The Jakarta Post
President Susilo Bambang Yudhoyono, as part of the government's efforts to avert further massive layoffs amid the current economic slowdown, signed on Thursday a presidential instruction that set a new structure for labor-intensive minimum wages.
The move was revealed by Manpower and Transmigration Minister Muhaimin Iskandar after the signing. Muhaimin said that the new formula, as regulated in the instruction, could be used at the end of the year to determine next year's wage increase.
'As instructed by the President, the increase [of the labor-intensive minimum regional wage] must not exceed the current inflation rate plus 10 percent,' Muhaimin said.
'This is to prevent companies from suffering further losses that could result in more layoffs,' he said.
Muhaimin added that he was preparing a ministerial regulation to detail the presidential instruction.
According to the instruction, labor-intensive industries would have to pay a wage increase based on annual inflation rate plus 5 percent, while overall business sectors outside the category use a formula of inflation rate plus 10 percent at the highest.
The issuance of the presidential instruction follows hot on the heels of the unveiling of an economic stimulus package by the government last week to avert a further slowdown in the economy, which in the first half of this year only expanded by 5.92 percent, the lowest level in nearly three years.
The formula is much lower than that demanded by labor unions, which usually go above 20 percent. The Confederation of Indonesian Workers Union (KSPI), for example, expressed their intention to urge a 50 percent wage rise next year in line with what it claims as the government's campaign of halting the 'cheap labor regime'.
Muhaimin said that the government would engage the Central Statistics Agency (BPS) in carrying out surveys to evaluate decent living standards (KHL).
'Starting from this year, the BPS will involve in surveys of regional wage councils, thereby reducing difference of views between the related stakeholders,' he said, adding that the standards would include 60 items.
For the past several years, debates to determine annual minimum wages have always emerged as a contentious battle between labor unions, employer associations and local administrations, partly due to unclear definitions of the KHL.
Muhaimin further said that the new formula would allow firms to set their own version of the productivity level, which should come along with the annual wage increase.
In response to the issuance of the presidential instruction, Indonesian Employers' Association (Apindo) chairman Sofjan Wanandi welcomed the move, saying it might help to reduce uncertainties in the annual wage increase process. However, he questioned the implementation of the instruction.
'We worry whether the regional administrations, which have the final say on the labor wage increase, can accept this,' he said.
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