By The Jakarta Post
Asia News Ne
The disregarding of the rule of law that saw dozens of factories in Jakarta and surrounding towns cease operations will be more damaging to investor sentiment than the wage hikes that resulted from the labour strikes and violence last week.
It was mind-boggling to see the police spectacularly fail to maintain public order despite being armed with the experience from the violent worker strikes here late last year.
The government and employers had appealed to the police to prevent a repeat of the 2012 violence and incidents. But alas, groups of striking workers were still able to force their way into factories to intimidate and harass workers to join them.
If we allow these annual bouts of turbulence and violence to recur every year, everyone loses. And if the annual wage hikes that result are too steep, many labour-intensive businesses will be forced to close. This would mean job losses, and most new investors shunning labour-intensive businesses, preferring capital-intensive ventures instead.
A labour movement that is too radical will scare potential new investors away to other countries. Certainly, Indonesia’s government cannot grow the economy without private investment, and if the economy does not expand, no additional jobs will be created to absorb the additional 2.7 million new job seekers entering the labour market annually.
In September, the government issued a regulatory framework for the provincial minimum wage, pegging the annual rise to inflation, economic growth and worker productivity.
Without such a strong regulatory framework, workers could demand wage hikes whenever they like and without reasonable grounds, as workers in Jakarta and its surrounding areas did last week with their demand for a 50-per-cent wage increase for next year.
But we should commend Jakarta Governor Joko “Jokowi” Widodo for his brave, yet sensible, decision last Friday to raise the minimum monthly wage by only 9 per cent to 2.4 million rupiah (Bt6,600).
Twenty other provinces also have set their new minimum wages and the increase in each case was less than the 50 per cent demanded by several trade unions.
But if the differences between the government, employers and workers on the measurement of the basic cost of living are not resolved, then the annual minimum wage review will continue to be vulnerable to labour violence and strikes.
The demand by trade unions in Jakarta that the number of goods and services used to measure the basic cost of living be increased from 60 to 84 items seems outrageously too excessive in a country with an average per capita income of less than US$3,000 (Bt93,900).
We should also remember that 70 per cent of our 120-million-strong workforce is still engaged in the informal economy, while the unemployment rate exceeds 8 per cent and an estimated 35 million people are under-employed.