Retailers reject 38% hike in minimum wage

Emmy Fitri, The Jakarta Post, Jakarta

Employers lodged a belated objection to next year's 38 percent minimum wage increase for the Greater Jakarta area to Rp 591,600 (less than US$60) as stipulated in a gubernatorial decree, saying the hike was irrational given the current sluggish economy.

Chairman of the Indonesian Retail Merchants' Association (Aprindo) Hari Darmawan told a press conference on Thursday that businesspeople were still attempting to recover from the various catastrophes that had followed the 1997 economic crisis. In addition, they were now also feeling the pinch as a result of the Sept. 11 terrorist attacks in the United States, which had heavily hit business in general.

"Last year, amid all our economic difficulties and low profit margins, we agreed to a Rp 426,250 minimum wage compared to the previous year's minimum wage of Rp 350,000. This proposed increase is devastating for us," Hari, who owns the Matahari chain of department stores, said.

Jakarta's Governor Sutiyoso issued a decree dated Nov. 2, 2001 on the new minimum wage for 2002 after receiving the recommendations of the city's tripartite wage committee, which consisted of labor union and employers' representatives, as well as officials from the Ministry of Manpower.

Hari claimed that businessmen were facing profit drops of between 20 percent and 30 percent due mainly to the fluctuating rupiah and the current economic problems in the United States.

"I've checked with my fellow businessmen, they're all complaining. Many exports to the U.S. have been suspended and their products remain unsold. This is bad. Our position has not yet stabilized," he said.

He called on the Jakarta administration to review the 2002 minimum wage hike, and to at least authorize the payment of the increase in two stages, with wages being increased by 20 percent during the first six months, and the rest of the increase being paid during the second half of the year.

Aprindo has 400 member companies located in 12 provinces, with its members employing more than 500,000 people.

Meanwhile, the association's executive director, Kustarjono Prodjolalito, admitted that it was too late for businessmen to reject the gubernatorial decree as it had already been issued. Still, he hoped that the decree could still be reviewed.

He said that the employers, as members of Apindo (the Indonesian Businessmen's Association), had also been represented on the city's tripartite wage committee. The employers had only agreed to the sharp wage hike due to the limited time allowed for negotiations with the other parties involved.

"It's because of technical mistakes that I can assure you will not happen in the future. The Apindo board of executives is also still discussing what to do because obviously we cannot afford the raise," Kustarjono quickly added.

"We could have just walked out of the negotiations, but it's too late for that now," he said.

He argued that in other regions, like Central Java and East Kalimantan, the employers had walked out of the negotiations and therefore the discussions on the minimum wage were deadlocked and undecided to the present day.

"But, we don't really want that to happen in Jakarta, I think. We'll still work to find any leeway and to discuss this with our colleagues," Kustarjono said.

Another executive, Hidayat, predicted that unemployment would rise if the employers had to pay the wage increase.

"It's probable that they (employers) will be left with very low profit margins so that expansion will be impossible. Another consequence is that there will be no more hiring as employers cannot afford such high wage levels. In the end, it's the government that will have to deal with the resulting unemployment," he said.