Jakarta minimum wage to increase by 7%

Damar Harsanto, The Jakarta Post, Jakarta

A tripartite wage committee consisting of the city administration, employers and worker unions agreed on Monday to increase Jakarta's provincial minimum wage (UMP) by almost seven percent beginning in January, a senior businessman said on Tuesday.

"We eventually reached an agreement to hike the Jakarta provincial minimum wage by almost 7 percent from about Rp 591,000 (a month) to about Rp 631,000 next year," said Sofjan Wanandi, who is a member of the committee.

Sofjan, also the chairman of the National Economic Recovery Committee (KPEN), told The Jakarta Post the agreement was "a compromise between employers and workers during the apparent economic hardships".

Previously standardized regional minimum wages, or UMR (Upah Minimum Regional), were determined solely by the Ministry of Manpower.

But with the implementation of regional autonomy last year, the central government lost its power to determine regional minimum wages, which are now set by provincial tripartite wage committees and then approved by the respective governors.

The debate over an increase in the Jakarta minimum wage became heated after employers grouped in the Association of Indonesian Employers (Apindo) refused to agree to any wage increase for 2003, citing a sluggish business climate worsened by capital flight due to heightened security concerns.

The Oct. 12 bombings in Bali that claimed 190 lives dealt another blow to the already-battered economy, with less new foreign investment and further capital flight expected.

"However, the agreement, I hope, will be a good start to solve problems that have caused both employers and workers to get caught up in exhausting conflicts," said Sofjan.

The Jakarta minimum wage is often used as a reference for nearby mayoralties, including Bogor, Tangerang, Depok and Bekasi.

Sofjan, however, warned that not all workers could expect to receive the new monthly minimum wage, because some financially troubled companies simply would be unable to afford to implement the increase.

The 7 percent increase fell well short of the 25 percent rise the worker unions were demanding.

Commenting on the new minimum wage, Tutur Suwito, chairman of the non-governmental organization Jakarta Labor Institute (IPJ), said the increase did not keep pace with the rise in prices of basic commodities.

"We must keep in mind that the inflation rate, which at times is used as a basis for the new minimum wage, often misleads as it does not reflect the real price of basic commodities in the market," said Tutur.

Jakarta's inflation rate hovered at 11.52 percent last year, a small increase from 10.29 percent the previous year. This year, economists predict inflation will still remain in double digits given the poor economic conditions.

Though not completely satisfied with the outcome, Tutur said the 7 percent wage increase had been agreed upon by the tripartite committee and should therefore by honored by all parties.

"There have been occurrences when a new minimum wage agreed upon by the tripartite committee and passed by the administration has been ignored by both employers and employees," Tutur said.

Last year, the tripartite wage committee agreed to a 38 percent increase for 2002, but employers refused to honor the decision. The employers ended up filing a lawsuit against the city administration over the increase with the Jakarta Administrative Court.

Meanwhile, the city administration spokesman, Muhayat, said Jakarta Governor Sutiyoso had yet to approve the new minimum wage.

"The governor has yet to sign the document so the new minimum has not yet been approved by the city administration," Muhayat said.

The provincial minimum wage applies only to new employees and workers with no previous experience. Other workers are paid above the minimum wage.