Indonesia: minimum wage battle set to escalate


A storm is brewing over a month-long minimum wage dispute and a fuel price hike in Indonesia, where an increasingly assertive trade union movement is gearing up for its third national strike since 2012 at the end of November.

Last week, the new governor of Jakarta – the hot-tempered, former quartz magnate Basuki ’Ahok’ Tjahaja Purnama – finally signed off on a new minimum wage for an estimated two million formal workers in the Indonesian capital.

Sticking to the same bid with which he stubbornly entered the negotiations, Ahok finally authorised a 10 per cent minimum wage hike for Jakarta’s workers, bringing the constituency’s official minimum wage for 2015 up to just 2.7 million rupiah (US$222) per month.

The decision was immediately and unanimously condemned by Indonesia’s trade union leaders, who last month put forward a compelling case for a wage hike of between 22.9 and 30 per cent during official talks with the governor at City Hall.

Indignant workers joined labour demonstrations in Jakarta and throughout Indonesia last Thursday.

In the West Java city of Bandung workers voiced their rejection of a similarly disappointing minimum wage hike, and in parts of East Java workers protested against long delays to the minimum wage decision in their province.

Union leaders also called on Ahok to reconsider the validity of the government’s official cost of living survey, the Decent Living Index, whose woefully inaccurate findings were later (mis)used as a basis for this year’s wage talks.

“The Decent Living Index for Jakarta was extremely low [this year], just like it was in 2013,” said Eduard Marpaung, deputy president of the Confederation of Indonesian Prosperity Trade Unions (KSBSI).

“[Our request] for an additional 24 items to be added to the Decent Living Index is still being negotiated at the Ministry of Manpower and Transmigration. . . [We] must keep battling for a wage hike that can at least cover the basic costs of living,”

Last week, workers were dealt a double blow when the national government raised subsidised fuel prices by more than 30 per cent, thus further diminishing the purchasing power of Indonesia’s poorest earners.

Indonesia’s trade unions are now urging Ahok to return to the negotiating table and reset Jakarta’s minimum wage to no less than three million rupiah (US$240) per month.

Failure to do so, unions warn, will result in large-scale industrial action.

“We will join forces with other workers’ confederations to mobilise a national strike at the end of November,” Prihanani Boenandi, vice president of the Federation of Indonesian Metal Workers Union (FSMPI), told Equal Times.

“[We are expecting] around two million workers to participate in 150 towns and cities, similar to national strikes one and two [during 2012 and 2013 respectively].”

However, Ahok remains defiant, repeatedly accusing Jakarta’s workers of making “egotistical” demands for wage packets that would likely “bankrupt” their employers.


Failed negotiations

With a population of almost 250 million and a GDP of US$868 billion, Indonesia is southeast Asia’s biggest economy and the only member of the G20 in the region. It is a nation of abundant natural resource wealth but also crippling and widening inequality.

At present, wages for Indonesia’s poorest formal workers lag far behind their counterparts in other rapidly industrialising, ‘tiger-cubs’ economies in the region – namely Thailand, Malaysia and the Philippines.

There is, however, an important channel through which Indonesia’s labour movement is struggling to resolve these disparities.

At the end of October every year, provincial and municipal leaders throughout Indonesia are obliged to set a new minimum wage in their provinces.

This system, which has been in place since the Manpower Act of 2003, is one of the most progressive hallmarks of Indonesia’s push towards decentralisation following the downfall of President Suharto’s 31-year dictatorship in 1998.

However, as can be seen from this year’s rather anomalous result in Jakarta, the benefits of decentralisation vary immensely from one region to another, and can quite easily be overturned by an intractable local leader who refuses to mediate fairly between different interest groups.

On looking at this year’s revised minimum wage in other Indonesian cities, where the cost of living is lower, then it becomes abundantly clear that Jakarta’s workers have been seriously short-changed by Governor Ahok.

In Bekasi City, for example – the heartland of Indonesia’s car industry - the city’s minimum wage was raised to an admirable 2.95 million rupiah (US$243) per month – almost US$21 higher than the equivalent figure in Jakarta.

