Is Covid-19 terminal for the rising middle classes of Malaysia and Indonesia?

As pay cuts and job losses hit hundreds of thousands of middle-income workers, the damage caused goes far beyond the individuals involved

Economists warn a cash-strapped middle class means less investment in education and pensions, less consumption to drive growth and possibly more populism. But there’s still time for governments to act

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A woman sits on an art installation at Trans Studio in Jakarta, Indonesia. Photo: Reuters

Published: 8:30am, 10 Jul 2021Updated: 2:33pm, 12 Jul 2021

Before Covid-19 hammered the Malaysian economy, Kuala Lumpur native Jeremy Johnson made 7,000 ringgit (US$1,670) a month as the general manager of a coffee company, and even had a car as part of his work benefits.

His family of six were firmly entrenched in the middle class: what Malaysia calls the M40 – for the 40 per cent of households considered “middle income” – defined as those earning 4,850 ringgit to 10,959 ringgit a month.

But movement restrictions forcing people to work from home and cautious spending from consumers hit his company hard and Johnson lost his job in August last year.

Since he was the sole breadwinner, that one change swept his family into the low-income group. The 43-year-old is unable to access government handouts and relies on assistance from his family and friends from church.

Johnson said that even when he was employed it had been hard to save money, as he had four children aged eight to 14 and was servicing the 2,500 ringgit monthly mortgage for his family’s home.

“I’ve been struggling,” he said.