Sat, 10 Dec 2022

Sandwich generation must also save for themselves

360 info
21 Nov 2022, 08:32 GMT+10

Sandwiched between the aged and the youth, with a societal expectation to care for both, millions of Indonesians are struggling.

Indonesian office worker Dedi Ardila, 28, doesn't dare dream of owning his own home. His modest monthly income is entirely consumed by his young family, his parents, and his wife's brother - all of whom live with him. He is supposed to be part of the generation who will contribute to Indonesia's economic rise. Instead, he and millions of other Indonesians are struggling to get by.

In 2012, Indonesia entered a period where a phenomenon known as the 'demographic dividend' became possible. Between 2012 and 2040, Indonesia's dependency ratio is expected to be below 50. This means that every 100 people of working age are responsible for fewer than 50 people of non-productive age (the very old and the very young). 

The large proportion of productive age people relative to dependents is closely linked to the government's success in family planning. The number of children per woman declined from 5.6 children in 1971 to 2.3 in 2020.

With fewer children in the household, the welfare of Indonesian families has continued to improve. Disposable income can be saved for old age or unforeseen events. Women have more time and can participate in the labour market. 

With higher incomes, households have better investment capacity for their children, supporting them to stay in school or graduate from university. In the long term, human development in Indonesia will continue to improve, resulting in increased productivity, a stronger economy and improving the welfare of the population: the demographic dividend.

But Indonesia's working young may not be able to contribute to this anticipated economic prosperity because they are too squeezed. Like the filling in a sandwich, the working generation is squeezed between the top (the aged) and bottom (the young), responsible for both at the same time. The sandwich generation in Indonesia has extended families that generally live together with other relatives, such as parents, their children's spouses, grandchildren, siblings, siblings-in-law, and so on.

Born between 1964 and 1998, nearly 30 percent of the sandwich generation cares for their household while also holding down a job. Each member of the sandwich generation is responsible for an average of three to four household members. One third of the sandwich generation in Indonesia is responsible for six or more people in their household.

According to March 2022 data of Indonesia's national economic survey, 8.4 million Indonesians belong to the sandwich generation. Nearly 17 percent of the sandwich generation is poor, compounding the dual burden they bear. In fact, 58 percent of the sandwich generation in Indonesia left school at 15 or younger.

Indonesians are generally family-oriented, and it is customary to care for the extended family. But the additional burden of providing for and caring for family members has a long-term impact, both for the sandwich generation and for national development. With many mouths to feed, the sandwich generation is careful with its income, spending only on essentials and not contributing to growth in the economy. 

Alongside a heavy emotional burden, caring for family also reduces the ability to save. When those of the sandwich generation enter retirement age, they will not have the resources to support themselves and will need to rely on the government or their descendants, further hampering long term economic growth. 

The sandwich generation also has to allocate its limited time to various activities, from working to caring for children and the elderly. This has implications for productivity and self-development, with reduced funds and time for professional education, health and nutrition.

In 2022, Indonesia's population is 274.8 million people, of which 7.3 percent are elderly. In 2045, the population is projected to reach 318.9 million, with the proportion of the elderly almost doubling, reaching 14.1 percent. Indonesia will become an ageing society, as the proportion of the elderly population continues to increase.

Indonesia's rapid growth in the second half of the 20th century has slowed, but it only has a limited time to take advantage of the demographic dividend.

Indonesia must work now to realise the demographic dividend and convert it into a welfare dividend. The current abundant productive age population must be absorbed in the labour market, with a high level of productivity, so they can earn well, save, and pay taxes.

The sandwich generation deserves special attention. The Indonesian government can reduce the pressure for the sandwich generation by including it as a vulnerable population group. Sufficient savings and a healthy lifestyle will reduce the burden on the sandwich generation. If they are rich and healthy before retiring, they will be able to meet their retirement needs from their own savings.

On the other hand, if Indonesia fails to convert the demographic dividend into a welfare dividend, after 2040 there will be a sandwich generation boom.

The pandemic and global crises certainly pose a challenge. But Indonesia still has 18 years to reap the windfall from its demography. It must do so soon, to prevent a sandwich generation boom during the 100th anniversary of Indonesia's independence in 2045. At least Dedi Ardila's children should not suffer as their father does.

Sonny Harry B. Harmadi is an assistant professor in the Department of Development Studies at Institut Teknologi Sepuluh Nopember (ITS) Surabaya, Indonesia. Currently seconded in National COVID-19 Task Force. His research interests are demographic, regional economics, and labour economics.

Originally published under Creative Commons by 360info.

The post Sandwich generation must also save for themselves appeared first on 360.

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