The average increase in the 2022 minimum wage is only 1.09 percent and is generally below the inflation rate of each province. There should be a renegotiation so the buying power of workers does not get worse.
By
AGNES THEODORA/HELENA NABABAN
·5 minutes read
KOMPAS/RADITYA HELABUMI
Workers members of the Federation of Indonesian Metal Workers Union (FSPMI) held an action to voice the determination of the 2022 minimum wage in the Silang Monas area, Jakarta, Tuesday (9/11/2021).
JAKARTA, KOMPAS — Based on a new formula as stipulated in the Government Regulation No. 36/2021 on Wages, the increase in the minimum wage for 2022 is set at an average of 1.09 percent. The increase is generally below the inflation rate in each province. More negotiations are needed to determine a fair increase in the minimum wage so that workers’ buying power will not be further depressed in the midst of the pandemic.
However, the Manpower Ministry considers that the minimum wage in Indonesia has already been too high for businesspeople. The minimum wage in almost all regions has exceeded the median wage. This can be seen from the low compliance of business owners in fulfilling the minimum wage.
The simulation used by the Manpower Ministry in calculating the minimum wage indicates there are 13 provinces whose minimum wage increase is below 1 percent. Meanwhile in 14 provinces, the increase ranges between 1 percent and 3 percent. Only three provinces will see the minimum wage rise above 3 percent, namely North Maluku (5.17 percent), Yogyakarta (4.3 percent) and Central Sulawesi (3.78 percent).
In comparison, the increase in the minimum wage over the last five years has always exceeded 8 percent. Before that period, the increase was even higher, namely 19.1 percent in 2013 and 22.2 percent in 2014.
The president of the Confederation of Indonesian Trade Unions, Said Iqbal, said on Tuesday (11/16/2021) that the 2022 minimum wage decision would further depress the people’s purchasing power, which plays an important role in driving the national economy.
The increase in the minimum wage in the majority of provinces is even below the inflation rate. Central Java's inflation rate, for example, was recorded at 1.28 percent, while the minimum wage increase was only 0.78 percent. Meanwhile, the inflation rate in Central Kalimantan reached 2.17 percent, but the minimum wage only rose 0.67 percent. "Workers have to cover the shortfall in their wage on their own as the minimum wage increase is below the inflation rate," he said.
Moreover, workers' purchasing power has been eroded due to reduced working hours and wage cuts in the midst of the pandemic. Statistics Indonesia (BPS) indicated that the decline in labor wages occurred in almost all business sectors. In the last six months, the average real wage of the workers fell by 4.34 percent. Meanwhile, in the last year, the average real wage fell by 0.72 percent.
Negotiations
The executive director of the Institute for Development of Economics and Finance (Indef), Tauhid Ah-mad, said the 2022 minimum wage policy would further hit the purchasing power of workers, which would in turn reduce household spending and hamper economic growth. Such policies can also reduce incentives for workers, causing lower productivity.
He asked the government to reopen the space for negotiations with workers and the associations of the entrepreneurs. However, the newly implemented Job Creation Law eliminates negotiations and bargaining over the determination of the minimum wage as previously applied. Now, the minimum wage is only based on statistical data and standard formulas.
The inflation of basic foods is even higher than the increase in the workers’ wages. How do workers fulfill the needs of their families?
According to Tauhid, it would be unfair if the low increase in the minimum wage was evenly implemented in all business sectors and companies. He said that not all business sectors were hit by the pandemic because certain sectors were able survive and could even make profits. He also questioned why the low increase in the minimum wage, which was below the inflation rate, was approved.
“The inflation of basic foods is even higher than the increase in the workers’ wages. How do workers fulfill the needs of their families?” he said.
According to Manpower Minister Ida Fauziyah however, the minimum wage has been too high, burdening most employers as seen from the low compliance of businesspeople in implementing the minimum wage policy. The minimum wage increase is implemented across the board regardless of the individual performances of the workers.
Ida said that the new wage calculation formula was actually intended to restore the minimum wage as a safety net and to encourage an improvement in work performance or productivity. "If the increase in the minimum wage is too high, most entrepreneurs will be unable to fulfill it and this will bring a negative impact on its implementation in the field," she said.
Ida asked the governors to set the minimum wage according to the formula stipulated in Regulation No. 36/2021. Governors who do not follow the formula will be given sanctions in the form of a written warning, temporary or even permanent dismissal.
This is regulated in Law No. 23 of 2014 concerning Regional Government. “The provision for setting minimum wages is a national strategic program. The Home minister has sent a letter to the governors regarding the sanctions to be given to governors who do not comply with the wage policy," said Ida.
This article was translated by Hendarsyah Tarmizi.
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