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.