Minimum Living Cost Measures Are Distorted, Employers Allege

Indonesia will focus on attracting more investments this year to increase consumption spending that has been stagnant in the previous years, Finance Minister Sri Mulyani Indrawati said on Tuesday (06/02). (Reuters Photo/Beawiharta)

By : Ezra Sihite & Edi Hardum | on 12:02 AM November 18, 2014
Category : News, Jakarta, Politics, Featured

Jakarta. The Indonesian government plans to support workers’ welfare through other means than wage hikes, the nation’s top economics minister said, adding an equivocal nod to both sides in a continuing battle over wages between employers and labor unions.

Coordinating Minister for the Economy Sofyan Djalil said workers’ welfare should be tended to, as it was important for increasing their productivity.

However, due to the potential burden Indonesian businesses would face as a result of a national minimum wage increase, Sofyan suggested the government plans to assume added responsibility for caring for the country’s labor force — a commitment that he said will take the form of new public facilities aimed to benefit workers.

These include low-cost apartments, schools and health facilities around industrial zones.

“Workers therefore won’t spend too much on transportation, considering how costly it is these days. The amount of expenses that they pay will lessen, and their welfare will improve,” Sofyan said at the president’s office in Jakarta.

“Many people are seeking to improve workers’ welfare. But their productivity must improve as well.”

He added the government would develop new industrial zones where wages would be “highly competitive,” in order to bridge workers’ need for decent livelihoods and businesses’ need for competitiveness.

“We want a formal sector that moves and works faster. And on the other hand, we want workers’ welfare to improve. [We want] a balance,” Sofyan said.

Sofyan’s statements came as the Indonesian Employer Association, or Apindo, stands at loggerheads with labor unions over minimum wages in several regions.

Apindo has accused the administrations of the West Java cities of Bekasi and Sukabumi of manipulating their respective Reasonable Living Cost Index, or KHL, scores .

The reasonable cost of living index is used to define the minimum amount needed to sustain a “decent” quality of life in a region, and is a key determinant in setting the monthly minimum wage of that region.

Manpower Ministry regulations stipulate a region’s minimum wage must be at least 10 percent higher than its KHL.

Bekasi has set its minimum wage for next year at Rp 2.9 million ($237), higher than Rp 2.7 million that Jakarta Acting Governor Basuki Tjahaja Purnama said he would likely endorse for the capital.

Apindo deputy chairman Haryadi Sukamdani argued it was impossible for living costs in Bekasi to be higher than Jakarta, accusing the Bekasi administration of basing its KHL calculations on a one-time survey of market prices of staples and other KHL factors, rather than an aggregate of surveys required to obtain the right figure.

In Sukabumi, meanwhile, the district chief has endorsed Rp 1.94 million as the region’s monthly minimum wage next year. Although that amount is smaller than Jakarta’s planned figure, it is too high for minimum living costs in the district, Apindo argues.

“Sukabumi is no different from Bekasi: They’ve lied. Why do governments lie?” Haryadi said on Monday.

“If the administrations in the two regions still refuse to play honestly [instead of] lowering minimum wages ... then all businesses under Apindo and the Indonesian Chamber of Commerce will boycott all activities of regional wage councils across the country,” he threatened.

Regional wage councils are tasked with determining a jurisdiction’s minimum wage, and are typically comprised of labor unions, employers’ representatives and officials from the local manpower agency.

Indonesia’s labor laws state that the absence of an element of the council during a meeting to decide the minimum wage renders its decision invalid.

Haryadi said he is concerned that what he characterizes as “lies” fabricated by the Bekasi and Sukabumi administrations may inspire other regions to follow suit.

The head of Apindo’s Bekasi chapter, Purnomo Narmiadi, said last week that he suspected labor unions pressured city officials to heed their demands.

“This is labor’s tactic to pressure Bekasi city administration officials, who are easy to threaten and intimidate,” Purnomo said.

He argued industries in Bekasi would not be able to afford the wage hikes, as the majority of the 1,100 operations in the city were small-scale firms.

“Only a minority, around 20 percent of them, can pay the minimum wage.”

Purnomo went on to add that if the Bekasi administration insisted on pushing for the Rp 2.9 million minimum wage, many companies, especially labor-intensive ones like garment manufacturers, would have to lay off many of their workers, boosting the city’s unemployment rate.

This year alone, Purnomo said, eight companies — most of them garment producers — have requested exemption from mandated increases for their employees’ wages.

Additional reporting by Mikael Niman & Deti Mega Purnamasari

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