Public Transfers and the Social Security System in Indonesia: An Analysis Using Generational Accounting and National Transfers Account

This paper investigates how Indonesian public transfers contributes to the well being of the elders and how the new social security system will be sustained in the future. It discusses to what extent existing government support reaches the elderly poor and meets their consumption needs. The results show that how the elderly finance their retirement differs by income level, that the elderly poor in both rural and urban areas rely heavily on public transfers, and that they use public cash transfers to support other household members as well as themselves. The analysis of Generational Accounting also shows that with the same scheme, in which public transfers only covers their 80% consumption, tax adjustment as much as 7% is needed in 2020 from the current level.
Alternate scheme that follow the commitment at Law on Social Security System considers higher coverage on health insurance, particularly for the poor families. If public transfers are higher to comply with the social security requirement, tax adjustment needed is about 13% in 2020 and increase to 16% and 19% in 2030 and 2040. General imbalance is increase to 26%. However, this adjustment does not consider other component of social security that considered as public transfers.