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Businesses warn job creation Perppu may shrink labor market
Both laborers and businesses have expressed their concerns over government regulation in lieu of law (Perppu) on job creation, with the issue of minimum wage remaining contested.
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Putting their feet down: Members of a factory union stand behind a banner protesting the recently passed omnibus bill on job creation during a strike on Oct. 7,.2020 at the sports footwear factory of PT Panarub Industry in Tangerang, Banten. The banner calls on workers to answer to the “challenge”: “Don’t let them silence you. Reject and challenge the omnibus law on job creation.” JP/Dhoni Setiawan (JP/Dhoni Setiawan)
Both laborers and businesses have expressed their concerns over government regulation in lieu of law (Perppu) on job creation, with the issues of minimum wage and job security remaining contested.
In a press briefing held on Tuesday, Indonesian Employers Association (Apindo) chairperson Hariyadi Sukamdani said that businesses were surprised by the sudden announcement of this regulation, as he said that his association was not involved in its discussion.
As a result, Apindo needs more time to “comprehensively” assess more than one thousand pages of the new regulation, which spans to 10 clusters including the ones on manpower issues.
Although stating that Apindo understood the government decision, he said that the new minimum-wage formula in the Perppu, which includes both inflation and GDP growth rate, would shrink the job market.
He said that businesses would prefer to take experienced workers with only slightly higher pay margins, thus risking an increased unemployment rate for the inexperienced workers.
Investment would instead flow drastically to capital-intensive industries, he said, but not to labor-intensive industries, due to the higher minimum wage compared to the rest of Southeast Asia, in which Indonesian minimum wage was estimated to be the highest in 2025.
In regards to layoff risk, he said that it was not specifically due to the Perppu and it was “relative” to the situation within each sector, as factors varied from slow recovery from the COVID-19 pandemic to a hit in export demand.
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