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303 16 The Yudhoyono legacy on jobs, poverty and income distribution: a mixed record Chris Manning and Riyana Miranti* Outcomes in the general area of job creation, poverty and income distribution were ambiguous during the Yudhoyono years. Jobs growth flip-flopped between rapid expansion of informal jobs in President Yudhoyono’s first term, and then of formal employment during the resources boom in his second term. On the positive side, rates of poverty declined almost continuously throughout his period in office, and policy in this area was one of the big achievements of his presidency. But these improvements for the poor were not reflected in a better distribution of income. In fact, inequality worsened strikingly during Yudhoyono’s second term of government. Although strong and sustainable jobs growth can be associated with both declining poverty and improvements in income distribution, in Southeast Asia rapid economic growth has quite often been associated with rising inequality (Booth 1999). Indonesia appeared to be the exception during the Suharto period but there are good reasons to expect that this may not be the case now. While poverty alleviation is widely accepted as a legitimate focus of government policy, middle-class interests have more influence in a democratic polity, and these will not always * The authors would like to thank Vivi Alatas, Emma Allen, Rahma Irjanti, Suahasil Nazara, Sudarno Sumarto, Asep Suryahadi and Mathew Wai-Poi for giving up their time to discuss some of the issues raised in this paper. We are also grateful to Raden Muhammad Purnagunawan, who assisted us with some of the national labour force data. The normal disclaimers apply; the authors are entirely responsible for any errors and omissions in the manuscript. Update book 2014-15.indb 303 19/04/2015 11:39 am 304  The Yudhoyono Presidency: Indonesia’s Decade of Stability and Stagnation favour rapid employment growth or more equitable fiscal arrangements. Moreover, organised labour did not support policies that could have achieved a more rapid expansion of blue-collar jobs in Indonesia in the early reformasi period, and subsidised energy and other fiscal arrangements have mainly benefited the better-off, facilitating growing inequality (Manning 2010; Dartanto 2013). President Susilo Bambang Yudhoyono projected a greater concern for and a deeper knowledge of policy alternatives in areas affecting the welfare of the poor than any of Indonesia’s first three reformasi presidents , B.J. Habibie, Abdurrahman Wahid and Megawati Sukarnoputri.1 This chapter will show that he oversaw considerable progress in social programs oriented towards overcoming poverty, and that he personally supported some major innovations in this field. At the same time, the president’s extreme caution in policy-making in areas affecting the poor, his aversion to conflict and his need to take political calculations into account all meant that his government avoided making some difficult decisions that could have benefited lower-income groups much more. More progressive fiscal policies could also have prevented a sharp rise in the share of income accruing to the top 10 per cent of households in the country. But short-term political considerations often dominated, and these held more sway towards the end of the Yudhoyono presidency when his popularity was at its lowest and his party was in some disarray. The next section discusses some of the broad contextual relationships that bear on the Yudhoyono record in the areas of employment and social welfare. This is followed by a discussion of developments in three main areas: jobs, poverty and inequality. The treatment is necessarily selective given the broad scope of the subject matter. In the section on jobs, the focus is on labour policy, which was a difficult issue for both Yudhoyono administrations. The discussion of poverty deals with some of the main government strategies and the role of the president and vice-president in guiding policy. On the third topic, we seek to evaluate the effects of policy on inequality, to discuss the likely causes of rising inequality and to outline what the government might have done to ameliorate these trends. THE ECONOMIC AND SOCIAL CONTEXTS When Yudhoyono came to power in 2004, Indonesia had more or less recovered economically from the major disruptions of the Asian financial 1 Indeed, the parallels with Suharto are much more striking in this regard. Both presidents came from poor rural backgrounds and both paid close attention to rural policies, food production and prices, and the poor. Update book 2014-15.indb 304 19/04/2015 11:39 am The Yudhoyono legacy on jobs...


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