Time to introduce wage scale system, economist says

JAKARTA (JP): Companies in Indonesia should establish a wage scale and enforce it consistently to win workers' loyalty, a Singaporean labor expert says.

David Chew, an economics professor at the National University of Singapore, said yesterday that companies should stop using the official minimum wage level as a yardstick and introduce their own wage scales.

Chew, who is an expert at the International Labor Organization, was responding to a question during a seminar on wages organized by the Ministry of Manpower.

Workers who continue to be paid below the minimum wage after many years of service are more likely to change jobs when opportunity knocks, he said.

One seminar participant explained that the minimum wage level in Indonesia was often understood to be the lowest salary that could be given to a skilled worker. "This means that unskilled workers, no matter how long they have worked, will receive salaries lower than the minimum wage," he astutely pointed out.

Chew suspected that such a situation had been created because the market mechanisms of the labor market are not working properly. He added, however, his belief that the situation in Indonesia was not as bleak as that portrayed by the questioner.

He warned that in the absence of proper enforcement of a wage scale system, a company will face difficulties in retaining its workers because they are likely to become dissatisfied, de- motivated and less productive.

"As a result of the wage scale, the worker should be getting a higher salary. The company should not continue to pay the worker at the bottom of the scale," he said.

The two-day seminar is the third in a seven-part conference organized by the Ministry of Manpower to examine the overall manpower situation in Indonesia. The first and second tabled the problems of unemployment and industrial relations.

There have been suggestions that Indonesia strengthen the existing national wage council which should look beyond simply setting the minimum wage levels in different regions and professions.

Coordinating Minister for Industry and Trade Hartarto, in his speech read by aide Djermani Sandjaja, stressed the need for management and workers to work together as partners.

"If a company earns a large profit, it is only natural that the workers receive their fair share," Djermani said.

A worker's wage should be seen as remuneration to meet the basic needs of the workers and their families and not as a component of a company's production costs, he added.

Chew explained that several criteria should be used to set the minimum wage level. Protection

It should meet the workers' physical requirements and provide some kind protection from imperfections of the labor market, he said "The two will not cause a conflict because, as a safety net, the minimum wage would be consistent with economic growth."

Chew conceded that it may be easy to attract a worker who is willing to work for low pay. "But will you get a motivated worker when, after 10 years, he sees other workers in other companies making more money?" he asked.

"So maybe you can get a worker --- because of your under- employment problem -- but you won't get one that is committed, which is important to the company," he added.

However, he pointed out, any such decision would hearken back to the managers' ethics and morality.

"These, besides economic considerations, are factors which should be used to determine the minimum level of satisfying the workers' physical requirements.

The government raised the minimum wage levels throughout Indonesia in January in the hope of bringing them closer to what is considered the workers' minimum physical requirements. The hikes, however, have met continued resistance from companies, especially those operating outside Jakarta.

In the capital, the daily minimum wage level is Rp 3,800 ($1.80). (pwn)