Governors Have to Announce Wages

KOMPAS/WAWAN H PRABOWO

An employee works at the car assembly line of PT Gaya Motor, Sunter, North Jakarta, Wednesday (18/07/2018).

JAKARTA, KOMPAS — Minimum wages will see an increase of 8.03 percent from last year. The increase was determined based on national inflation of 2.88 percent and national economic growth of 5.15 percent.

Governors are obliged to decide and announce the 2019 provincial minimum wage (UMP) on Nov. 1. The regency/city minimum wage (UMK) will be decided and announced no later than Nov. 21.

In the manpower minister\'s circular letter dated Oct. 15, the 2019 UMP and UMK will be enacted starting Jan. 1, 2019.

In 2018, minimum wages rose 8.71 percent from 2017. The 2017 minimum wages rose 8.25 percent from the 2016 minimum wages. The formula for increasing the minimum wages was the same, namely based on national inflation and economic growth.

Secretary-general of the Indonesian Workers Organization, Timboel Siregar, said the circular must be addressed objectively. At a time when economic conditions are not stable, while the rupiah exchange rate is weakening against the US dollar, production costs are skyrocketing and burdensome.

"In my opinion, an 8.03 percent increase is good enough because current economic conditions are not yet stable. This condition must be maintained. Do not let companies collapse because the burden is too heavy," he said in Jakarta, Tuesday (16/10/2018).

For export-oriented companies with incomes in the dollar, Timboel asked them to be transparent with their workers. Therefore, the wages of workers in such companies can be increased above the government standard.

Timboel acknowledged that labor productivity in Indonesia was still low, partly due to the low level of education of the workforce. He believed that it could be overcome gradually.

Indonesian Employers Association (Apindo) chairman Hariyadi B Sukamdani said the 2019 UMP increase did not reflect the ability of the most marginal business sector to pay labor costs. "The initial base wage increases in 2015-2016 were too high. So, an increase of 8.03 percent for entrepreneurs is actually not ideal," he said.

According to him, amid current conditions, minimum wage is no longer a social safety net payment, but has become an average wage.

Indonesian Furniture and Handicraft Industry Association secretary-general Abdul Sobur said the 8.03 percent increase was reasonable it had taken economic growth into account.

"The composition of the wage component in the production cost structure is around 30 percent. So, it can be imagined that labor-intensive industries are very sensitive to the extent of wages," he said.

Middle ground

Manpower Minister M. Hanif Dhakiri said the implementation of minimum wages -- in line with the provisions of Government Regulation No.78/2015 -- must be seen as middle ground to meet the needs of workers and employers.

The increase in minimum wages also gives certainty. The first certainty, said Hanif, was to workers. The second certainty is to entrepreneurs, while the third is certainty for job applicants.

The increase in annual minimum wages can be estimated in line with inflation and economic growth. Thus, this situation will facilitate ease of financial planning for entrepreneurs.

"State protection becomes comprehensive because it protects workers, employers and job applicants simultaneously," said Hanif. (FER/ CAS/ NAD/ MED)