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ka, who owns and runs a cellular phone shop in Palmerah market in West Jakarta, does not see the recent debate on next year’s minimum wage for Jakarta workers as having any advantages for small and medium enterprises (SMEs).

With three workers on her payroll and around Rp 7 million (US$735) in monthly sales, she could never comply with the labor law requiring all businesses to pay workers the minimum wage.

“If small businesses like us are forced to obey the law, it will be better for us not to employ anyone and just shut the business,” she said on Friday.

Jakarta’s minimum wage is set at Rp 1.52 million per month, and labor unions have been staging protests to have it increased by around 80 percent.

Labor unions, business representatives and governments in all cities and regencies are in the process of negotiating a new minimum wage for next year.

The government and labor unions have called for a significant increase — around 30 to 50 percent for 2013 — much to the dismay of business associations who want an exclusion for SMEs and labor-
intensive businesses.

While the negotiations have often been marred by violent rallies, workers and owners of SMEs have been left out of the loop, despite accounting for around 90 percent of businesses in Indonesia.

As of 2010, there were 53.8 millions SMEs, employing more than half of the country’s workforce, according to the Cooperatives and Small and Medium Enterprises Ministry.

Based on the law, SMEs are businesses with net worth not more than Rp 2 billion and annual sales of not more than Rp 1 billion.

Virtually, no SMEs can afford to pay their workers minimum wage.

The owners all risk going to jail because, based on the existing labor law, business owners who fail to comply with the minimum wage policy will face a maximum of four years in prison.

In some cases, owners pay kickbacks to officials to avoid prosecution.

“During negotiations on the minimum wage, there should be a differentiation between those for SMEs, labor-intensive businesses and large businesses,” said Indonesian Chambers of Commerce and Industry (Kadin) chairman Suryo Bambang Sulisto.

“Not all businesses can cope with the rising minimum wage,” said Suryo, adding that it was the SMEs that cushioned Indonesia from the impact of the late 1997 Asian financial crisis and the 2008 global economic meltdown.

According to the law, a minimum wage is applied to all businesses regardless of their financial capacity. What differentiation there is usually applies to sectors like automotive, telecommunication and finance.

Sugi, who represents an association of West Jakarta’s warteg (food stalls), said he would hold a meeting of members over their opposition to the minimum wage requirements.

“Some warteg owners pay their workers around Rp 600,000 per month. There’s no way we can comply with the law,” said Sugi.

The Indonesian Employers Association (Apindo) has also called on the government to exclude labor-intensive businesses, such as footwear and textiles from complying with the rising minimum wage.

According to the association, there are currently three million people working in labor-intensive industries.

Manpower and Transmigration Minister Muhaimin Iskandar has often said that the ministry could not exclude SMEs and labor-intensive businesses from complying with the minimum wage policy as they are required to pay their workers based on the standard cost of living.