Recovery without Inequality

Kompas/Hendra A Setyawan

A toddler lies on a cart pulled by his mother in the Ciledug area, Tangerang, Banten, Friday (7/5/2021). Welfare inequality has increased as a result of the Covid-19 pandemic.

Preventing the worsening of welfare inequality must also become a priority in accelerating economic recovery due to the Covid-19 pandemic.

The Covid-19 pandemic has not only made our economic growth decline but also widened welfare inequality. According to Statistics Indonesia (BPS), our Gini ratio index on Feb. 14, 2021, rose from 0.380 in September 2019 to 0.385 in September 2020.

Also read:

> Transformation of Social Welfare System

> Ensure the Result of Social Restrictions

The government\'s response related to health to maintain the supply side in the form of debt restructuring, tax reductions, and interest subsidies for businesses, including micro, small and medium enterprises (MSMEs), as well as the demand side in the form of a health safety net program, and to reduce turmoil caused by the Covid-19 pandemic, is relatively successful in reducing inequality. This is a note that we got from the online discussion of the Business Competition Supervisory Commission (KPPU). (Kompas, 8/6/2021)

In the future, we want the government through its fiscal and monetary policies to keep inequality from narrowing again, as it did from 2014 until before the pandemic. Everyone agrees that rising welfare inequality will hamper economic growth, poverty alleviation and can even trigger social conflict. Even though the economy began to grow in the first quarter of 2021 from the previous quarter, we want the growth to be of quality and equal.

KOMPAS/RIZA FATHONI

A mother who makes a living by being a clown feeds her daughter on the sidelines of a break on Jalan Raya Pasar Minggu, South Jakarta, Saturday (6/2/2021).

Some of the sources of inequality, among others, are caused by new conditions due to the pandemic which is marked by the rapid growth of the digital economy. Some digital-based companies that are advancing rapidly and skilled workers they employ get far better salaries and income than some of the workforce. Another source of inequality is the concentration of wealth in the hands of a handful of people, some of which is obtained through corruption and collusive practice.

We also need to be aware of the increase in food prices which, according to a report by the Food and Agriculture Organization of the United Nations (FAO) in May 2021, was the highest in the last 10 years.

Also read:

> Spurring Regional Economic Activity

> Economic Growth Reduces Inequality

Broader policy designs can be added to policies to address the current impact of Covid-19. Workforce training programs, especially for those who do not have the opportunity to attend quality education, as well as the creation of quality jobs according to the promise of the Job Creation Law. Social safety nets are linked wherever possible by working for recipients, for example, through labor-intensive programs. Public services for health, family planning, and education must remain of high quality and continue to be provided despite the constraints by the pandemic.

One way of equalization is through the tax mechanism. The government is proposing new regulations to raise taxes. In addition to filling the state treasury, progressive taxes will equalize income. The value added tax, which has been applied to all products, can be considered to be selectively imposed so that the poor do not pay taxes.

This article was translated by Hyginus Hardoyo.