T

he city administration said it would increase the minimum wage by 15.38 percent to Rp 1,290,000 (US$143), higher than the expected inflation in Jakarta of 5.7 percent next year.

Manpower and Transmigration Agency head Deded Sukandar said Friday that the figure was also higher than the 7.15 percent increase proposed by the Remuneration Board, which was chaired by representatives of the administration, labor unions and business associations.

A gubernatorial decree for the new minimum wage was signed by Jakarta Governor Fauzi Bowo on Nov. 15.

“With this increase, Jakarta’s minimum wage is higher than in satellite areas,” Deded said, adding that the new minimum wage would take effect on Jan. 1.

Last year, the city’s minimum wage was set at Rp 1,118,009, lower than in Bekasi regency (Rp 1,168,000), Bekasi (Rp 1,155,000), Depok (Rp 1,157,000) and Tangerang (Rp 1,175,000).

The new level, however, is still below the cost-of-living standard (KHL) set earlier this year by the administration’s Remuneration Board of Rp 1,401,829.

Deded said the minimum wage was not set in accordance with the KHL because the city took into account medium- and small-scale companies that might not be able to comply with such high wage levels.

He added that in making the calculations, the city assumed an economic growth rate of 6.5 percent and inflation of 5.7 percent in 2011, and referred to the 2010 Jakarta Working Plan and also appropriate living standards in Greater Jakarta.

Deded said there was widespread misunderstanding of wage regulations. “The minimum wage excludes meal, transportation and overtime allowances. The wage applied only for workers in the first 12 months of their working period,” he said.

Workers in Jakarta have repeatedly held rallies to demand that the minimum wage be set in accordance with the KHL, with the latest rally held on Thursday when thousands of workers gathered at the Nusantara Industrial Zone in Cakung, North Jakarta.

The Jakarta branch of the Chamber of Commerce and Industry (Kadin) said it was surprised by the administration’s decision.

“We expected the minimum wage to only increase by 7.15 percent,” said Nita Yudi, Kadin’s deputy chief for human resources, education and social affairs.

Nita said entrepreneurs would have to make adjustments to fulfill the new regulation. “We may have to cut costs, leading to a worst case scenario of massive layoffs.”

Failure to pay the minimum wage is punishable by law. Business owners face up to Rp 400 million in fines and one to four years in prison for violating the regulation.

Business owners, however, are allowed to request a waiver, which is only granted after audits proving that the business is undergoing financial difficulties.