Minimum wage policy 'bad for workers'<\/p>\n
Dewi Santoso, The Jakarta Post, Jakarta<\/p>\n
Researchers have suggested that the government limit its minimum
\nwage policy as their findings showed that the existing practice
\nof annually raising the wage was counterproductive for the
\noverall employment situation in the country.<\/p>\n
Conducted with over 40 private and state-owned companies in
\nGreater Jakarta and Bandung from April to October 2001, their
\nresearch found the minimum wage policy benefited white-collar
\nworkers at the expense of blue-collar workers.<\/p>\n
Asep Suharyadi, one of the Social Monitoring and Early
\nResponse Unit (SMERU) researchers, said on Friday the study
\ndiscovered that for every 10 percent increase in real minimum
\nwage, approximately 1 percent of that particular region's workers
\nwould lose their jobs.<\/p>\n
\"Female, young and less educated workers, who make up the bulk
\nof the country's labor force are those most vulnerable to the
\nimpacts of the wage policy,\" said Asep.<\/p>\n
The research, conducted by Asep, Wenefrida Widyanti, Daniel
\nPerwira and Sudarno Sumarto was published in the April edition of
\nBulletin of Indonesian Economic Studies magazine and won on
\nFriday the H.W. Arndt Prize, a special prize intended to
\nencourage Indonesian scholars to publish their work in the
\nAustralian bulletin.<\/p>\n
The researchers found that the number of blue-collar workers
\ndecreased to approximately 75.6 million in 2000 from 77.7 million
\nin 1996, while minimum wages increased by 49 percent from 1999 to
\n2000.<\/p>\n
They also discovered the employment varied with respect to
\nminimum wages for female and young workers (aged between 15 and
\n24 years) were around -0.3, and -0.2 for less educated (those who
\ndo not finish elementary schools) during the period of study,
\ncompared to 1.0 for white-collar workers.<\/p>\n
\"This means the higher the minimum wage is, the lower the
\nemployment rate for female, young and less educated workers is,\"
\nAsep said.<\/p>\n
Sudarno said when the level of minimum wages increased, firms
\nreduced the employment of other types of workers and replaced
\nthem with white-collar workers. This may be due to the
\nsubstitution of more skill-intensive production processes in
\nplace of labor-intensive ones in response to minimum wage rises.<\/p>\n
\"It's very clear that high minimum wages can lead to
\ndismissals, as companies realize they cannot afford to pay that
\nmany people, and replace them with machines,\" Sudarno said.<\/p>\n
These results imply that the policy benefits those who keep
\ntheir factory jobs, and of course, white-collar workers.<\/p>\n
\"But for those who are disadvantaged by the policy, they will
\nbe forced to take up lower paid jobs with poorer working
\nconditions in the informal sector, which is already overcrowded,\"
\nsaid Sudarno.<\/p>\n
He said informal sector workers, including street vendors and
\nstreet hawkers, was a productive form of creating employment for
\nlower-class people.<\/p>\n
\"But being in an overcrowded sector they are the least
\nprotected by the government and have no access to the wage
\npolicy,\" he said.<\/p>\n
SMERU is an independent research institution that focuses
\nmostly on social, economic and poverty issues.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/minimum-wage-policy-bad-for-workers-1447893297",
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