Is there a new middle-class emerging in Indonesia? The answer is “yes” and it is not that much different from the kind of middle-class we know in, for example, The Netherlands. Of course, the figures (read: salaries and costs of living) are different, but as far as purchasing power and purchasing behavior are concerned, there are remarkable similarities.
Actually, there are 2 consecutive generations in Indonesia’s new middle-class. First, there are the 55-60-year olds, who have completed their home mortgage payments or those who have inherited a family home. Their children have finished their education by now. And some of these 50-60-year olds have retired and are enjoying a small pension. Although, household expenses for water and electricity are quite high in Indonesia, the total costs of living (burdened by a mortgage and children’s education) have now decreased substantially. As most of this age group are small entrepreneurs as well, they seem to manage to add a decent income to their (low) pension.
What you see is that this group is able to enjoy a true middle-class lifestyle, including frequent travelling, both domestically (with the island of Bali and the beach resort of Pangandaran among the favorite destinations) and abroad, helped by numerous low-cost airlines that continuously offer attractive rates to Bangkok, Hong Kong, Kuala Lumpur, and other cities in the region. Their homes are featuring a minimum of one flat-screen TV, plus one car and several motorcycles in the yard. Again, as far as purchasing power and purchasing behavior goes, not that different from the Dutch middle-class.
The next generation, children of those 55-60 year olds, are now in their Twenties. They have graduated from university and have just started their working career. In this context, think of urban families, think of 20+-year olds in cities like Jakarta, Bandung, Solo and Surabaya. Early-married couples tend to live in at their parent’s the first year, or two, of their marriage, saving for the next step, which is buying a house or apartment. They go out for dinner and see a movie every now and then, all things a middle-class does.
These middle-class youngsters are each earning somewhere between 2,5 – 4 million Rupiah (US$205 - US$328) a month. Being married and not yet having kids enables them to buy a small property on the outskirts of the city. A 2-bedroom, 80 m2-studio, for example, requires a down-payment of around 2.2 million Rupiah (US$180,4) and a monthly mortgage payment of around 2.3 million Rupiah (US$188.6) for a period of 15 years. This new middle-class, however, cannot afford to buy a place in the city center, where prices are much higher.
This new middle-class resembles the middle-class of the generation of the late-Eighties/early-Nineties in The Netherlands, which often goes through the same stages in life. In The Netherlands too, “dinkies” (double income no kids) are the most prosperous among young adults. And in The Netherlands too, there are not many couples who can afford to buy an apartment in the center of a city like Amsterdam, but will end up living further away from the city center, towards the outskirts. And yes, they go to the movies and they travel too.
This article appeared earlier in e-magazine Business Trends Asia
