Wed, 23 Feb 2000

The minimum wage riddle

How do you eke out an existence on a monthly salary of Rp 231,000 (US$31)? It is a riddle that can be answered in thousands of different ways. Many workers in Jakarta who are paid the current minimum wage are bound to have different tales to tell of how they make ends meet. The minimum wage in the capital barely covers the minimum required for a single person to subsist. People on a minimum wage, many of them with dependents to support, have devised their own innovative ways of scrimping and saving to survive from day to day.

The 24 percent increase announced by the government on Monday takes the minimum wage in Jakarta to Rp 286,000, but that still covers only 81 percent of the monthly cost of living for a single person. People in most other regions are not doing any better, either. A worker receiving the minimum wage in West Nusa Tenggara is the worst off of all because his new income of Rp 180,000 will still cover only 70 percent of the estimated subsistence level. Only in onshore Riau and parts of East Java do minimum wages cover the subsistence level.

The government should be commended for increasing regional minimum wages at a time when the economy is still in the doldrums and when most local and foreign investors are holding back because of continuing political uncertainty. According to the announcement on Monday, minimum wages, effective April 1, will increase by between 15 percent and 55 percent. The increases followed negotiations between representatives of workers, employers and administrations in each province. The central government, for a change, played a minimal role in setting the minimum wages, essentially limited to announcing the deals.

The raises are still significant if we consider that inflation in 1999 was only 2 percent, and they will certainly make up for lost ground. Last year, minimum wages rose an average of 16 percent, lagging behind the 78 percent runaway inflation of 1998. Since minimum wages in most cases do not cover the subsistence level, there is a powerful argument for all parties concerned to raise them even further. But there is a limit on how fast employers can increase wages given the current state of the economy. Since the latest increases resulted from negotiations between unions and employers, we can only surmise that this is as far as most employers can go for now.

The most important thing at this stage is that the government has shown the political will. The Ministry of Manpower, which announced the hikes, has promised to strive to bring the minimum wages to a level that will afford workers a decent life. That means ensuring that they are at least on par with the subsistence level.

In today's era of democracy, workers unions are in a far better bargaining position to fight to improve the welfare of their members. With workers' constitutional right to organize fully respected, the number of unions has mushroomed, all of them claiming to be struggling in the workers' best interests. While we do not advocate more militant trade unions, the country's labor organizations have been far too submissive in the past in dealing with employers. With greater freedom and with a more neutral government, these unions should make it their priority to fight for more acceptable minimum wages.

The government can help in contributing to the search for the answer to the riddle of minimum wages. The cost of doing business in Indonesia is still bogged down in too many levies, legitimate and otherwise, imposed by government agencies at almost every level. Past administrations, under presidents Soeharto and B.J. Habibie, recognized this problem but seemed helpless in breaking through the powerful bureaucracy, which has an interest in keeping these levies. Now President Abdurrahman Wahid, given his popular support, should confront the bureaucracy on this issue and for once prevail. For too long, our workers have been deprived of their fair share only because some bureaucrats have decided to enrich themselves by using their power. Eliminating the levies will mean that huge sums of money can be better spent on improving the workers' lot.