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Ministry drafts new formula for wage hike
The Industry Ministry will propose a new formula to determine the amount of the annual minimum wage increase, to settle a continuing dispute between employers and labor unions on the issue
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he Industry Ministry will propose a new formula to determine the amount of the annual minimum wage increase, to settle a continuing dispute between employers and labor unions on the issue.
The proposal, to be discussed with related ministries, is expected to boost certainty and create a better business climate.
Industry Minister Saleh Husin said on Tuesday the formula would be based on yearly inflation, plus a percentage value that would be decided later. This formula would be effective for five years and the final amount would depend on the level of inflation.
'With such a formula, business players can arrange financing plans regularly and this will give a better level of certainty for their business,' he told reporters at his office.
Saleh ensured that such a fixed wage increase format would create a 'win-win' solution for employers and workers by accommodating the interests of both parties.
The formula had been proposed by former industry minister MS Hidayat as a way out of recurring disputes over the minimum wage.
Coordinating Economic Minister Sofyan Djalil recently said wage policy reform would facilitate the government's effort to attract investors who are leaving China and heading to Asian countries with lower labor costs, such as Thailand.
Each year, the regional minimum wage issue has become a contentious debate among labor unions, employers' associations and local administrations, as there is no clear definition of 'decent living standards' in 2003 Labor Law.
Labor unrest is common during annual negotiations over wage increases, coupled with large strikes in some labor-intensive industries.
This year is no exception, as thousands of workers in recent weeks have held demonstrations in a number of places, including Greater Jakarta and West Java, demanding that their aspirations be heard.
- Formula will be based on yearly inflation, plus a percentage to be decided
- The formula expected to give certainty to business players
The Jakarta administration was among the first to settle this dispute following deadlock in talks between labor unions and employers last year, aiming to raise the provincial minimum wage by 12.5 percent to Rp 2.7 million (US$221) next year.
Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said his group had also proposed to the government a format for 'yearly inflation plus several percent', which should apply for 10 years.
Apindo aimed to offer the formula to some local administrations and once they agreed, the business group would facilitate entry of investment in the regions, particularly the labor-intensive manufacturing industry, Sofjan added.
'We plan to do the first pilot project in Central Java where the government provides all the necessary facilities from infrastructure to housing for workers, which enables them to work comfortably,' Sofjan said.
The strong business lobby has aspired to help spur growth in the manufacturing industry and create much-needed jobs in the country, which based on its estimate will reach a total of 3 million jobs each year.
The pilot project can be extended to other regions, such as the southern part of Bandung, West Java, and some parts of East Java, where people are still living in poverty and are in dire need of jobs, according to Sofjan.
