The Indonesian Employers Association (Apindo) has defended a government circular instructing regions to leave their minimum wages unchanged in 2021, arguing that the policy is based on “data and facts” regarding the pandemic’s impact on business.
Apindo chairman Hariyadi Sukamdani said on Monday that almost all business sectors in the country had been impacted by the pandemic, which brought about an economic contraction in the second quarter of this year. Indonesia’s economy shrank by 5.32 percent year-on-year (yoy) in the third quarter, according to Statistics Indonesia (BPS) data.
“Our suggestion is based on facts, data and our own calculations. We suggest that the 2021 minimum wage should stay unchanged as the pandemic has caused businesses to struggle to pay their employees,” he said during an online press briefing.
He said the calculation was based on Government Regulation (PP) No. 78/2015 on wages, which included a formula to calculate the next year’s minimum wages that accounted for inflation and economic growth.
Manpower Minister Ida Fauziyah issued a circular on Oct. 26 instructing regional administrations to maintain the 2020 provincial minimum wage (UMP) for 2021.
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The decision was met with protests by labor unions demanding an increase in next year’s minimum wage. The unions argued that at least 11 business sectors had not been affected by the COVID-19 pandemic, including energy, electronics and pharmaceuticals.
Apindo also criticized the decisions of several regional administrations to increase their provincial minimum wage despite the Manpower Ministry circular.
“We deeply regret their decision as they are insensitive to what we [business players] are going through during this pandemic,” said Hariyadi.
Several regional administrations, such as Central Java, Jakarta, East Java and Yogyakarta, have announced that they will raise next year’s minimum wage.
Hariyadi also criticized Jakarta Governor Anies Baswedan’s decision to have businesses impacted by the pandemic to submit a request to waive the wage increase.
The requirement was too complicated, he said, and added bureaucratic hassle.
National Wage Council (Depenas) vice chairman Adi Mahfudz added that the minimum wage had been widely misunderstood in Indonesia as many assumed it would be used as a base for businesses to pay for their employees’ wages.
“The minimum wage is merely a social safety net for businesses to pay for single, inexperienced employees and is not applicable to experienced employees,” he said.
He also dismissed rumors about a deadlock between businesses and labor representatives regarding the minimum wage, saying that all parties that were present during the national dialogue on the 2021 minimum wage had agreed to leave the wage unchanged next year.
Indonesian Chamber of Commerce and Industry (Kadin) vice chairman on manpower and industrial relations Anton J. Supit said labor unions should focus on educating workers about negotiating pay with their employers to get wage increases.
“We should also focus on developing the labor force’s skills so that we can compete with other countries in the region,” he said.
