Problems beset new minimum wage policy<\/p>\n
By Teten Masduki<\/p>\n
JAKARTA (JP): Many businessmen have called for a postponement
\nof the government's newly established minimum wage regulation for
\nindustrial workers, which went into effect beginning April 1.<\/p>\n
The businessmen, who are members of seven associations of
\nmanufacturing companies, feel that they will not be able to
\ndiscard the daily wage system and streamline it into a monthly
\npayment system for workers of all categories.<\/p>\n
Chairman of the Indonesian Chamber of Commerce and Industry
\nAburizal Bakrie says the new regulation will result in higher
\nproduction costs, considering the existing burden of illegal
\nlevies.<\/p>\n
This is a valid argument, because illegal levies range from 20
\nto 30 percent, as compared to the labor wage component of 7 to 11
\npercent of total production costs.<\/p>\n
So far, the manpower minister has not responded to the
\nproposal.<\/p>\n
Indonesia's minimum wage level is the lowest among neighboring
\ncountries, including Vietnam.<\/p>\n
In terms of figures, Indonesia's new nationwide minimum wage
\nlevel is Rp 4,072 per day. Although it is 10.63 percent above
\nlast year's figure, it still does not meet the workers' daily
\nminimum needs of subsistence living.<\/p>\n
Any effort to break this deadlock should not make victims out
\nof workers. The crux of the problem lies in the illegal levies,
\nwhich should be wiped out by the government. But this is by no
\nmeans easy, since businessmen have long been subjected to the
\nbureaucracy and the military.<\/p>\n
A late 1995 survey on workers' daily expenditures in Jakarta
\nand its satellite towns found that single workers spent Rp
\n251,000 a month to meet their needs, but still fell short of
\ntheir goals by Rp 115,000 if they depended solely on their basic
\nwages, based on last year's minimum wage level. Even with the new
\nminimum daily wage of Rp 5,200 (for Jakarta and its surrounding
\ntowns), they still fell short by Rp 95,000, if based on last
\nyear's expenditures.<\/p>\n
In order to make ends meet, workers resorted to working
\novertime, side jobs, credit and collective buying and loans. As a
\nresult, the workers' cash flows in a vicious circle. They take
\nout loans to help meet their needs and end up taking out
\nadditional loans to pay the original loans.<\/p>\n
The gap between the workers' minimum wage and their real needs
\nis caused by the fact that their assumed needs for consumption
\nand public services have remained unchanged for 40 years.<\/p>\n
The calculation of minimum physical needs has a number of
\nflaws. Gender bias is one example, since there are no
\ncalculations of women's physical and social needs, even though
\nthe light manufacturing sector is dominated by low-paid female
\nlabor.<\/p>\n
The new minimum wage also fails to differentiate between
\nsingle and married workers, despite the ILO Convention No. 131 of
\n1971, which states that wages should be sufficient for workers
\nand their dependents.<\/p>\n
The 1996 minimum wage is calculated based on 1991 prices. For
\nexample, rice is calculated at Rp 600 per kilogram. A Bank
\nIndonesia report dated Sept. 29, 1995 said that rice prices
\nthroughout Indonesia were higher than Rp 700 per kilogram.<\/p>\n
This shows that the agencies responsible for the minimum wage
\nlevel do not conduct field surveys properly. The minimum wage
\ncalculation is completed solely by the minimum physical needs
\nsection within the Manpower Ministry.<\/p>\n
The increase in the minimum wage, which is based solely on the
\nofficial inflation rate, is flawed because it disregards the
\nreality of worker consumption patterns. For example, 70 percent
\nof a worker's income is spent on food.<\/p>\n
The new standard of minimum living requirements, which is now
\nbeing introduced, appears to be no better than the previous one
\nbecause it is still dominated by physical needs (food and
\nclothing) to the tune of 83 percent for single workers and 87
\npercent for workers with families. The remainder of 13 to 17
\npercent includes education, health, recreation, transportation
\nand other needs.<\/p>\n
The minimum wage should be determined by an institute that is
\nwell-informed about price fluctuations in consumption and service
\ncommodities, inflation and company profits. Labor organizations
\nshould be consulted, as well as the central statistics agency,
\nfinancial institutions and banks.<\/p>\n
A standard wage policy for all industrial sectors is no longer
\nrelevant. The sectors of capital-intensive industries and light
\nnon manufacturing (monopoly) industries have proven themselves
\ncapable of paying wages above the minimum wage. But
\nbecause the minimum wage is treated as a maximum standard -- both
\nby companies and the government -- it will deny workers their
\nright to obtain wages above the minimum level, as a result of
\nvarious regulations and repression of their right to organize.<\/p>\n
The writer is a member of the Wages Committee and Head of the
\nLabor Division of the Indonesian Legal Aid Institute Foundation,
\nJakarta.<\/p>",
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