Minimum wage raised<\/p>\n
Trade unions are understandably disappointed with the 10.63
\npercent average increase in the minimum wage level. The raise,
\neffective as from April 1, will increase the workers' purchasing
\npower by only about 2 percent, given last year's inflation of
\n8.64 percent. Moreover, the increase is the lowest over the last
\nthree years -- 17.7 percent in 1993, 30 percent in 1994 and 18.6
\npercent in 1995.<\/p>\n
However, as Manpower Minister Abdul Latief explained, the rate
\nof the increase was the most that the government could ask for
\nfrom employers. In fact, even with such a small raise, executives
\nof the Indonesian Employers Association have expressed concern
\nthat quite a number of small firms may not be able to meet the
\nnew minimum wage level.<\/p>\n
It should be understood first of all that this wage increase,
\nlike the previous ones, has nothing to do with labor
\nproductivity. That, we think, is one of the main reasons why the
\nemployers' association has agreed to such a modest raise. That
\nmeans the increase serves simply as an adjustment to the
\ninflation rate to prevent the workers' purchasing power from
\nbeing eroded by the higher consumer price index.<\/p>\n
The workers' complaints are quite legitimate because the
\ncurrent minimum wage level is still far below what the government
\ndefines as the minimum requirement for subsistence living. Even
\nafter the increase in April, the minimum wage level will still be
\nabout 10 percent below the requirement for subsistence living and
\nwill remain the lowest among the ASEAN countries.<\/p>\n
There is, we reckon, another reason why the new wage increase
\nis seen as too low. The 8.64 percent inflation last year hurt
\nmostly low and fixed-income earners because a high portion of the
\ninflation was caused by increases in the prices of food, housing
\nand clothing.<\/p>\n
Nonetheless, since the raise is not related to labor
\nproductivity and will therefore only add to production costs, too
\ngreat an increase may hurt many enterprises. That in turn may
\nforce a reduction in the size of labor forces, thereby worsening
\nthe unemployment problems and consequently having potentially
\ndamaging repercussions on social, economic and political
\nstability.<\/p>\n
The wage increase is likely to adversely affect many small
\nfirms which rely solely on the domestic market. But export-
\noriented enterprises should be able to meet the new wage level.
\nEven after the increase, the minimum daily wages will range only
\nfrom Rp 3,200 (US$1.4) in Yogyakarta to Rp 5,200 in the greater
\nJakarta area; the exception being Batam island near Singapore
\nwhich will see a rise to Rp 7,350.<\/p>\n
If export-oriented firms are not able to live with such low
\nlabor costs, there must be something wrong in the structure of
\ntheir production costs, particularly because the social security
\nscheme for workers in Indonesia is not as comprehensive and
\nexpensive as those in other countries.<\/p>\n
The government should further decrease the costs of doing
\nbusiness in the country, especially what most investors consider
\nas invisible costs related to regulatory requirements and
\nlicensing procedures. We are afraid that enterprises, notably the
\nsmall and medium-sized ones, will not be able to increase
\nemployment and to raise wage levels to the minimum requirement
\nfor subsistence living by 1998, if the invisible costs are not
\nreduced.<\/p>\n
Of course the government has the power to force annual
\nincreases in the minimum wage levels without taking into account
\nany gains in labor productivity. But such increases will not be
\nsustainable because they erode the competitiveness of enterprises
\nand make the country less attractive to new investments by both
\ndomestic and foreign businessmen.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/minimum-wage-raised-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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