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The Jakarta Post
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Industry Ministry pushes for wage hike exception

  • Amahl S. Azwar and Hans David Tampubolon

    The Jakarta Post

Jakarta | Tue, December 18 2012 | 10:08 am
Industry Ministry pushes for wage hike exception

Getting on with the job: Coordinating Economic Minister Hatta Rajasa (second left) chairs a job creation coordination meeting, attended by Finance Minister Agus Martowardojo (left), in Jakarta on Monday. The government hopes to create 2.5 million new jobs in 2013. Antara/Andika Wahyu

In an attempt to meet the country’s expected industrial growth by the end of 2013, the Industry Ministry has recommended that labor-intensive firms, including textile, garment and shoe manufacturers, be exempted from adopting a new minimum wage in the new year.

Industry Minister MS Hidayat said on Monday that his office was “upbeat” about the country’s non-oil and gas industry growing to around 6.8 percent to 7.1 percent next year, despite the challenges of poor infrastructure and the high cost of investment.

However, he said the estimated growth might not be realized if labor-intensive companies, which employed tens of thousands of workers, remained under the new minimum wage between 30 and 40 percent to around Rp 2.2 million (US$228) next year.

“If we force them to comply with the new minimum wages, they might have to lay off their workers, creating a huge amount of unemployed people.”

The ministry, he said, was currently waiting for a response from the Manpower and Transmigration Ministry about the proposal for labor-intensive companies to be exempted from the new minimum wage. The deadline for a decision from the Manpower and Transmigration Ministry, according to Hidayat, was on Dec. 20.

This year saw a number of incidents where labor union members shut down several factories by force as they demanded a higher minimum wage in moves that thwarted the country’s business certainty.

Both Manpower and Transmigration Minister Muhaimin Iskandar and the ministry’s director general of industrial relations and social security affairs Irianto Simbolon were not available for comment on Monday.

In November, Muhaimin said that firms claimed to have been burdened by the new minimum wages would be able to file complaints with their respective provincial administrations.

The administrations, he said, would carry on auditing the firms’ financial performance as part of the requirement of suspending raising minimum wages for their workers.

The growth for the textile, leather and footwear industries in the third quarter this year was among the lowest compared to other sectors, with only a 3.64 percent growth — smaller than the same period last year, which saw the industries reach 8.77 percent growth.

Petrochemical and rubber industries experienced the largest growth in the third quarter of 2012 by reaching 8.91 percent, followed by cement and non-metal extractive industries (8.75 percent) and drinks and cigarette industries (8.22 percent).

In a job creation coordination meeting on Monday, Coordinating Economic Minister Hatta Rajasa said the recent trend showed investment in labor intensive sector had declined. “The ratio of investors interested in the cheap workforce and labor intensive sector has declined. More and more are interested in the manufacturing and secondary sectors. This is part of our industrial transformation,” Hatta said.

Hatta said to provide more jobs in 2013, the government planned to prepare regulations that could help small and medium scale enterprises grow.


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