POVERTY OR ECONOMIC STAGNATION? ASSESSING THE DUAL ROLE OF SOCIAL ASISSTANCES IN JAVA

Abstract

This study aims to identify the factors that affect the structural transformation of individuals on the island of Java, including the role of education, technology, access to credit, and the condition of basic needs. This study also analyses the influence of structural transformation on the risk of poverty and extreme poverty. It evaluates the extent to which government social protection programs can encourage structural transformation while reducing poverty. The novelty of the research lies in the use of a simultaneous approach of two micro-outcomes, the transformation of the employment sector and the risk of extreme poverty, to test whether social assistance only acts as a consumption protection or can also be a catalyst for more inclusive, productive, and sustainable village development. The analysis was carried out by multinomial logistic regression using SUSENAS 2022 data, with an analysis unit of 352,646 individuals on the island of Java. Dependent variables include structural transformation and extreme poverty levels, while independent variables include conditions of meeting basic needs and government programs. The results of the study show that individual structural transformations on the island of Java still face complex dynamics; Significant internet use is driving a shift to the non-agricultural sector, while savings, education, telephone, and cooperative credit tend to retain individuals in the agricultural sector. Structural transformation has not been significant enough to reduce the risk of extreme poverty. However, it can reduce the probability of individuals being in the poor category, thus requiring a risk mitigation strategy that is integrated with strengthening the productive economy. Therefore, social protection programs need to be designed more progressively, focusing on improving digital skills, financial literacy, entrepreneurship, and graduation mechanisms in order to function as a catalyst for individual economic mobility towards a more productive and sustainable sector.