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Jakarta Post

Manpower minister backs down on wage cap regulation

Bagus BT Saragih
Jakarta   ●   Thu, September 19, 2013

A minister has retracted his claim that President Susilo Bambang Yudhoyono had signed a presidential instruction that will cap the increase on minimum wages for labor intensive industries, saying that the process was halted due to '€œsome resistance'€.

Manpower and Transmigration Minister, Muhaimin Iskandar, admitted on Wednesday the instruction had not been signed yet, saying the government needed time '€œto raise mutual understanding'€ that labor-intensive corporations needed '€œspecial treatment'€ when it comes to the minimum wage structure.

'€œThe new minimum wage regulation is needed to support the government'€™s effort to avert further layoffs amid the current economic slowdown. However, all concerned parties, be it the businesspeople and labor unions, must first accept the government'€™s reason [behind the new regulation],'€ Muhaimin, who is also the chairman of the National Awakening Party, said.

On Aug. 29, Muhaimin said the President signed a presidential instruction and that it could be used at the end of the year to determine next year'€™s wage increase.

Under the new formula, the increase of labor-intensive minimum regional wages must not exceed the current inflation rate plus 5 percent, while overall business sectors outside the category would have to pay a wage increase based on an annual inflation rate plus 10 percent at the highest.

'€œLabor-intensive industries hire a massive number of workers while their capital and resources are limited,'€ Muhaimin said. '€œAt the end of the day, I am optimistic that all concerned parties will understand why such industries need to be treated differently than other kinds of big industries,'€ Muhaimin said.

Despite the delay, the new formula will not change, the minister said. Muhaimin acknowledged the delay could pose negativity to labor-intensive corporation which had already been encouraged after his '€œfalse'€ announcement.

'€œIt would be better for us to be patient, rather than rush, as it may result in misunderstanding,'€ he said.

The proposed wage increase regulation has received wide opposition from the country'€™s labor unions, which usually demanded more than a 20 percent increase. The Confederation of Indonesian Workers Union (KSPI), for example, expressed their intention to urge a 50 percent wage rise next year. Muhaimin acknowledged the workers'€™ protests had contributed to the government'€™s decision not to sign the new regulation immediately. Indonesian Employers'€™ Association (Apindo) chairman Sofjan Wanandi said that he had not heard about the cancellation of the Presidential instruction, which would set a new structure in determining the increase in the minimum wages for labor-intensive industries.

'€œThree ministers already signed it. The Presidential instruction for implementation of the new minimum wage formula is currently being prepared by the State Secretariat,'€ Sofjan said in a text message, referring to the latest information he obtained from Industry Minister, MS Hidayat.

Sofjan earlier said that a new wage increase mechanism would help reduce uncertainties in the annual wage increase process. But, he said he was worried that the regional administration, which has the final say, would not accept the formula.