World Bank urges RI to review labor regulations
World Bank urges RI to review labor regulations
JAKARTA (JP): A World Bank expert urged Indonesia yesterday to review its labor regulations to promote industrial relations.
Alejandra Cox Edwards said in a seminar that the current regulatory system handling dismissals, representation and dispute solutions is not conducive to creating industrial harmony between workers and employers.
"The current labor regulations are found ineffective because they fail to encourage workers and the management to reach volun tary agreements in facing industrial disputes," she said.
Edwards made the remarks on the second day of a three-day seminar on economic reforms and labor market restructuring in Indonesia.
She said that labor regulations should exist to facilitate voluntary agreements between workers and to help reduce transaction costs.
"But, most often, the current regulations do exactly the opposite, discouraging the creation of jobs and, more importantly, distorting direct communications between the two sides," she said.
Edwards pointed out that laws No. 22/1957 and No. 12/1964 on the dispute resolution system and labor dismissal procedures need reviewing because they overly protect workers. They also make it more difficult for employers to dismiss unproductive workers.
The two laws and other ministerial decrees stipulate that labor dismissals must be approved by the government and unresolved labor disputes settled at local and central levels, she said.
She said the two labor laws discourage risk taking and slow down the job creation process in the formal sector.
She said that the government's laws and labor regulations have loopholes which allow the government to interfere in industrial disputes.
"The government should stay out of industrial disputes because workers' statutory rights have been guaranteed by the labor law," she said.
According to Edwards, workers and employers should be encouraged to seek voluntary solutions benefiting the two sides, or managements should be allowed to fire their workers provided they pay the severance set by law.
She added that the government's single-union policy forbidding any labor organizations other than the All Indonesia Workers Union Federation must be reviewed to strengthen the collective bargaining power of workers.
She said she did not see any legal basis for the official union to have a monopoly on worker representation given that the freedom of association is guaranteed in the 1945 Constitution.
Edwards said she disagreed with the Indonesian government's policy that emphasizes job security as a means of improving worker welfare because the policy does not help workers to advance to better paying jobs.
"The best way workers can respond to the opportunities and risks associated with a more competitive and globalized economy is by increasing their capacity to adapt and to move to better- paid jobs," she said.
"Pay scales, hiring, promotion and firing decisions should be taken as central factors in a company's performance evaluation and in it's competitive strategy. And the relationships between the management and workers should be based on individual and collective bargaining," she said.
Meanwhile, Aris Ananta of the University of Indonesia said that the government should not overlook those working in the informal and rural sectors, 70 percent of whom are not covered by labor laws.
"Those workers in the informal and rural sectors are unedu cated and low-skilled and most of them are living below the poverty line," he said.
He warned that social disparities will persist and possibly widen if the informal and rural sectors are not developed.
"Eighty million workers have yet to share in the economic growth," of the country, he added. (rms)