Poverty and income inequality are persistent structural challenges in Indonesia, fundamentally related to the dominance of the informal sector in the labor market. This article aims to analyze the relationship between the characteristics of the informal sector and the level of vulnerability to poverty in Indonesia through a literature review and recent data analysis. In contrast to static (ex-post) poverty measurements, this article emphasizes the concept of vulnerability to poverty as a measure of a household's risk of falling into poverty in the future due to economic shocks. Findings indicate that the informal sector in Indonesia is characterized by low productivity, limited educational levels of its workers, and wages significantly below those of the formal sector. Additionally, informal workers, especially the younger demographic, have a high level of vulnerability to health and economic crises such as the COVID-19 pandemic. Further analysis reveals that limited access to national social protection schemes (NHIS/BPJS) is a major factor exacerbating the risk of extreme poverty in both rural and urban areas. In conclusion, effective poverty alleviation policies must go beyond short-term assistance and focus on strengthening social security and increasing the productivity of informal workers to reduce income inequality in the long term.