Minimum wage to be raised by 10%

JAKARTA (JP): The government announced yesterday it is to increase the minimum wage level in all 27 provinces by an average of 10.07 percent from Apr. 1.

Minister of Manpower Abdul Latief said the increase would bring the average minimum wage across the country closer to what is officially perceived as the minimum physical requirement.

"The minimum wage will average 95.32 percent of the minimum physical requirement, compared to 92.49 percent in 1996," Latief said after he, Coordinating Minister for Production and Distribution Hartarto and Minister of Industry and Trade Tunky Ariwibowo reported to President Soeharto at Bina Graha.

The minimum physical requirement is calculated on the basis of the local costs of a daily calorie intake of 3,000 for a single worker.

Latief said the increase was the result of "very democratic" deliberations involving representatives of the government, employers and workers, with proposals coming from a wide range of people in all sectors.

He said increases had taken into account regional inflation rates. Nationally, 1996 inflation was 6.7 percent.

With the increase, the minimum monthly wage for a worker in the Greater Jakarta Area (Jakarta, Bogor, Tangerang and Bekasi) would increase from 156,000 ($68) to Rp 172,000 ($75).

The minimum wage level in the industrial-designated zone of Batam, including the islands under the Batam Development Authority, would be increased to 235,000 from Rp 220,500.

Batam had the highest minimum wage level, reflecting the high cost of living there. Yogyakarta still had the lowest minimum wage level, in spite of an increase from Rp 96,000 to Rp 106,500.

The minimum wage levels in some regions already equaled or surpassed the minimum physical requirement.

Latief said the government had made a commitment to make minimum wages in every region at least equal the minimum physical requirement by the end of the Sixth Five-Year Plan in 1998/1999.

"We still have one more year to do it," he said.

Last year, the government introduced a regulation requiring that all companies calculate wages on the basis of 30-working days a month, abandoning the traditional practice of setting a basic daily wage. This meant workers employed on a daily basis were entitled to wages for the Sundays they did not work.

The regulation was opposed by employers, particularly textile and apparel producers whose association sued Latief in the State Administrative Court. The minister won the case.

"Let's make it clear to everyone: this is a regulation and the government intends to uphold it," he said when asked about objections to the wage laws.

This year's increase is the lowest in the past five years. The annual increases between 1993 and 1996 were 17.76 percent, 30 percent, 18.6 percent and 10.63 percent.

Latief was quick to point out the accumulated total of wage increases since 1993 had reached 125.6 percent.

Latief said companies who felt the increase was too burdensome could apply for exemptions, but they would have to allow their books to be audited by outsiders.

While requests for exemption would be considered, the government would seek ways of helping these companies out, he said, adding the assistance could be in the form of management consultancy, arrangement of new loans, or rescheduling of existing debts.

Last year, of 44,564 companies that employed more than 25 workers, only 365 sought exemption. The government approved 269 requests, including 203 from textile and garment companies.

Under the labor law, employers that failed to pay minimum wages faced three-months imprisonment or a fine of Rp 100,000.

When asked whether he considered the punishment too light, Latief said: "That's what the law says. That is why, God willing, I will submit a draft to revise the law on manpower."

Latief disclosed a government plan to encourage workers to set up cooperatives under a scheme jointly-run by the Ministry of Manpower and the Ministry of Cooperatives.

PT Jamsostek, the state-run company which runs social security programs, will set aside Rp 50 billion as soft loans to workers cooperatives. Loans carry an annual interest rate of 12 percent.

PT Jamsostek, overseen by Latief, is expected to chalk up a net profit of Rp 200 billion this year. Its asset stands at Rp 5.8 trillion, up from Rp 1.2 trillion in 1993, he said. (emb)