Analysis: Wages, not jobs, are the real challenge now

The lower the wages for the worker, the greater the profits for the investor. That simple reality lies at the very core of capitalism. That’s why first-world companies employ labor in third-world countries. That’s what makes the world go round. Money. Profit.

I have no trouble understanding the paradigm. Over the years, we have all witnessed a rising Japan being challenged by a feisty South Korea, chased in turn by the likes of Thailand and Indonesia. As Asia and Latin America progress, Africa too is slowly emerging out of the darkness. This is all good. The exploitation of opportunity is bringing jobs to the jobless, hope to the hopeless. But the line between good and bad, fair and unfair, sensible and senseless, needs to be drawn somewhere.

In particular, I draw your attention to the “I” word, “Inflation”. It is used, may I say abused, too often by economists and employers as the convenient sword of Damocles to keep the lower echelons of all societies in a state of fear, giving them less than they deserve. I would readily agree that most people are ever satisfied. The trouble everywhere, in both developed and developing economies, is the yawning gap that continues to grow between the haves and the have-nots, the rich and the poor, the 1 percent and the remaining 99 percent.

My gardener in Melbourne earns more in two hours than my cook in Jakarta earns in two weeks.

I struggle with this disparity of income, every month, as I am the paymaster. All things considered, this is simply not fair. The thinking gets even more difficult to reconcile when I consider the difference between the annual incomes of employers and employees, across professions, in the two countries. The exploitation in Indonesia is too glaring to ignore. And I am very much a contributor to this state of affairs.

By giving her a good raise in Jakarta last year, I think I did more than salve my conscience. It is no different at the office. Now in the process of building our own network of field offices around Indonesia, we have pledged to distribute much of the savings to better wages for the interviewers, not the management team. Is this wise? I think so, in every way, from any perspective. As the New Year approaches, I would urge every employer, at home and at work, to reconsider the way wage increases for employees are parceled. If the official rate of inflation was used as a yardstick across all cadres, the weaker sections of our society would remain as under-privileged as ever. On the other hand, better wages and skills-upgrades for the lower echelons can only be good for all of us.

I realize this is an invitation for the economists to heap scorn on this researcher. I welcome the brickbats. Regardless, I believe that disproportionately higher raises for our unskilled workers in comparison with our professionals can only strengthen Indonesia. The days of the sweatshop are over. More money in the hands of millions more means more products and services sold to more consumers with bigger disposable incomes. Bigger savings mean more assets for families. That also means higher revenues, bigger profits for employers. That should be good news for investors and managers as well. It’s that simple. Especially when you consider the evidence.

Unemployment is at record lows. The number of people actively “looking for a job” is now down to an amazing 3.5 percent of the workforce. That’s as good as it can get, anywhere, realistically. But there the good news ends. The overwhelming majority of the workers are unskilled, mostly laborers doing menial jobs for precious little. On the one hand, they are probably grateful they have a job. On the other, it is a shocking example of the injustice the privileged mete out to the under-privileged, every day. Jobs are no longer a challenge for Indonesia. The focus needs to shift to better wages for our weakest. And those of us who can help make things better need to remember there is really no charity involved in doing so voluntarily. There’s even more money to be made.

While the numbers of professionals and skilled workers have been on the rise, the percentage of unskilled workers has not declined as rapidly as we would wish. Wages for workers have been on the rise too, but yet again, not as significantly as we would have liked. Having said that, I should point out that the need for better wages is an easier problem to fix than not enough jobs. But, for the millions of unskilled workers at the bottom, the exploitation continues. High percentage growth rates on a low base have little meaning at the pasar. The need for trade schools is now perhaps as great as if not greater than the need for more universities. When the foundation of the pyramid gets stronger, the entire structure stands tall with greater confidence.

These conclusions are based on Roy Morgan Single Source, the country’s largest syndicated survey with over 25,000 Indonesian respondents annually, projected to reflect almost 90 percent of the population over the age of 14. The results are updated for subscribers, every 90 days. The opinions expressed in this column are my own.

The writer can be contacted at debnath.guharoy@roymorgan.com.