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Ada Pertanyaan? Hubungi Kami Marcell Sihombing, Ady TD Achmad
Minister of Employment Hanif Dhakiri. Photo by: RES
The ongoing struggle to raise the minimum wage across Indonesia remains a major issue, as long-term economic growth generates a workforce looking to get its hands on a bigger slice of the pie. Currently, all eyes are intently focused upon the Draft Government Regulation on Wages (Draft Regulation), which is currently under deliberation.
Indeed, Indonesia’s Minister of Employment, M. Hanif Dakhiri, has revealed that the Draft Regulation is in the process of being finalized. The Draft Regulation itself will normalize a number of items, including the formula used to calculate hikes in the minimum wage. The Draft Regulation will also oblige employers to standardize their wage structures and scales.
“The deliberation of the Draft Regulation aims to offer certainty as regards the annual wage rise, as well as the actual sum involved,” asserted Minister Dakhiri in Jakarta last Thursday.
Minister Dakhiri further revealed that the government was planning to create a simple formula, which would be used to calculate any rise in the minimum wage and which, it is hoped, will prove easy to understand for all of the relevant stakeholders. The formula will be implemented in such a way as to keep the purchasing power of the workforce in line with inflation and economic growth.
Mr. Dakhiri has expressed his firm belief that, in the short-term, minimum-wage calculations that employ the new formula can help the country’s currently moribund economy. Moreover, in the long-term, a productive and healthy industrial-relations paradigm can be achieved, according to the minister.
Up until the present, the country’s minimum wage has been intended as a safety net. However, inequalities between married workers, workers who have been employed for over a year, and workers who have better educations or competencies have persisted in the calculations.
Minister Dakhiri asserts though that each company will now be obliged to standardize and implement a structured wage scale. Aside from guaranteeing a greater certainty as regards wages, a controlled wage scale will also, it is hoped, motivate workers to increase their productivity.
“The implementation of a structured wage scale by companies will create both internal and external equality. Internal equality means that wage discrimination and discrepancies, as they exist between co-workers, should be eradicated as the salaries of individual workers will be evaluated based on the structural level of their occupation,” Minister Dakhiri claimed.
The Draft Regulation will also regulate common Indonesian wage practices, including holiday allowances (Tunjangan Hari Raya – THR), service fees, and non-wage income. In addition, national and regional Wage Councils will play a strategic role in increasing competitiveness, as it relates to wages and businesses.
“It is the obligation of central and regional government to empower Regional Wage Councils in supporting and encouraging companies to standardize and implement structured wage scales for their employees,” asserted Minister Dakhiri.
Lawmaker Rieke Diah Pitaloka (Commission IX) has previously stated that the level of worker welfare in the country was still low, in view of the fact that most of the workforce only received an average salary of IDR 2.5 million per month. An amount such is this is an insufficient reflection of the economic needs of both single and married workers, according to Ms. Pitoloka, who has stated her opposition to the Draft Regulation which will, she believes, result in low and insufficient wages.
Ms. Pitaloka has also revealed that the current disparity between workers’ low wages and a decent level of subsistence expenditure works out, according to her calculations, at 13% of the average monthly wage for single workers, 43.5% for married workers, 89% for married workers with a single child, and 133% for married workers with two children.
Meanwhile, the average price breakdown of basic domestic and household necessities, based on cost-of-living index (KHL), is around IDR 2.8 million for single workers, IDR 3.6 million for married workers, IDR 4.8 million for married workers with a single child, and IDR 5.9 million for married workers with two children.
Ms. Pitaloka also believes that the 60 KHL items laid out by the government no longer match up with the economic realities of life in Indonesia. In her opinion, at least another 23 new items need to be added to the KHL list in order to realistically reflect the actual needs of single and married workers, such as drinking water, formula milk for children, education, social activities, communications, and housing.
