Indonesia Mulls Minimum Wage Boost Amid Protests: Southeast Asia

Indonesia Mulls Minimum Wage Boost Amid Protests
A laborer loads bales of clothing onto trucks at a textile market in Jakarta. Photographer: Ed Wray/Bloomberg

Indonesia may boost the average minimum wage by as much as 50 percent next year as labor groups demand higher pay amid economic growth that has exceeded 6 percent for eight straight quarters.

The government may raise the lowest required compensation to 2 million rupiah ($208) a month, Industry Minister Mohamad S. Hidayat said yesterday in Jakarta. That would be an average, he said, as living costs vary among provinces. The Confederation of Indonesian Labor Unions is seeking an increase to 2.5 million rupiah from 1.5 million rupiah, Andi Gani Nena Wea, the group’s president, said in an interview.

“When prices are going up and Indonesia’s economy is growing more than 6 percent, it’s not enough for laborers to finance their family, especially those with children,” he said.

Economic expansion is boosting the cost of living, with last month’s inflation reaching the highest in more than a year. Domestic investment rose 33 percent and foreign direct investment gained 22 percent in the third quarter, according to government data. Indonesia’s minimum wage is among the highest in the world relative to average salaries at 65 percent, according to the Organization of Economic Cooperation and Development’s September economic survey.

Protest March

About 4,500 people protested in three areas of Tangering Regent today, Aos Koswara, chairman of the Karya Utama workers federation, said by phone. They demand a monthly minimum wage of 2.8 million rupiah for the Tangerang area, he said. Calls to Boy Rafli Amar, a police spokesman, weren’t immediately answered.

The Jakarta administration is considering increasing the monthly minimum wage to almost 2 million rupiah after labor groups rallied last month to demand higher pay, Sofjan Wanandi, chairman of the employers association, Apindo, said last week. Some companies have indicated higher wages may prompt them to relocate their operations outside the country, he said, declining to name any.

“I haven’t heard that investors want to relocate,” Hidayat said yesterday, adding that companies such as Toyota Motor Corp. have committed to increasing investment in Indonesia. “They want the government to solve this problem soon, but they’re still committed.”

Accelerating Inflation

Indonesia’s inflation accelerated to a 13-month high in October with consumer prices climbing 4.61 percent from a year earlier, the statistics office said Nov. 1. In China, Shenzhen has the highest monthly minimum wage of 1,500 yuan ($241), while Beijing has the highest hourly minimum wage of 14 yuan, People’s Daily reported Oct. 26.

Representatives of Indonesian businesses, labor groups, academics and the government are in talks under a so-called wage council to decide on the increase, with Jakarta expected to make a decision Nov. 20, Dita Indah Sari, an expert staff member at the Manpower and Transmigration Ministry, said last week.

The latest survey in the capital shows a minimum living cost of 1.99 million rupiah, which will have to be adjusted for variables such as inflation and labor market conditions, Indah Sari said. The final increase may bring the minimum wage to 2.1 million rupiah, she said.

“Jakarta is a barometer for wages in nearby regions,” Koswara said by phone last week. “Whenever there’s an increase in labor wages companies always make threats such as shutting down but they never do it; it’s just an empty threat.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE