The Institute for Economic and Social Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) has found that Indonesia’s economic growth so far has not been optimal in raising workers’ incomes.

According to LPEM FEB UI economist Teuku Riefky, during the past seven years — specifically from 2017 to 2024 — when Indonesia’s economy grew by an average of around 5% per year excluding the Covid-19 crisis period, the average annual growth in real wages was only 0.6%.

“From 2017 to 2024 we most likely grew by 5% excluding Covid-19, but real wages only increased by about 1%,” Riefky stated in the LPEM FEB UI Podcast, quoted on Thursday (August 14, 2025).

Riefky explained that this indicates economic growth during that period was not being enjoyed by wage-earning workers, but was instead largely captured by capital owners.

“So if growth is 5%, it means the gains are going to capital owners. This has been a highlight of the 5% growth rate — who is actually benefiting from it,” he explained.

The low annual real wage growth during this period compared to overall economic growth stands in contrast to the 2008–2016 period, when workers’ average real wage growth exceeded economic growth at 6.3% versus 5.6%.

The erosion of workers’ real incomes had actually been identified by the Ministry of National Development Planning (PPN)/Bappenas in 2024. At that time, Bappenas revealed a decline in people’s purchasing power, as reflected in the falling share of disposable income to gross domestic product (GDP).

Scenaider Clasein Hasudungan Siahaan, then serving as Deputy for Development Funding at Bappenas, stated that the share of disposable income to per capita GDP in 2023 stood at only 72.7%, continuing a decline from 75.3% in 2020.

He explained that disposable income represents the maximum amount of income available for consumption after taxes are deducted. In other words, of the total per capita GDP in 2023, only 72.7% was available for household consumption.

“The proportion of disposable income in 2023 was at 72.7%,” Scenaider said during a working meeting with the DPD RI Committee IV in Jakarta on Monday (September 2, 2024).

Furthermore, he noted that average wages in sectors with high labor absorption remain below the national average wage of Rp 3.04 million, based on February 2024 Sakernas data from Statistics Indonesia (BPS).

Sectors paying below the national average include manufacturing (Rp 3.03 million), construction (Rp 2.95 million), education (Rp 2.84 million), water supply (Rp 2.69 million), trade (Rp 2.54 million), agriculture (Rp 2.24 million), accommodation and food & beverage (Rp 2.24 million), and other service activities (Rp 1.74 million).

Meanwhile, sectors that are not major employers tend to have higher wages, such as finance and insurance (Rp 5.15 million), mining (Rp 4.94 million), electricity and gas supply (Rp 4.85 million), information and communication (Rp 4.74 million), real estate (Rp 4.31 million), professional services (Rp 3.73 million), public administration (Rp 3.67 million), transportation (Rp 3.63 million), and health (Rp 3.35 million).

“We also identified sectors that absorb a large workforce but pay below the national average wage,” Scenaider concluded.