jokowinomics.
LUKY DJANI
Director of the Institute for Strategic Initiatives
