The minimum wage riddle

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.