Workers and employers still play tug-of-war

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)