Indonesian Workers Rally in Jakarta in Last Push for Wage Boost

More than 500 workers rallied outside the Jakarta governor’s office today in a last push for higher wages before a deadline for the Indonesian capital to set minimum salaries for next year.

Jakarta Governor Joko Widodo may decide to raise the city’s minimum wage to 2.44 million rupiah ($215) a month from 2.2 million rupiah this year, said Dita Indah Sari, an official at the nation’s manpower ministry. That’s less than the 3.7 million rupiah a month demanded by workers, said Aos Koswara, chairman of the Karya Utama workers federation. Labor unions will continue to press for an increase in Jakarta because the capital is the “barometer” for wages nationwide, Koswara said.

“The decision will still be made today,” Indah Sari said by phone today. “We don’t want to be held hostage by workers.”

Unions have stepped up industrial action in the past two years to seek a greater share of the wealth generated by Southeast Asia’s biggest economy. Companies are concerned that higher wages will boost costs at a time when consumer purchasing power is being eroded by accelerating inflation.

Indonesia’s economy expanded 5.81 percent in the second quarter, the first time since 2010 that the economy has failed to grow by at least 6 percent. Bank Indonesia has raised its benchmark interest rate by 1.5 percentage points since early June to 7.25 percent to curb price pressures and a weakening rupiah.

PT Astra International (ASII), Indonesia’s largest automotive retailer, said yesterday that higher labor costs were partly to blame for a 6.3 percent drop in third-quarter net income.

Weaker Consumption

The rise in workers’ purchasing power from higher wages has not matched increases in prices for transport, fuel and power, said Henri Honoris, President Director of PT Modern PutraIndonesia, the franchise holder of 7-Eleven in Indonesia.

“All of these have put a cap on consumer spending,” Honoris said in an interview on Oct. 31. “We have to delay our expansion. This year we will not open new shops as aggressively.”

About two million workers went on strike yesterday to push for higher wages, according to the Confederation of Indonesian Workers Union. A plan to continue the walkout today was scrapped as workers plot their next move after hearing reports that pay increases in Jakarta will fall short of their demands, Koswara said.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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