Ms. Pitaloka has therefore suggested that any national-wage calculation formula should be based on these considerations. According to the lawmaker, the proper formula should be as follows: KHL (actual) x {PDRB (added value of goods and service production within a certain period in a particular area) + Inflation (the increase in prices in a given economic area) + Risk Index (the reduction in purchasing power caused by specific economic policies)}
Ms. Pitaloka believes that the above formula will result in a more realistic and civilized 2016 average hike in the minimum wage of around 33 percent across seven industrial areas, including Jakarta, Banten, Central Java, East Java, and the Riau Archipelago. This would breakdown as IDR 3.3 million for single workers, IDR 4.2 million for married workers, IDR 5.5 million for married workers with a single child, and IDR 6.9 million for married workers with two children.
Furthermore, Ms. Pitaloka also asserts that there is a pressing need to revise several regulations, such as Minister of Employment Regulation No. 13 of 2012 on Components and Achievements of the KHL, Minister of Employment Regulation No. 7 of 2013 on the Minimum Wage, and Minister of Employment Regulation No. 49 of 2004 on Wage-Scale Structures.
Ms. Pitaloka has further pointed out that several steps must be taken by the government in order to create a fair and proper system of wages. The first of these steps is the evaluation of wage components for single and married workers based on a proper and common assessment of their actual necessities. The second step would be to formulate a more comprehensive and valid survey methodology, which goes beyond traditional markets to also take account of people who work within communities and from residences.
Thirdly, a greater degree of both certainty and realism has to be achieved as regards the parameters and formula used in any minimum wage calculation. Fourthly, a proportionally structured wage-scale system should be introduced based on family necessities, length of employment, performance and level of occupation. And finally, a nationwide minimum wage should be determined for certain primary sectors.
Ms. Pitaloka has also demanded that the government strengthen the country’s industrial base, reduce prices (especially fuel prices) and urgently address fundamental necessities such as education, housing, transportation, and health. Finally, Pitoloka insists that the government must issue a Wage System and Salary Protection Law.
(sp)
Marcell Sihombing, Ady TD Achmad
Minister of Employment Hanif Dhakiri. Photo by: RES
The ongoing struggle to raise the minimum wage across Indonesia remains a major issue, as long-term economic growth generates a workforce looking to get its hands on a bigger slice of the pie. Currently, all eyes are intently focused upon the Draft Government Regulation on Wages (Draft Regulation), which is currently under deliberation.
Indeed, Indonesia’s Minister of Employment, M. Hanif Dakhiri, has revealed that the Draft Regulation is in the process of being finalized. The Draft Regulation itself will normalize a number of items, including the formula used to calculate hikes in the minimum wage. The Draft Regulation will also oblige employers to standardize their wage structures and scales.
“The deliberation of the Draft Regulation aims to offer certainty as regards the annual wage rise, as well as the actual sum involved,” asserted Minister Dakhiri in Jakarta last Thursday.
Minister Dakhiri further revealed that the government was planning to create a simple formula, which would be used to calculate any rise in the minimum wage and which, it is hoped, will prove easy to understand for all of the relevant stakeholders. The formula will be implemented in such a way as to keep the purchasing power of the workforce in line with inflation and economic growth.
Mr. Dakhiri has expressed his firm belief that, in the short-term, minimum-wage calculations that employ the new formula can help the country’s currently moribund economy. Moreover, in the long-term, a productive and healthy industrial-relations paradigm can be achieved, according to the minister.
Up until the present, the country’s minimum wage has been intended as a safety net. However, inequalities between married workers, workers who have been employed for over a year, and workers who have better educations or competencies have persisted in the calculations.
Minister Dakhiri asserts though that each company will now be obliged to standardize and implement a structured wage scale. Aside from guaranteeing a greater certainty as regards wages, a controlled wage scale will also, it is hoped, motivate workers to increase their productivity.