Slightly further afield, in the tiny coastal city of Cilegon, the minimum wage was set at 2.76 million rupiah (US$227), surpassing Jakarta’s by a comfortable US$5.

“It’s just not logical for Jakarta’s minimum wage to be lower than in neighbouring regions. The cost [of living] in Jakarta is higher,” said Muhamad Rusdi, secretary general of the Confederation of Indonesia Workers’ Union (KSPI).


Cheap labour policy

So how did Ahok get it so spectacularly wrong? Was the offer of 2.7 million rupiah just a miscalculation made in good faith? Or has the governor deliberately, and deceitfully, attempted to rekindle Indonesia’s outmoded ’cheap labour policy’ of the Suharto era?

The fact that Ahok said in a recent newspaper interview that workers in Jakarta who are unhappy with the minimum wage should move elsewhere, suggests the latter.

He has also expressed his concerns that by raising the minimum wage, factories would be forced to close because investors would look elsewhere for cheaper production costs.

“[Investors in Indonesia now] threaten to move to Vietnam, Cambodia or other [poorer] countries,” said Marpaung in an interview with Equal Times.

“This has been the case since there was a significant increase in the minimum wage in China.

“Five years ago [they would] threaten to move to China. The ASEAN [Association of South-East Asian Nations] Free Trade Agreement of 2015 has also given a strong incentive for companies to relocate. . . so we really need to have a single, unified movement for solidarity between the nations of ASEAN.”

Last month KSPI president Said Iqbal voiced his suspicion that Ahok took a behind-the-scenes “order” from Jakarta’s powerful employers’ associations, allowing them to delimit this year’s minimum wage increase prior to the opening of talks at City Hall.

Given Ahok’s unbreakable reticence throughout the negotiations, this would seem to be a reasonable suspicion. FSPMI vice president Boenandi elaborated on the theory in an interview with Equal Times:

“[Our] suspicion about a possible “order” from the employers’ [associations] stems from the way that Ahok consistently reiterated that any increase to Jakarta’s minimum wage must not exceed 10 per cent, even when the negotiations were still ongoing.

“Ahok is the one who has been arrogant and “egotistical”. It’s just not ethical to state a decision on the minimum wage whilst the negotiations are still open.”

Marpaung similarly believes that Ahok has been a crooked broker throughout this year’s wage talks.

“In my opinion,” he told Equal Times, “Ahok has clearly sided [with Jakarta’s employers]. He’s very different to [the former governor turned President] Jokowi, who tended to mediate cautiously.

“Ahok has absolutely no empathy for the plight of workers in Jakarta; [some of them] have to work overtime or get a second job just to cover the basic cost of living.”


Rotten tomatoes

At Thursday’s demo in Jakarta with around 500 cadres from the KSPI, FSPMI and the Indonesian Labour Unions Association (ASPEK), rotten tomatoes were thrown at the governor’s office in protest against Ahok’s miserly 10 per cent wage hike.

Equal Times later spoke to Safriadi, a 28 year-old member of the KSPI, who gave his thoughts on the wage dispute thus far.

“Last week the mayor of Bekasi set the minimum wage in his city at 2.95 million rupiah, and then this week Ahok set the Jakarta minimum wage at 2.7 million. This has never happened before in the history of my country! How can it be that wages in Jakarta are going to be lower than in the surrounding areas? The cost of living [in Jakarta] is more expensive than anywhere else in Indonesia.

“All we are asking for is a realistic wage, and it has to be higher than Bekasi’s. We will settle for three million rupiah (US$247) at the very least.”

After lunch, Safriadi and the rest of the demonstrators marched onwards toward the State Palace, where they called on President Joko ’Jokowi’ Widodo to personally intervene in the wage dispute – which would be a first.

But the workers surely need to produce something extraordinary if they wish to sway the iron will of Governor Ahok.

Failing a direct hit from a fresh volley of rotten tomatoes, or an unlikely presidential intervention, perhaps a well-subscribed national strike might finally persuade Ahok to see reason…