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Jakarta Post

Firms lay off thousands, blame new minimum wage

  • Sita W. Dewi and Fikri Zaki Muhammadi

    The Jakarta Post

Jakarta   /   Tue, August 20, 2013   /  09:38 am

Up to 60 companies on Pulogadung Industrial Estate (KBN) in East Jakarta dismissed at least 1,200 workers after failing to cope with Jakarta'€™s minimum wage.

The minimum monthly wage was raised this year to Rp 2.2 million (US$209) from Rp 1.5 million by Governor Joko '€œJokowi'€ Widodo.

'€œThe new minimum wage was too high for labor-intensive industries, which only have small margins. Sales also decreased and as a result many companies couldn'€™t pay their workers,'€ Bambang Adam, head of industrial relations at the Indonesian Employers Association (Apindo) East Jakarta chapter, said in a telephone interview on Monday.

Bambang said the companies hands were forced as they had failed to comply with the new regulation, adding that the 60 companies had requested the postponement of the implementation of the new minimum wage, '€œbut some of their requests were rejected'€.

Separately, the Indonesian Chamber of Commerce and Industry (Kadin) Jakarta office reported that four textile companies from South Korea operating at the National Business Belt (KBN) in Cakung, North Jakarta, had ceased to do business this month as a result of the provincial minimum wage (UMP) increase.

Kadin Jakarta office vice chairman Sarman Simanjorang said on Monday that the closure had caused thousands of workers to loose their jobs. Some companies chose to move their factories to Vietnam, which has a lower wage.

'€œMore than 10,000 workers lost their jobs because of closures and layoffs,'€ he said.

Besides Vietnam, some factories were moved to other cities including Semarang and Surakarta, Central Java; Yogyakarta; and Sukabumi and Subang, West Java.

Sarman said in the future, the city administration must consider the company'€™s ability to pay the agreed wage, current economic growth and the rate of inflation, before deciding on minimum wage increase. When asked about the issue, Jokowi declined to comment on the policy.

'€œIf the companies could not comply with the regulation, what can I do? That is the companies'€™ business and this is may be one of the consequences,'€ he said. He emphasized that his decision to increase the minimum wage was aimed at improving the workers'€™ welfare.

Jokowi said he was not worried that some companies were planning on relocating their factories.

'€œJakarta is a service and trade city in the first place,'€ he said.

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