The 7 percent deal

The 7 percent deal

Jakarta Governor Sutiyoso has officially approved the 7
percent increase in the provincial minimum wage which will take
effect next year.

Probably no one can say exactly whether the decision is good
or bad news for both employers and workers. The increase is in
fact 18 percent lower than what the labor unions had demanded.
The figure is also lower than the inflation rate which is
estimated to reach almost 10 percent this year.

With the increase, a worker will receive a monthly wage of Rp
631,000 beginning January 2003. Employers who cannot afford to
pay higher wages can submit their objections to the governor.
They may be shown some leniency and be allowed to delay the
implementation of the new ruling.

Indeed, it is hard to imagine how one can survive for a month
on such a small amount of money in this capital city. The
increase is not in keeping with the rise in prices of basic
commodities, but this is a fact of life that the workers have to
accept.

It is definitely risky in such a situation for employers or
companies to give more than a 7 percent increase, but to give no
increase at all could be considered as a sign of disregard and
could trigger violence. Under such circumstances, to give a 7
percent increase is the best thing they could do.

This decision was made after a prolonged debate. The
Indonesian Employers Association (Apindo) had previously rejected
any wage increase for 2003, arguing that business had been
sluggish in the capital city. They also blamed the big floods
that devastated many parts of the city between January and
February this year as an important factor which had affected
their businesses. They claimed to have suffered a total loss of
Rp 5 trillion due to the floods. They also fear the repercussions
of the Bali bomb attacks will affect their businesses in the near
future. Last but not least, the high-cost economy is still an
unresolved problem that burdens businessmen in Indonesia.

We all agree that business has been slack for years as there
have been few new investments and capital flight continues.
However, no one can deny that hardship has sharply increased for
workers.

It is of course understandable that workers demand a higher
wage increase. Nevertheless it would also be wise to consider the
chaotic state of the national economy. Therefore, all parties
concerned in the debate in truth have no other option but to
accept the 7 percent increase and to start thinking in a more
realistic way.

There are things the workers should take into consideration if
they reject the decision -- for example protests and outbreaks of
violence that may end up in dismissal.

Last year, records showed that this capital city of more than
eight million people had a labor force of more than four million.
Fifteen percent of the total potential labor force, or more than
600,000 people, were jobless. This is an alarming figure.

Had the workers' unions been persistent in their demand for a
25 percent increase in the minimum wage, and had the workers
rejected the 7 percent hike, things could have been worse. The
number of unemployed might rise and this could lead to an
increased number of poor people in the city. The latest data
indicates that some 860,000 people in the city are classified as
poor. Social unrest, therefore, is on the doorstep as hungry
people are angry people.

Another classic question that has yet to be answered is the
relationship between wage hikes and productivity. There has been
no definite answer to the question of whether a wage increase
would boost productivity, or whether productivity must come
first.

This enigma is not unlike the question of which comes first,
the chicken or the egg?

We all acknowledge that the national economy is now in a sorry
state. Therefore it is better for both, employers and employees,
to join hands and realize that they cannot be separated as, in
fact, they share a mutual interest.

The employers for their part must be honest and fair and not
pretend to be unable to pay their workers more and submit a
letter of objection to the governor. They should also realize
that on the one hand workers have a right to live decently as
citizens while on the other they must also be aware of their
obligation to give their best.

This mutual respect between worker and employer must be
maintained and promoted, especially in these difficult times to
prevent labor-related problems from developing and growing into
exhausting conflicts.