Labor unions bow to employers over wage hikes

Ridwan Max Sijabat, The Jakarta Post/Jakarta

Despite pro-labor legislation, workers had to bow down to employers' pressure in determining the hike in the 2006 monthly minimum wages in the wake of economic difficulties and the alarmingly high level of unemployment.

The Indonesian Employers' Association (Apindo) has recommended a maximum increase of 17.9 percent in the provincial minimum wage (UMR) to match the national inflation rate.

Provincial administrations are still negotiating the increase with employers and labor unions that will take effect on Jan. 1, 2006.

Labor unions said on Friday they could not press employers and the government to comply with Law No. 13/2004 on labor which requires the employers to raise the monthly minimum wage to cover the minimum physical needs in the 2006 fiscal year, mainly because most companies have been facing difficulties as a result of the two fuel price hikes this year.

The law stipulates that as of 2006, the minimum wage shall be increased to cover the minimum physical needs. The current minimum wage is 94 percent of that.

"We will see no real hike in the 2006 minimum wages in the provinces because the upcoming hike will only reflect the rise in inflation," chairperson of the National Front for the Struggle of Indonesian Workers (FNBI) Dita Indah Sari, told The Jakarta Post here on Friday.

Chairman of the All-Indonesia Workers Union Confederation (KSPSI) Rekson Silaban said the organization, which claims to represent three million workers nationwide, could understand the economic difficulties most employers had been facing because of the rising prices of raw materials.

"The situation may be more difficult as many labor intensive companies are expected to stop operations or lay off a number of their workers while the number of people unemployed has already reached 43 million. What is most important is, however, that employers should hold dialogs with their workers to avoid labor unrest," he said.

Chairman of KSPSI Jacob Nuwa Wea called on governors and employers to be prudent in setting the provincial minimum wages to enable low-income workers to survive the current economic hardships.

"The soaring prices have hit the low-income workers' purchasing power the hardest. Even if the minimum wages are doubled, it would still be insufficient to enable them to live a decent life," he said.

Nuwa Wea, also a member of the Indonesian Democratic Party of Struggle (PDI-P), said that by raising the fuel prices twice, the current government had set a time bomb that would explode some time in the future.

Apindo Secretary-General Djimanto said many employers were unable to raise the minimum wages as high as the inflation rate for numerous reasons.

"Even worse, more and more labor-intensive companies on Java, Sumatra and Kalimantan have stopped operations or laid off some of their workers because of economic difficulties."

He predicted the 15 percent increase set for the minimum wage in Jakarta would be the highest, and most small- and medium-scale companies would fail to comply with it because the hike was deemed unreasonable.

In many provinces Apindo members have proposed a hike of between 3 percent and 5 percent only to avoid mass layoffs.

The labor unions and Apindo shared the view that a new remuneration system deliberated in a negotiation between employers and workers should replace the current system, which they say is no longer relevant.

Under the current system, the provincial governments set the minimum wages, which is effective only for single workers who have worked in the formal sector for less than one year. The majority of workers are employed in the informal sector.

"Workers and employers are partners in the production process and, thereby, it is better if the wage level is set through bipartite negotiations," Djimanto said.

The way the minimum wage is determined has often cause conflicts and many small companies have failed to comply with it.