East Java raises regional minimum wages by up to 15%

Ainur R. Sophiaan, The Jakarta Post, Surabaya

Following tough negotiations with labor unions and employers, East Java Governor Imam Utomo eventually approved a minimum wage increase of between 13 percent and 15 percent in regencies and mayoralties in the province starting Jan. 1, 2003.

"I signed the decree on the minimum wage increase on Tuesday after wage boards representing employers and workers in the regencies and mayoralties gave their agreement to the proposed increase," he said in Surabaya on Thursday.

Employers had proposed an increase of five percent to eight percent while labor unions wanted an increase of between 15 percent and 30 percent.

Imam said employers had till 10 days before the gubernatorial decree took effect to lodge objections against paying the increase.

"All objections will be assessed and (audited) companies found economically unable to implement the regulations on the new wages will be exempted from it and allowed to comply with the current regulation. This mechanism is made available to avoid any ... dismissals (and strikes)," he said.

Workers could appeal against any exemptions, he said.

Minimum wages in the province will be raised to around Rp 550,000 per month from the current Rp 450,000 per month (see table).

Many employers expressed disappointment with the new standards, saying many companies would not be able to cope with the increase, combined with electricity, telephone and fuel hikes.

"It is a serious problem. But we are talking with other members of the Indonesian Employers Association (Apindo) to seek the best solution," Maspion Group human resources manager Romy C. H. said.

Maspion has already been forced to shut part of a furniture factory due to decreasing demand and efficiency.

"We are evaluating all units in our groups to analyze our market and costs in the coming year to see whether we will be able to pay our employees in accordance with the gubernatorial decree in 2003," he said.

The president of footwear company PT Mekar Lastindo, Alianto Wibowo, said he would lodge an exemption application over the new minimum wage because he could not afford the increase.

He said the hike would certainly affect labor intensive industries such as footwear and garment factories.

Of 120 shoe factories in the province, only 38 have survived the prolonged economic crisis while many others have relocated to China, Vietnam and Cambodia.