Govt delays new ruling on minimum wage

Govt delays new ruling on minimum wage

Ridwan Max Sijabat, The Jakarta Post, Jakarta

Outgoing Minister of Manpower and Transmigration Jacob Nuwa Wea
has issued a circular delaying the implementation of the use of a
more humane criteria than basic physical needs in determining
regional minimum wages until 2006.

Article 89 of Law No. 13/2003 on labor, which will take effect
in January 2005, stipulates that the provincial minimum wages
determined by governors shall be determined on the basis of
"humane physical needs", which is presumed to be far higher than
the minimum basic needs.

The issuance of the circular means that any wage increase
would be nominal as it mainly aims at offsetting the effects of
inflation, not increasing workers' purchasing power.

The circular, issued last week amid intensive tripartite
discussions on minimum wages in provinces, said the government
had decided to delay enforcing the labor law due to the prolonged
economic crisis.

"The government decides to delay enforcing the new ruling on
minimum wages because of continued economic difficulties and
because workers and employers have yet to submit detailed
information about humane physical needs," Minister Nuwa Wea told
The Jakarta Post here on Tuesday.

Nuwa Wea said the circular implied that there would be no real
increase in the minimum wages in 2005 and workers should be
prepared for such conditions.

Workers, employers and provincial administrations are
conducting intensive tripartite discussions to set the provincial
minimum wages for the 2005 fiscal year.

According to the labor law, the minimum wages shall be
announced to the public in December and will take effect in
January the following year.

A bipartite forum representing workers and employers in
Jakarta had recently agreed to raise the minimum wage to Rp 1.2
million (US$130) from the current Rp 671,550, but Minister Nuwa
Wea called for a review for fear that it would encourage poor
provinces to propose intolerable wage hikes.

Industrial relations expert Payaman Simanjuntak said the
ministerial circular was regrettable and not a wise solution for
the conflicting interests of workers and employers.

He argued that the government could encourage the National
Wages Research Board to set realistic components of the humane
physical needs to allow major companies to pay their workers at
least in line with the new ruling.

"The law has prepared a mechanism for small companies and
those facing financial difficulties to be exempted from the new
law," he said.

Payaman, who is also former director general of labor
industrial relations and supervision at the Manpower and
Transmigration Ministry, said that the minimum basic needs was no
longer an appropriate guide in determining the minimum wages as
its components were inhumane and unrealistic.

Meanwhile, Djimanto, secretary-general of the Indonesian
Employers' Association (Apindo) said on Tuesday that more
companies would likely close if the new labor law took effect in
such difficult economic conditions.

"We will have no other alternative but to close down or
relocate to other countries if the government enforces the new
law," he said without elaborating.