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Jakarta Post

Editorial: All lose out in labor violence

The disregard of the rule of law, which forced dozens of factories in Jakarta and its surrounding towns to cease operations, would be more detrimental to investor sentiment than the resultant wage hikes from the labor strikes and violence last week

The Jakarta Post
Thu, November 7, 2013

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Editorial: All lose out in labor violence

T

he disregard of the rule of law, which forced dozens of factories in Jakarta and its surrounding towns to cease operations, would be more detrimental to investor sentiment than the resultant wage hikes from the labor strikes and violence last week.

It is mind-boggling to see how the police who are mainly responsible for public order, have been so pathetic, not learning from the violence during the worker strikes and demonstrations late last year.

The government and employers had appealed to the police to prevent a repeat of the 2012 violence and incidents. But alas, groups of striking workers could still force their ways into factories to intimidate and harass workers to join them.

If we allow these annual bouts of turbulence and violence to reoccur every year everyone loses. And if the annual wage hikes are too steep many labor-intensive businesses will be forced to close. This means job losses, and most new investors would shun labor-intensive businesses, preferring instead capital-intensive ventures.

A labor movement that is too radical would scare away potential new investors to other countries. Certainly, the government cannot grow the economy without private investment and if the economy does not expand, no additional jobs will be created to absorb the additional 2.7 million new job seekers entering the labor market annually.

The government issued in September a regulatory framework to establish legal certainty in the annual review of provincial minimum wages by pegging the annual rise to inflation, economic growth and worker productivity.

Without such a strong regulatory framework, workers may demand wage hikes as they like without any reasonable grounds, as workers in Jakarta and its surrounding areas did with a 50 percent wage increase demand for next year.

But we should commend Jakarta Governor Joko '€œJokowi'€ Widodo for his brave, yet sensible, decision last Friday to raise the minimum wage by only 9 percent to Rp 2.4 million ($230). Twenty other provinces also have set their new minimum wages and the increases were all less than the 50 percent as demanded by several trade unions.

But if the differences of views between the government, employers and workers on the measurement of the basic cost of living are not resolved then the annual minimum wage review would continue to be vulnerable to labor violence and strikes.

The demand by trade unions in Jakarta that the number of goods and services used to measure the basic cost of what they consider decent living be increased from 60 items, currently used by the Central Agency of Statistics, to 84 items, seems outrageously too excessive in a country with a per capita income of less than US$3,000.

We should also remember that 70 percent of the 120 million work force are still engaged in the informal economy, the unemployment rate exceeds 8 percent and under-employment is estimated at more than 35 million.

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