WAGE INCREASE TRIGGERS INDUSTRY OUTCRIES

By Andi Abdussalam

Jakarta, Nov 29 (ANTARA) - Following increased demonstrations in Jakarta by workers who demanded wage increases and an end to the outsourcing of labor, the Jakarta governor decided on November 14, 2012 to raise the monthly regional minimum wage from Rp1.5 million to Rp2.2 million. However, Jakarta Governor Joko Widodo's move on wages is being viewed by the business community as harming labor-intensive industries since the wage increase far exceeded the basic living cost (KHL). Management is of the view that the ideal regional minimum wage (UMP) for Jakarta is about Rp1.9 million per month.          "KHL should ideally be set at Rp1.9 million, but the Jakarta governor has raised it to Rp2.2 million, or about 44 percent. This is just proof of the fact that the governor wants labor-intensive industries to slump and is encouraging them to relocate their factories from Jakarta," Ernovian G Ismy, secretary general of the Indonesian Textile Producers (API), said on Tuesday.  Further, some 60 companies will ask the Jakarta city administration to postpone the introduction of the 2013 minimum wage, saying that the Rp 2.2 million ($229) per month set by the government is too burdensome. a          Meanwhile, Sarman Simanjorang, deputy chairman of the Jakarta Chamber of Commerce and Industry (Kadin), noted that 80 companies in North Jakarta's Cilincing and Marunda special customs bonded estates (KBN) believe the new UMP was determined by politics, rather than the established method for evaluating wages.          Further, representatives of 60 garment companies from the KBNs expressed their opposition to the wage increase through the Jakarta branch of the Indonesian Employers Association (Apindo). "The companies each employ around 1,000 to 1,500 workers," Sarman told the Jakarta Globe on Sunday.          According to Ernovian, by raising the minimum wage to that level, the head of the regional governments did not take into account the interest of labor-intensive industries.          "Formulation of minimum wages in Indonesia involves many interests that affect workers. With the increase, an intensive-labor industry with 1,000 workers would spend Rp1 billion per month to pay its workers," according to Ernovian G Ismy.          Additionally, the increase in the regional minimum wage will cause industries to reduce their payrolls or move to other countries, he warned. "Compared with Vietnam, the basic living cost in Indonesia is relatively higher. But labor-intensive industries at home would not be able to develop with such a high minimum wage," he said.          The API warned, therefore, that some 100,000 workers could be laid off in the wake of the 44 percent minimum wage hike as companies look to cut costs. On Tuesday, the textile association held a press conference announcing possible layoffs.          "We've talked with foreign companies," added secretary general  Ernovian G. Ismy. "They said they would cut about 100,000 workers."     The increase in workers' minimum wages and the planned increase of the basic electricity tariff by 15 percent in 2013 will affect textile and textile product (TPT) exports.  "We predict that next year TPT exports will drop further due to the increase in the rates of minimum wage and electricity tariffs."    The country's textile exports next year are expected to reach only US$12.58 billion," Ernovian G Ismy, said.          Jakarta Governor Joko Widodo further said the Jakarta administration had done its best, yet it could not satisfy all parties with its decision to raise provincial minimum wages from Rp1.5 million per month to Rp2.2 million in 2013.          "It is difficult to satisfy all," Jokowi, as Joko Widodo is popularly called, said  on Wednesday.          Jokowi noted that officials had invited the Indonesian Employers' Association (Apindo) and workers' unions to discuss wages before he decided to set the regional minimum wage for Jakarta and its buffer towns of Tangerang and Bekasi.          "That morning, before we fixed the minimum wage, the City's Remuneration Board (DP DKI) had made a calculation about it," he said, explaining that the UMP 2013 has passed through considerations by the remuneration board. "All are passed through the remuneration board after we have met with employers and workers' unions. We passed all stages before we arrived at the decision," the governor said.          The decision was taken after workers staged demonstrations to demand wage increases in Jakarta and other regions in Indonesia.          According to the head of the Capital Investment Coordinating Board (BKPM), Chatib Basri, multinational companies have been able to pay their workers based on the current regulations. They are even prepared to pay workers above the minimum wage requirement, and they are ready to hold discussions with workers.          The problems arise when small and medium scale companies are not able to pay workers, as per the regulations. This forces workers to stage rallies. Some workers even demand that their colleagues who have been paid the correct amount join them in the protests, Chatib said.          In this case, the Indonesian Chamber of Commerce and Industry proposed that companies be given a chance to set their own minimum wage, based on their financial capabilities.          "The policy issued by the government should give companies room and opportunity to negotiate with their workers on setting the minimum wage based upon their financial capacity," chief of the chamber's industry, research and technology, Bambang Sujagat, said.          He added that the Jakarta administration has agreed to a monthly 2013 provincial minimum wage (UMP) of more than Rp2 million.          "If the policy is put into force, we predict many companies here will go bankrupt because they will not be able to pay their workers," he said.          Therefore, Industry Minister MS Hidayat said that employers opposed to the newly introduced provincial minimum wage (UMP) may seek postponement of the implementation of the regulation.          "So far, we have managed to avoid a confrontation between workers and employers on the issue of provincial minimum wage standards. The government's role is to mediate between the workers and employers in setting the minimum wage," he said.          Hidayat stated that workers have been staging rallies because of the lack of communications between laborers and business owners.          "They staged demonstrations because their relations with the employers were not harmonious. If the two sides can solve their problems internally, there would be no demonstrations," he explained.         "Industries that have objections to the new minimum wage standard can submit a request to the Ministry of Manpower and Transmigration, seeking postponement in the implementation of the new wage standard," Hidayat said.          In the meantime, Manpower and Transmigration Minister Muhaimin Iskandar said small and medium businesses that could not afford to pay the new minimum wage could ask for a deferment.          "The application, however, must be done according to the mechanism and by bringing forward a two-party agreement between companies and workers," he said.          The minister also said the government was grateful for the rise in the minimum wage in several big cities throughout the country. "We welcomed it as creating a momentum for improving the welfare of the workers," he said, adding that workers must also be grateful by improving their productivity so that their companies would be able to progress and develop themselves, while ultimately create more jobs." ***2*** (T.A014/INE/H-YH) (T.A014/A/KR-BSR/A/H-YH) 29-11-2012 19:50: