Raising minimum wages

Raising minimum wages

Few people would argue against the 10 percent average increase
in the minimum wages in the 27 provinces announced Wednesday,
especially if the figure was reached after what Minister of
Manpower Abdul Latief described as "very democratic"
deliberations, involving representatives of the government,
employers and workers.

Some union leaders may complain that the increases are too
small and few employers are expected to object citing financial
difficulties. In view of the democratic process, we expect the
ruling to be widely observed and accepted eventually by
employers, workers and their union representatives.

As much as everyone would like to see workers improve their
welfare, there are factors that constrain the government from
awarding a larger increase in the minimum wages. The
competitiveness of the nation's industry, and concerns about
inflationary pressures are probably two main factors that were
taken into consideration when discussing raising minimum wages.

What most of us tend to forget, however, is that minimum wages
in Indonesia is also a moral issue, besides an economic and
political issue. As Latief has pointed out, the 10 percent
increase would take the average minimum wage levels to only 95
percent of what is perceived as the minimum physical requirement
-- calculated on the basis of the costs to support a daily
calorie intake of 3,000 for a single worker. This means that
there are hundreds of thousands, probably even millions of
Indonesians, who are eking a living barely enough to support
himself or herself, let alone a family. Morally, this is not
acceptable. The country has tolerated this situation and allowed
economic and political arguments to override moral argument.

It is hard to fault the government entirely for this moral
shortcoming. To be fair, they have progressively raised the
minimum wage levels since 1993 by an accumulative total of 125.6
percent. Back then, the minimum wages ranged between 70 to 85
percent of the minimum physical requirement. The country has come
a long way from that deplorable situation, but still has some way
to go. It is hoped the government will make good on its promise
to bring the minimum wages across the nation equal to the minimum
physical requirement next year.

We need to reach that point quickly in order to set new
criteria to fix the minimum wages. The minimum physical
requirement is deficient, for it is a measure of subsistence for
a single worker. Already, there are new concepts being proposed
to link minimum wages with other indexes that would take into
account factors such as raising a family, access to basic health
and education facilities for their children. Once we have reached
the point where minimum wages allow workers a decent living, we
can start linking future increases to productivity.

Even as we wait for minimum wages to reach a morally
acceptable level, the government could act on the issue of
corruption in the administration, an issue union leaders and
employers believe is the reason why wages in this country are
depressed. Estimates of "invincible costs" that companies have to
pay in the form of government levies -- legal and illegal --
range between 30 to 40 percent of total business costs. Labor in
contrast amounts to an average of 9 percent.

Minister Latief set the scene last year by slashing dozens of
levies at his ministry. But his initiative was not followed by
fellow cabinet ministers, and the entire campaign faded away. We
can only hope the government's determination to improve the
welfare of workers is accompanied by an equally strong political
will to deal once and for all with the problem of corruption.