By: Wisnu Setiadi Nugroho
Department of Economics, FEB UGM
Head of Poverty and Inequality Alleviation Studies (EQUITAS)
The number may seem small: a decline of 1.2 million people in a year. Yet behind this statistic lie millions of stories, families postponing home purchases, parents hesitating to send their children to their dream university, and workers who feel their positions are becoming more fragile. A report by the Mandiri Institute shows that Indonesia’s middle class shrank from 47.9 million people in 2024 to 46.7 million in 2025. Its share of the total population also fell from 17.1% to 16.6%.
At the same time, the aspiring middle class (AMC) increased by 4.5 million people and now accounts for 50.4% of the population. It means more than half of Indonesians live just below the middle-class threshold, close enough to move up, yet vulnerable enough to fall back. It is not merely about statistics. It is about a sense of security.
The middle class is typically the group that feels “secure enough”: enough to save, enough to plan for the future, enough to dream bigger than their parents did. When their numbers shrink, what actually erodes is the belief that hard work leads to progress.
The study “Who is the Middle Class and Why Should We Care?” shows that Indonesia’s middle class is relatively thin and concentrated mainly in the lower-middle class. It means its foundation is fragile. Even small shocks, such as layoffs, rising education costs, or higher loan installments, can push them downward. The expansion of the AMC today reflects how many families are standing at the edge of uncertainty.
Why Is This Happening?
First, because available jobs increasingly fail to provide mobility. Research from the study ‘From Survivability to Mobility’ found that many new jobs are survival-based, providing just enough to get by but not enough to progress. The gig economy, informal work, and low-productivity jobs do absorb labor. However, these jobs rarely offer income stability, social protection, or clear career pathways. People work hard, but the social ladder does not get any longer.
Second, purchasing power is slowly being eroded. Real wages for the lower middle class are relatively stagnant, while housing, education, and transportation costs continue to rise. It is not a dramatic collapse, but rather a silent pressure and an income squeeze that erodes the ability to save and plan for the future. Many families still appear to be “doing fine,” but their fiscal and financial breathing space is shrinking.
Third, the increase in vulnerable household-based work. The study Demystifying Home-Based Jobs shows that many of these jobs lack social protection. When illness strikes or demand weakens, there is no safety buffer. A single slight shock can wipe out the stability built over the years.
Fourth, we still lack adequate shock absorbers for the near-middle group. Social policies remain focused on people with low incomes, which, of course, must continue to be protected. However, the AMC, now the majority of the population, exists in a gray area: not poor enough to receive assistance, but not secure enough to be fully independent. They stand alone when risks arise. If this trend continues, the impact will not only be economic but also social.
The middle class is the engine of domestic consumption. When people feel insecure, they spend less and save more as a precaution. Economic growth may look stable on paper, but in reality, people delay buying cars, homes, or even pursuing further education.
More broadly, middle-class anxiety emerges. Repeated uncertainty breeds frustration. History across many countries shows that when the middle class weakens, social polarization and political tension tend to increase. The belief that “moving up is possible” is replaced by the feeling that “no matter what I do, it’s never enough.”
It is the most significant risk: aspiration without mobility. Society’s aspirations remain high, children want to live better than their parents, but the ladder of opportunity is not available to them. If the AMC continues to grow without a clear upward pathway, we face a mobility trap. In the long term, the foundations of consumption and the tax base weaken, and the transition toward a developed economy loses its main support.
Economic growth matters. But growth without job quality is fragile growth. Gross Domestic Product (GDP) can rise, but if mobility stalls, social hope freezes along with it.
We Need a Bolder Response
First, create jobs that truly enable mobility—high-value-added manufacturing, modern services, and high-productivity sectors. Vocational education must be genuinely connected to industry needs, not merely a formality in the curriculum.
Second, build risk buffers for the aspiring middle class. Unemployment protection and social insurance must reach non-formal workers. Housing and education financing schemes must prevent middle-income households from slipping downward following a single shock.
Thirdly, ensure policies cater to mobility, not just short-term redistribution. To avoid the ‘cliff effect’, in which a slight increase in income results in the complete loss of protection, social assistance must be evaluated.
We must not allow the aspiring middle class to become a permanently vulnerable class. The shrinking middle class today could be an early signal of deeper structural stagnation.
The middle class is not merely a statistical category. It is a stabilizer of society, a source of consumption, a taxpayer base, and most importantly, a guardian of social optimism. If the engine of social mobility continues to slow, we will lose more than just the figure of 1.2 million. What we lose is the belief that tomorrow can be better than today.
