Sun, 23 Feb 1997

Workers and employers still play tug-of-war

JAKARTA (JP): When it comes to wages, it's a tug-of-war between employers and workers. Employers want the lowest possible wages, and workers want it vice versa.

Every time the government increases regional minimum wages, union leaders complain the increases are too small and employers grumble, citing financial difficulties.

The same contradictory responses were voiced to last month's announcement that the government is to raise minimum wages by an average of 10.07 percent, effective starting April.

The 10 percent increase was considered unsatisfactory by the All-Indonesia Workers Union Federation because it did not guarantee workers decent living conditions.

The use of the minimum physical requirement as a reference in setting the minimum wage was inappropriate, the federation said. Its leaders said the standard was calculated based on wholesale prices and not on the retail prices workers actually pay.

The federation's former chairman, Bomer Pasaribu, said the increase was small considering last year's inflation rate of 6.4 percent.

The federation had officially asked for a 16 percent increase in the minimum wage, though several of its unions had called for an increase of up to 20 percent in major industrial centers like Jakarta and Surabaya.

Minister of Manpower Abdul Latief said no other country had hiked its wages over 100 percent in three years, as Indonesia has. Therefore, the government could not repeat increases of 20 percent or 30 percent as it had in previous years.

Little has been heard from the nation's business circle. They probably realize the decision was not only based on economic considerations but also political ones. Moreover, this is the year of a general election.

Informed sources said a number of employers wrote a letter to President Soeharto asking him to cancel or postpone the planned 10 percent wage increase.

Last year, when the government increased the minimum wages also by 10 percent, many employers raised reservations. Hundreds of companies asked for exemption from the minimum-wage regulation. Most demands were agreed to.

Chairman of the Indonesian Chamber of Commerce and Industry, (Kadin) Aburizal Bakrie, said he hoped all companies could comply with this year's minimum wage policy.

To balance the increase, businesses should attempt to improve efficiency and persuade workers to step up productivity, Aburizal said.

Ideally, he added, increases in minimum wages should be linked to workers' productivity. Otherwise, employers will have to make trade-offs in costs elsewhere.

Legislator Erry Soekardja disagreed. He said increases in minimum wages should not be linked with productivity because the annual increases only compensate the inflation rate and meet the basic needs of a single worker, not a married one.

"Companies should have anticipated the increase in minimum wages. Thus, there is no excuse for companies which do not abide by the minimum wage policy," Erry said.

He said a 10 percent increase would not affect cost structures of most industries because labor wages constitute less than 10 percent of industries' overall cost structures.

Minister Latief, also a businessman, agreed that a 10 percent increase in worker wages will not cause a significant impact on a company cost structure provided the company was soundly run by professional executives and entrepreneurs.

Many times, unscrupulous entrepreneurs abused bank loans and placed the burden on workers, Latief said. They often used a portion of the loans for personal ends, like buying houses and/or cars.

"How can these kinds of people give decent wages to their workers?" Latief asked.

In addition, labor-intensive companies, which frequently fail to meet minimum wages every year, still employ many foreign workers. This expatriate labor is certainly expensive, both in pay and in facilities.

Many parties have called for a complete overhaul of the management of human resources development, to reduce local companies' dependence on expatriate labor.

The most troublesome factors considered inhibiting a real improvement in labor wages are legal levies and illegal levies, dubbed by the business sector as invisible costs.

Reports from the Indonesian Employers' Association's West Java branch, for instance, show companies must allocate 22 percent of production costs to bribes and levies. In other areas, the percentage could be much higher, up to 40 percent.

The problem is that companies cannot account such spending as operational or production costs because they cannot produce legal receipts.

Thus, they often have to markup raw material prices or keep down labor wages, otherwise such illegal spending would have to be included in taxable incomes, said Iman Taufik, Kadin's vice chairman.

The federation's chairman, Wilhelmus Bokha, said many companies have demanded these invisible costs, the root of Indonesia's high-cost economy, be eliminated so they could pay workers more.

"If we really want to compete in the free market, we have to stop monopolies, collusion and the infamous illegal levies," Bhoka said.

He warned that the low wages paid to workers could threaten production. "Workers who earn low wages are vulnerable to agitation and calls for demonstrations," he said. (rid)