A Labor Day Full of Anxiety

KOMPAS/KRISTI UTAMI

A tea factory worker is packing tea,  on Saturday (12/10/2019) in one of the tea factories in Slawi, Tegal Regency, Central Java. Slawi is claimed to be one of the centers of the largest fragrance tea industry in Indonesia.

It never crossed the minds of workers that there would be a time when Labor Day cannot be celebrated because of a global pandemic.

This annual celebration of workers that has been going on for hundreds of years will be watched with great anxiety at home, staring at television broadcasts reporting the worsening economic condition. In their rented houses, workers are beginning to experience problems with their landlords over late rent, loan payments, and the pressures of saving money.

From its headquarters in Geneva, Switzerland, the International Labor Organization (ILO) has called on countries around the world to take immediate and responsible action to minimize the social and economic impacts of the pandemic – which they are calling “the worst global crisis since World War II” – with innovative and fast solutions. An ILO source said that one of the global effects of the Covid-19 crisis in the next three months is that around 195 million people will lose their jobs. As many as 125 million jobs will be lost in the Asia-Pacific, 22 million in Africa, and 29 million in the Americas.

Seven sectors will be the most severely affected, namely garments and textiles, restaurants, transportation, manufacturing, hospitality, construction, and goods and services.

In Indonesia, the Manpower Ministry reported that 1,304,777 formal workers had been dismissed up to 20 April 2020, excluding layoffs. The Center of Reform for Economics (Core) Indonesia projects that open unemployment in the second quarter of 2020 could increase by 4.25 million people on the conservative end to 6.68 million people as the median, and 9.35 million in the worst-case scenario. Seven sectors will be the most severely affected, namely garments and textiles, restaurants, transportation, manufacturing, hospitality, construction, and goods and services.

Meanwhile, data at the Workers Social Security Agency (BP Jamsostek) to 20 April revealed that 3,454 companies had requested payment deferrals for Jamsostek premiums. The government, as represented by the Industry Ministry, is formulating the rules for the payment deferral mechanism in coordination with BP Jamsostek.

Also read: Expansion of Social Protection to Lower Middle Class

Mitigation policy

The International Trade Unions Confederation (ITUC) published in March the results of its international survey on 59 countries regarding government policies on workers’ protection.

The ITUC used five parameters to measure the governments’ policies for workers during the crisis: paid sick leave (for workers with COVID-19 or in self-isolation), wage support (liquidity support for companies

to help them pay a part of the worker\'s wages), income support (monetary assistance for laid-off workers over three months), loan relief (deferring payments for housing loans and other bills), and free health care (free medical coverage for laid-off workers).

The survey has found that only 12 countries have good scores: Argentina, Austria, Canada, Denmark, France, Germany, Ireland, New Zealand, Norway, Singapore, Sweden, and the United Kingdom.

Meanwhile, the International Monetary Fund (IMF) published praise on 28 March 2020 for the 12 countries providing the largest fiscal support to Covid-19 prevention and control measures by percentage of gross domestic product (GDP): Singapore 10.9 percent, the US 10.5 percent, Australia 9.7 percent, Canada 6 percent, Germany 4.5 percent, Saudi Arabia 2.7 percent, France 2 percent, Italy 1.4 percent, China 1.2 percent, South Korea 0.8 percent, Spain 0.7 percent, and Malaysia 0.4 percent.

KOMPAS/RIZA FATHONI

Banners on the rejection of the discussion on the Cipta Karya Bill were installed in the factory area in Ciracas, East Jakarta, Saturday (25/4/2020). The workers welcomed the decision taken by President Joko Widodo to postpone the deliberation of the Omnibus Work Cipta Karya Bill (RUU). The government\'s decision is in line with the House of Representatives (DPR).

Indonesia would rank seventh on the IMF list because it has allocated 2.55 percent of GDP to Covid-19 management, but the country is not included on the list because regulation in lieu of law (Perppu) No. 1/2020 was issued after the IMF published its report.

Returning to the question of the stimulus package, which is in doubt as regards its effectiveness in reducing layoffs, so far no one has been able to ascertain exactly when the outbreak might subside. President Jokowi even stated that the tourism sector might recover early next year. Increased subsidies, additional relaxation, and other facilities must continue to be sought and provided.

Government subsidies that are available only up to six months must be added if Indonesia faces the worst-case scenario.

Government subsidies that are available only up to six months must be added if Indonesia faces the worst-case scenario. The epidemic is predicted to peak in July, but this does not mean that recovery will follow the next month. From an economic perspective, the current restrictions – social distancing, the large-scale social restrictions (PPSB), the ban on public transportation, temporarily business closures, mass layoffs, and work from home – will hit supply (aggregate supply) and demand (aggregate demand) for the long term. That is why many project that the economic crisis will last beyond the Covid-19 pandemic.

Even after Covid-19 is eliminated from Indonesia, the country must wait for global economic recovery before its economy returns to normal, because the Indonesian economy has been badly hit and is heavily dependent on international markets.

KOMPAS/RADITYA HELABUMI

A number of freelance land diggers receive food distribution from residents in the Kemang area, South Jakarta, when a large-scale social restriction (PSBB) in Jakarta has entered its 11th day, on Monday (20/4/2020). Covid-19 pandemic which hit the economic sector has the potential to increase the number of poor people.

Will to work together

The government’s current economic solution must be welcomed with a positive response. Certainly it will have a strong and speedy impact if all parties are willing to work together. The discipline shown by the peoples of China, South Korea, Japan, and Vietnam in reducing the transmission of Covid-19 could reflect that problems are more easily overcome with cooperation and a high sense of nationalism. Politicking, excessive suspicion, and damaging the government’s image with hoaxes only worsens the people\'s lives.

This includes many workers who are still demanding that all their rights be met in the same way as they were before the crisis, even while their companies are on the brink of bankruptcy. As a matter of fact, there are still other options that can be used before arriving at a decision to impose mass layoffs. For example, postponing severance pay, temporarily cutting wages, restricting facilities and work shifts, reducing working hours or workdays, early retirement, furloughing workers with partial wages, and other options.

Government employees and state-owned enterprises (SOEs) have agreed to eliminate the holiday bonus (THR).

Government employees and state-owned enterprises (SOEs) have agreed to eliminate the holiday bonus (THR). There have also been agreements between workers and employers to cut wages up to 50 percent instead of being layoffs. Initiatives within an organization will be far more effective than bringing cases to court.

In terms of practicality, the government needs to think about adopting the bailout funds Singapore, Argentina and Austria are providing to support liquidity so companies can pay workers\' wages and avoid layoffs. Indeed, this stimulus will be very costly and a big fiscal burden. However, Indonesia can selectively provide liquidity funds to certain labor-intensive companies so that the majority of our workers can continue to work, consumption can be maintained, and the economy does not collapse. As for the repayment mechanism for bailouts, this can be a long-term loan scheme.

Rekson Silaban, Analyst, Labor Institute Indonesia