20 May 2019 (closed)
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Today's Headlines Minimum Wages Indonesia
Based on a circular that was issued by Indonesia's Manpower Ministry on 15 October 2018, the Indonesian government plans to raise provincial minimum wages by 8.03 percent in 2019. Provincial governors have up to 1 November 2018 to officially determine the local minimum wage for 2019.
Local governments in Indonesia have been announcing their new minimum wages in recent weeks. According to national law, municipal minimum wages have to be announced before 21 November 2017 (and will come into effect on 1 January 2018). Overall, the Indonesian government set a 8.71 percent increase in minimum wages for 2018. This way it allows the Indonesian workers to adjust to continuously rising living costs.
On Thursday (15/10), Indonesian Chief Economics Minister Darmin Nasution unveiled the fourth economic stimulus package with a main focus on boosting labor and employment in Indonesia. A key policy in the new package is the fixed formula that will be applied by the government to determine increases in labor wages across the 34 provinces of the Archipelago. The government said it will allow a wage increase, every year, based on the provincial inflation rate and economic growth pace.
Mirah Sumirat, Chairman of the Indonesian Association of Trade Unions (Asosiasi Serikat Pekerja, abbreviated ASPEK), stated that the tens of thousands of Indonesian workers who participate in the demonstration, organized in Central Jakarta on Tuesday (01/09), are not seeking anarchy or a coup but simply request that the government will make more efforts to protect the interests of the people (as stipulated by the 1945 Constitution; article 27, paragraph 2).
Indonesian Industry Minister Saleh Husin inaugurated the new USD $60 million shoe factory of Changshin Reksa Jaya in Garut (West Java) which will produce Nike branded shoes. The shoe factory has an annual production capacity of 15 million pairs and will provide employment to 5,500 people. Reportedly, all of the shoes produced at this plant will be exported to Europe, USA, and other parts of Asia. Minister Husin stated that the new factory is highly appreciated as it will boost the country’s non-oil & gas exports.
Foreign investors continue to be concerned about rapidly rising minimum wages in Indonesia. In Indonesian media it was reported that a total of sixteen investors, mostly from South Korea and Japan, cancelled their plans to establish footwear factories in Indonesia due to uncertainty over Indonesian minimum wage growth. In the last couple of years, minimum wages in Indonesia have grown sharply, possibly as a result of politicians looking for popular support ahead of regional elections.
A total of 29 Indonesian provinces have already confirmed their new provincial minimum wages for the year 2015. Overall (excluding the four remaining provinces), the average Indonesian minimum wage rises 12.77 percent (y/y) in 2015. Although this growth is considerable, it is smaller than Indonesia’s minimum wage growth in 2014 (19.10 percent y/y). The highest minimum wage growth occurred in the province of Bangka Belitung (28 percent), while the lowest wage increase was in Riau (0.58 percent).
Acting Jakarta Governor Basuki “Ahok” Tjahaja Purnama said that the minimum provincial wage for Jakarta (Upah Minimum Provinsi) will not exceed IDR 2.7 million (USD $221) in 2015. This new minimum wage would mean a 10.3 percentage point increase from Jakarta’s current minimum wage of IDR 2.44 million (USD $200). According to the acting Governor, the new minimum wage would be above the needed salary to have an acceptable standard of living in the capital city of Indonesia (which Ahok puts at IDR 2.53 million or USD $207).
