Inequality was big issue in Indonesia, one of the most noticeable areas when formal and informal sector is in comparison, the gap between workers in this two sector reflect structural challenge in achieving welfare.
According to the ILO, the informal sector is the part of the economy that's not included in the scope of legal regulations or outside the supervision of the government. Jobs in the informal sector are not always protected by labor laws, do not have access to social security, and do not always follow safety standards or decent working conditions, like Teacher, Doctor, Civil servant, Banker, office worker, etc.
Also according to the ILO, formal sector is includes all economic activities regulated and protected by governments. This means workers in this sector get rights such as a minimum wage, clear working hours, and access to insurance or social security. The example are like Domestic Assistant, Street Vendor, casual labourers in construction, land lord, ministore owner, small agricultural workers, temporary helpers, Ojol and etc.
In Indonesia, a country with a population of over 270 million this could be interesting topic, According to the Badan Pusat Statistik (BPS) currently in February 2024 more than 142,18 million people or 59,17% are work in informal sector, or for instance we can see in this graph comparison between formal and informal sector based on Badan Pusat Statistik (BPS).
Data Source: Badan Pusat Statistik
From this data we can see that over years  informal sector always dominating the employed sector. Is that a good thing? Some may say yes but unfortunately if we see in the income factor or maybe other factor informal sector have a few minus point from the formal sector, Workers in the informal sector generally earn significantly less than those in the formal sector. some noticeable inequality between those factor are:
Wage Differences
According to the Badan Pusat Statistik  (BPS), the average monthly wage for workers in the formal sector is typically higher due to better regulatory protections, minimum wage laws, and the benefits that come with employment contracts. For example, the average monthly wage for formal sector workers in 2022 was around IDR 3.5 million (USD 220).Â
Workers in the informal sector, by contrast, generally earn significantly less. Informal sector workers earn around 30-50% less than their formal sector. Based on data from the World Bank, the average monthly wage in the informal sector is IDR 1.7-2 million (USD 110-130).
Job Security and Social Protection
Workers in the formal sector enjoy greater job security, with formal employment contracts that provide stability and long term employment opportunities. They also have access to government mandatory social protections such as health insurance (BPJS Kesehatan), employment insurance (BPJS Ketenagakerjaan), paid leave, and pensions.Â
In contrast, informal workers lack these benefits. Many rely on daily wages, have no employment contracts, and face job instability. They are also excluded from social protection program it will be complicated if they got into troubles, such as sudden illness, accidents, or unemployment.
Government Policies and Minimum Wage Regulations