“The implementation of a structured wage scale by companies will create both internal and external equality. Internal equality means that wage discrimination and discrepancies, as they exist between co-workers, should be eradicated as the salaries of individual workers will be evaluated based on the structural level of their occupation,” Minister Dakhiri claimed.
The Draft Regulation will also regulate common Indonesian wage practices, including holiday allowances (Tunjangan Hari Raya – THR), service fees, and non-wage income. In addition, national and regional Wage Councils will play a strategic role in increasing competitiveness, as it relates to wages and businesses.
“It is the obligation of central and regional government to empower Regional Wage Councils in supporting and encouraging companies to standardize and implement structured wage scales for their employees,” asserted Minister Dakhiri.
Lawmaker Rieke Diah Pitaloka (Commission IX) has previously stated that the level of worker welfare in the country was still low, in view of the fact that most of the workforce only received an average salary of IDR 2.5 million per month. An amount such is this is an insufficient reflection of the economic needs of both single and married workers, according to Ms. Pitoloka, who has stated her opposition to the Draft Regulation which will, she believes, result in low and insufficient wages.
Ms. Pitaloka has also revealed that the current disparity between workers’ low wages and a decent level of subsistence expenditure works out, according to her calculations, at 13% of the average monthly wage for single workers, 43.5% for married workers, 89% for married workers with a single child, and 133% for married workers with two children.
Meanwhile, the average price breakdown of basic domestic and household necessities, based on cost-of-living index (KHL), is around IDR 2.8 million for single workers, IDR 3.6 million for married workers, IDR 4.8 million for married workers with a single child, and IDR 5.9 million for married workers with two children.
Ms. Pitaloka also believes that the 60 KHL items laid out by the government no longer match up with the economic realities of life in Indonesia. In her opinion, at least another 23 new items need to be added to the KHL list in order to realistically reflect the actual needs of single and married workers, such as drinking water, formula milk for children, education, social activities, communications, and housing.
Ms. Pitaloka has therefore suggested that any national-wage calculation formula should be based on these considerations. According to the lawmaker, the proper formula should be as follows: KHL (actual) x {PDRB (added value of goods and service production within a certain period in a particular area) + Inflation (the increase in prices in a given economic area) + Risk Index (the reduction in purchasing power caused by specific economic policies)}
Ms. Pitaloka believes that the above formula will result in a more realistic and civilized 2016 average hike in the minimum wage of around 33 percent across seven industrial areas, including Jakarta, Banten, Central Java, East Java, and the Riau Archipelago. This would breakdown as IDR 3.3 million for single workers, IDR 4.2 million for married workers, IDR 5.5 million for married workers with a single child, and IDR 6.9 million for married workers with two children.
Furthermore, Ms. Pitaloka also asserts that there is a pressing need to revise several regulations, such as Minister of Employment Regulation No. 13 of 2012 on Components and Achievements of the KHL, Minister of Employment Regulation No. 7 of 2013 on the Minimum Wage, and Minister of Employment Regulation No. 49 of 2004 on Wage-Scale Structures.
Ms. Pitaloka has further pointed out that several steps must be taken by the government in order to create a fair and proper system of wages. The first of these steps is the evaluation of wage components for single and married workers based on a proper and common assessment of their actual necessities. The second step would be to formulate a more comprehensive and valid survey methodology, which goes beyond traditional markets to also take account of people who work within communities and from residences.
Thirdly, a greater degree of both certainty and realism has to be achieved as regards the parameters and formula used in any minimum wage calculation. Fourthly, a proportionally structured wage-scale system should be introduced based on family necessities, length of employment, performance and level of occupation. And finally, a nationwide minimum wage should be determined for certain primary sectors.
Ms. Pitaloka has also demanded that the government strengthen the country’s industrial base, reduce prices (especially fuel prices) and urgently address fundamental necessities such as education, housing, transportation, and health. Finally, Pitoloka insists that the government must issue a Wage System and Salary Protection Law.
(sp)