Wage hike delay may cause unrest
By Kastorius Sinaga
JAKARTA (JP): The government's 10.6 percent minimum wage increase for industrial laborers has met with resistance since it was imposed on April 1, 1996. Some 400 member companies of the Indonesian Textile Association have threatened to bring the case to court (The Jakarta Post April 20).
This is odd because when the policy was announced in January, no objection was heard from any businesses. The only criticism was from a number of NGOs and intellectuals who strongly protested that the increase would not meet the price of food and transportation.
If the textile producers go ahead with their suit, won't this trigger more strikes?
This question is very relevant considering the problematic labor conditions and the sizzling political climate leading into the 1997 general election.
Industrial growth in the last 15 years has been tremendous, as reflected in labor absorption and export growth data. In 1993, industrial growth absorbed 11.8 percent of the labor force which increased two years later to 13.5 percent. The figure is expected to increase to 14.3 percent in 1998.
The export value of industry has also seen a staggering increase of 34 percent a year in the last 10 years, with labor- intensive manufacturing topping the lineup with 43 percent of the increaser, followed by capital intensive industry with 35 percent and natural resource intensive industry with 23 percent.
The data illustrates that both the manufactured export value growth and the comparative advantage of industry are based solely on cheap labor.
That Indonesia has low wages is easily shown by comparing the wages to subsistence needs and wages in other countries. The 10.63 percent minimum wage increase is not based on the real prices of essential goods and services in 1996, but on 1991 prices.
As an example, the price of rice according to the 1996 calculation is only Rp 600 per kg, but Bank Indonesia's report No.1893 of 1995 states that the cheapest variety of rice sold for Rp 700 per kg. Moreover, the calculation of a laborer's minimum living needs is gender-biased because it does not incorporate the minimum subsistence needs required by women laborers.
Indonesia ranks lowest among 30 countries in industrial labor wages. Business Times pointed out last year the irony that Indonesia's labor wages are lower than those in war-ridden rump Yugoslavia as well as China, which has a huge population. In a wage comparison of 10 Asian countries, Indonesia occupies the lowest rank with labor wages amounting to 2 U.S. cents an hour.
The low wages reflect the economic exploitation of labor in Indonesia. It goes hand in hand with strict political control of labor, especially the workers' right to organize themselves, and the repression by security forces of laborers who fight for their rights. It is not certain that companies which violate labor laws will be punished. All this has landed Indonesian labor in a state of double exploitation, economically as well as politically.
It is not surprising that labor strikes and protests have caused great concern in the past few years. Jakarta and West Java saw 257 labor strikes in 1992. The number increased to 334 in 1995, involving 276,607 workers. The causes leading to the actions were low minimum wages (61 percent), the absence of freedom to organize and the demand for social security (26 percent) and poor working conditions (13 percent).
This year there has been a drastic decline in strikes. This must be seen as a positive effect of the 1996 minimum wage hike.
Labor upheavals may very well return if the 400 textile producers, mostly based in West Java, persist in delaying paying the new minimum wage. The province is the most troubled by strikes and hence can be regarded as the barometer of labor unrest.
Or do the businesses want to exert pressure on the government as it concentrates on next year's general election?
The writer is a lecturer for post-graduate studies at the School of Social Sciences, University of Indonesia, Jakarta.
Table: Labor wages in Indonesia and its neighboring countries
Country US$/hour
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Indonesia 0.20 (38)
China 0.54 (35)
Philippines 0.68 (33)
Thailand 0.71 (31)
Malaysia 1.80 (28)
South Korea 1.97 (22)
Hong Kong 4.21 (24)
Singapore 5.12 (21)
Source: Morgan Stanley Research, 1994. The figure in brackets indicates world ranking.