600,000 workers to lose jobs

Tantri Yuliandini, The Jakarta Post, Jakarta

Some 600,000 workers in Greater Jakarta are likely to lose their jobs next year, following the implementation of new provincial minimum wage, the Employers' Association of Indonesia (Apindo) said on Tuesday.

Apindo secretary-general Djimanto said that the October fuel price hike followed by the minimum wage hike to be implemented in 2006 will put more pressure on the already ailing manufacturing industry.

"The previous fuel price hike in April cost about 200,000 jobs in Greater Jakarta between April and September, this time the impact will be much worse," he told The Jakarta Post at his office in Kuningan, South Jakarta.

There was no available data on unemployment figures in Greater Jakarta.

He said that although the direct impact of the fuel price hike on production costs was only about 5 percent, indirectly the hike also meant other increases such as workers' transportation and meal allowances.

The increase in the minimum wage, too, would not be much of a problem for larger manufacturing firms if it was not followed by a demand for an increase from non-minimum wage workers, Djimanto said.

"Almost all of my workers have more than one year's work experience, so are not on the minimum wage. What is usually the case, when the minimum wage increases, all other workers also expect a raise," the member of footwear company PT Eltri Indo Footwear's board of commissioner explained.

The minimum wage is given only to workers with less than one year's work experience, who are unmarried and hold the lowest position in the company.

The monthly minimum wage in 2006 for Jakarta was increased by 15 percent to Rp 819,100 (about US$81), while for West Java it was increased by 9.65 percent to Rp 447,654.

Companies affected by the minimum wage increase in Jakarta include hotels, retail outlets, restaurants and offices, while in West Java they include labor intensive manufacturing companies.

Labor costs constitute about 28 percent of total production costs in a manufacturing firm, Djimanto said, adding that raw materials -- and utilities such as electricity and gas -- contribute about 60 percent and overhead costs about 10 percent.

"The remaining 2 percent is the profit margin, which will of course disappear if wages rise following the minimum wage increase," he said, adding that should wages increase the prices of goods may also increase by at least 20 percent.

On the other hand, the competitiveness of the country's manufacturing industry has long been eaten away by high economic costs represented by difficulties in access to raw materials, high bank interest rates, high labor costs, bureaucratic costs, security costs and transportation, he said.

"These costs make our products 30 percent more expensive than products of countries such as China, Vietnam, the Philippines, and Malaysia," Djimanto explained.

To ensure that companies remain in business, Apindo suggested its members approach their workers and workers' unions for a delay in the salary increase. General increases in salaries, however, would still be given.

"The government, too, should help employers stay afloat by issuing more business-friendly regulations," he added.