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Reluctance as govt pledges 6.5% wage hike next year
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Calling for change: Workers take part in a rally in Jakarta on Oct. 24 demanding higher wages and the repeal of certain provisions of the Job Creation Law. (AFP/Juni Kriswanto)
T
he government’s announcement last week that it will increase the minimum wage by 6.5 percent next year has been met with quiet acquiescence, with some labor groups still mulling plans to call off nationwide strikes and employers concerned with the impending impact on overhead costs and competitiveness.
President Prabowo Subianto told a press conference on Friday that the decision was taken in a bid to improve workers' purchasing power by also taking into consideration the competitiveness of the business sector.
“The Manpower Minister initially proposed a 6 percent increase in the minimum wage. However, after discussions and meetings with labor leaders, we decided to raise the national average minimum wage by 6.5 percent,” he said.
Prabowo said that the minimum wage was an important security net for workers and that his administration would continue to work toward improving labor welfare, adding that the details of the wage policy’s implementation would be regulated in a ministerial regulation.
Indonesia has some of the most progressive labor laws in the region. But recent government debate over the formula of the wage hike has left both laborers and employers anxious, particularly after the government gave mixed messages regarding the plan to raise the value-added tax (VAT) to 12 percent from 11 percent next year.
Calling off strikes
Confederation of Indonesian Trade Unions (KSPI) chairman Said Iqbal said on Saturday that although the minimum wage hike was lower than those demanded by the union, he appreciated Prabowo for taking a middle ground between labor welfare and industry interests. Said Iqbal was one of the labor leaders who met Prabowo on Friday.
