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Labor market reforms catch-22 for policymakers
Many consider the Labor Law to be one of the factors dragging down the country’s competitiveness, as high severance pay requirements and high wage requirements have discouraged labor-intensive, smaller enterprises from investing in the country.
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Workers staged protests on Friday, Aug. 16, nearby the House of Representatives complex against the government's plan to revise the 2003 Labor Law. (Antara/Galih Pradipta)
A
s President Joko “Jokowi” Widodo presented his state of the nation address on the great future that lies ahead for the country’s human resources in front of lawmakers and policymakers at the House of Representatives last Friday, the events outside the complex were not so encouraging.
A few minutes’ walk from where President Jokowi, dressed in royal Sasak attire, spoke of the government’s commitment to human capital development — a key priority of the proposed 2020 state budget — hundreds of workers took to the streets in protest of a planned revision of Indonesia’s 2003 Labor Law.
A document showing key points of the proposed revision went viral on messenger and social media platforms recently, including a reduction in severance pay, an extension of working hours, more flexible outsourcing and a reinforcement of employers’ rights to lay-off staff for serious faults.
The Jakarta Post’s analysis found that the document is not a draft of the revision but is instead a 2018 analysis and evaluation by the Law and Human Rights Ministry’s National Law Development Agency (BPHN).
“The government is still waiting for all inputs from stakeholders such as labor unions, businesspeople and the public. So, as of today, we are still studying [labor conditions] while waiting for input from stakeholders,” Manpower Minister Hanif Dhakiri told the Post when asked about progress regarding the Labor Law revision.
Many consider the Labor Law to be one of the factors dragging down the country’s competitiveness, as high severance pay requirements and high wage requirements have discouraged labor-intensive, smaller enterprises from investing in the country.
President Jokowi has been quoted in many interviews calling for labor reform to boost Indonesia’s competitiveness as he looks to boost investment and domestic consumption to address sluggish economic growth, which at 5.05 percent is at its lowest level in two years.
