Time for new era of labor relations

Time for new era of labor relations

By James Castle

JAKARTA (JP): Reformasi offers an opportunity for a new era in
Indonesian industrial relations. Unfortunately, authoritarian
central control, mutual suspicion and even brutality
characterized 30 years of industrial relations under the New
Order.

This history is the reason for the atmosphere of
confrontation, mistrust and hostility that is poisoning relations
between labor and management today. In turn, poor labor relations
are discouraging new investment and contributing to the country's
economic malaise.

Contrary to public perception, labor law in effect during the
Soeharto era was one of the most pro-labor sets of legislation in
the region. Unfortunately, its implementation, like so many other
aspects of the New Order, was weighted in favor of the
unscrupulous both on the side of employers and employees.

Those willing to bribe or otherwise bend the rules often got
favorable results. Those who played by the rules usually lost and
often were punished for trying.

From the employee point of view, there was no true freedom of
association. Only one labor union was legally sanctioned and all
others were treated as illegal organizations.

When workers tried to avail themselves of their substantial
protection under the law, it was common for unscrupulous
employers to collude with government officials to deprive them of
their rights.

Even worse, as we know from the case of the late Marsinah in
East Java, workers seriously protesting their treatment were
sometimes subjected to torture and even murdered.

From the employers' perspective, those who tried to play by
the rules all too often suffered.

They frequently found themselves the subject of extortionate
demands from labor and unsympathetic hearings in manpower
tribunals if they did not offer financial gratuities in advance.

One of the most sensitive areas and the one perhaps most
abused by employees is termination with cause.

When obtaining proof of employee misbehavior or theft, most
companies found little support from the labor department
bureaucracy or the legal system and were often sued in turn by
criminal employees.

Consequently most companies simply tried to reach financial
accommodations with unscrupulous employees, usually meaning they
paid severance bonuses to employees who had committed crimes
because there was no effective legal recourse.

The controversial regulation PP-150/2000 is really an
overreaction to these abuses of the New Order government and the
improper implementation of existing manpower rules by
unscrupulous employers and government officials to the detriment
of workers and their rights.

Unfortunately, this regulation was never discussed with
employers and, indeed, seemed to contradict other discussions
held with Indonesian business groups prior to its implementation.

Consequently it establishes extreme positions which will
actually harm Indonesian labor because it discourages companies
from hiring workers, and it discourages foreign investors in
export-oriented industries from coming to Indonesia because of
uncompetitive labor rates.

It also confirms the rights of criminal employees to seek
redress from the employers they have abused.

As a result it is not surprising that honest employers who
attempt to follow the law feel that the government has turned its
back on them and has implemented yet another uncompetitive tax on
business.

This further discourages business in an already difficult
economic climate.

On the side of the workers, the regulation makes no
distinction between the relatively well-off, privileged white-
collar workers whose skills actually remain in short supply and
the semi-skilled or unskilled blue-collar workers, the true
buruh, who are in such great supply that they have extremely
limited bargaining power.

Like fuel and energy subsidies which were well intended, the
practical impact of PP-150 is to benefit the middle and upper
class, not the low-income workers most in need of social safety
net protection.

Unfortunately, discussions today that attempt to solve
particular labor disputes or, more broadly, to establish mutually
beneficial policies, often end in shouting matches rather than
dispassionate negotiation.

It is not surprising the majority of Indonesia's current labor
leaders have shown themselves more adept at demonstrations and
shows of force than negotiations, because shows of force are the
way they have been received for thirty years.

Physical abuse to which legitimate labor leaders were
subjected during the New Order has naturally generated a physical
response.

One should not expect workers to immediately trust the motives
of either the government or employers. Much more dialog is
needed.

Both sides must make every effort to remain calm while
reasonable solutions are found to complex regulatory and legal
issues. Rights of capital, management and labor must be
respected in any solution. It is often forgotten in the heat of
industrial disputes that labor, management and government depend
on each other.

If there are no investors, no owners and no managers, where
will workers find employment? On the other hand, if there are no
loyal, dedicated workers, how can companies succeed in today's
extremely competitive global market? If there is no labor harmony
and successful economic activity, how will the government
establish a reasonable tax base to fulfill its obligations to its
people?

Given the past history of confrontation, suppression and false
harmony that have characterized industrial relations here, it is
not surprising that the first years of the reform movement have
brought emotional confrontations.

What is important is that all parties quickly realize that
confrontation hurts both sides.

There are no winners if businesses are stopped because of
strikes or are closed because of high labor costs.

On the other hand, if employers do not treat their employees
fairly and Indonesia does not progress economically to the point
where it can pay its workers living wages, the social harmony so
necessary to conduct business successfully will be missing.

In industrial relations, labor, management and the government
are not enemies or competitors.

They are partners in the economic growth of Indonesia and in
raising the living standards and quality of life for all
Indonesians. Discussions and negotiations should be conducted in
this spirit.

The writer, of the Castle Group, chairs the American Chamber
of Commerce in Jakarta.