Alan Boulton, the International Labor Organization (ILO) representative in Jakarta, will conclude his eight-year assignment in Indonesia on Nov. 30, 2009.
Under his leadership, the ILO plays the role as partner to the country in labor development. Below is an excerpt from an interview with The Jakarta Post's Ridwan Max Sijabat on Saturday.
What is your assessment of Indonesia's labor development over the past eight years?
Indonesia has come a long way in improving labor and employment conditions. Some examples include finalizing the package of labor law reforms that have provided new dispute resolution systems, the progress in addressing the issue of child labor, providing more attention to the rights of migrant workers and putting more emphasis on improving labor policy.
However there are still many challenges facing Indonesia in these areas. There needs to be more jobs created to absorb people who leave school before they graduate, and even more jobs to address the chronic underemployment issue. This is a massive waste of the nation's human resources and a serious challenge while Indonesia seeks to make progress in poverty reduction measures. There also needs to be much more attention given to the rights of the nation's approximate 70 million workers, including female domestic workers who are entering the informal sector.
Do you see the economic livelihood of workers deteriorating and why?
Although Indonesia may have avoided the full impact of the current global financial crisis, it has still made an impact on export sectors with factory closures and layoffs. The crisis has also created flow-down effects in other parts of the economy, making it difficult for many companies to maintain the same level of activity and employment, which results in job losses in other sectors. Additionally, there seems to be a trend towards less secure employment in many developing economies. In Indonesia's case, the proportion of the workforce in the informal economy has increased over recent years.
The crisis has been responsible to some extent, but employment practices are changing and workers are now being offered less secure and temporary employment. Whatever the reason, this has become an emerging pattern in Indonesia.
What are the labor and social trends for the coming years?
The ILO recently released a report called "Labor and Social Trends in Indonesia 2009: Recovery and beyond through decent work". The report shows that the global financial crisis has impacted Indonesia most severely concerning falling exports, which have resulted in widespread job losses with subcontracted, casual and temporary workers in export industries being hardest hit. It also shows that restricted credit availability for small and medium enterprises (SMEs) is hampering economic rebound and labor absorption in these and other sectors of the economy. If the 1998-1999 Asian financial crisis is a guide, it may take several years for indicators such as unemployment, productivity, poverty and numbers of workers in vulnerable employment sectors to return to the pre-crisis state. Strategies to improve the situation need to address the quality of education and training to better equip Indonesian workers for the future and improve their skills so enterprises are competitive in a globalized economy.
Despite the law, a majority of workers either in the formal and informal sectors have been left unprotected. Your comment?
Like many developing countries, there is a problem in Indonesia with law enforcement. This means there are often protracted disputes just to ensure workers receive their entitlements under the law or collective agreements. This should be addressed through more effective labor inspection services and less costly and more transparent avenues to legal enforcement. The problem is different for those in informal employment. Informal workers often have no rights provided under the law or agreements. This may cause many problems in Indonesia as the population becomes better informed about fair treatment and less willing to tolerate abuse.
What should the government do to protect workers entering the informal sector?
The basic rights and protections for workers in the informal sector need to be assured. There is evidence of exploitation in some sectors that warrants action by governments and lawmakers. Domestic workers, for example, have no rights to wages, reasonable work hours and conditions or leave entitlements. The government can also provide greater security to workers in informal employment by working with local governments and worker representatives to address concerns such as vendors' rights, license fees and regulations.
Do you think the low wage system is a key labor problem in Indonesia?
For a variety of reasons Indonesia will need to find job opportunities for many low-skilled people. This means encouraging and supporting labor intensive industries, even though the wages and conditions in these industries may be relatively poor. Over time, the skills base of the Indonesian workforce needs to be improved with better education and training so that workers can find better paying and more fulfilling jobs.
How should the minimum wage system be revised?
The minimum wage system has undergone changes in recent years and has generally delivered wage increases in line with inflation. In some ways there are too many expectations about the system. Most minimum wage systems around the world are designed to protect the lowest paid in the workforce. However, in Indonesia the system does not apply to workers in the informal sector (about 70 percent of the workforce). It also tends to set a "going rate" for many workers in the formal sector. This is how wage-setting systems have developed in this country and it will be difficult to quickly move away from them.
Do you see a need for all confederations and labor unions to merge and, like Australia, form a political party or make a political engagement with existing parties to channel workers' aspirations?
The unions can have more influence on governments and bargaining power with employers if they find ways to work together effectively. Whether this involves a merger is an issue the unions and workers should decide. However, the trend in many countries is to have one national organization. As the unions in Indonesia develop (remember freedom of association is just 11-years-old in this country) they will begin to find ways to strengthen the representation of workers in policy-making forums. Currently, it may be difficult for the unions form their own political party. It will likely involve alliances with existing parties. But this is Indonesia and, hey, you can never be sure what will happen!