Linda Yulisman, Jakarta – Local business associations have complained about recent demands by workers for wage increases above the proper-living needs (KHL) standard set by regional labor councils, saying that it would bring negative impacts on the domestic industry.
Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said on Monday that the demanded wage increases would also increase the burden on the domestic industry, especially the labor-intensive sectors such as textiles and garments, footwear and electronics.
"Textiles and garments, footwear and electronic manufacturers have complained about this matter. If they must pay significant raises, it will be very hard for them to survive," he told reporters during a press conference at his office.
Sofjan also said that the demand would also severely affect small and medium-sized businesses in the informal sector that absorbed 70 percent of the country's labor force of 120 million people and would hamper investment in the sector.
"If the wages are raised, it will be difficult for our small and medium enterprises [SMEs] in the informal sector to shift to the formal one," he said, adding that around 90 percent of the country's SMEs could not even pay the regional minimal wage for their workers.
Sofjan said that around 80 percent of the provinces nationwide already met the provincial minimum wage standards.
The 2003 Labor Law protects workers in the formal sector by ensuring that they receive regional minimum wages and various allowances among other benefits.
Indonesian Textile Association (API) chairman Ade Sudrajat told The Jakarta Post that the wage increase would significantly affect textile firms, as wages were one of the biggest components of the production cost, at between 15 and 20 percent.
"Amid liberalized trade, we are now in tight competition with rivals in other countries. Rising production costs will reduce our competitiveness," he said in a phone interview.
Higher wage demands and worker demonstrations have surged recently as local administrations are slated to determine the provincial minimum wages based on the KHL, which accommodates 48 components of living including the prices of basic needs and house rents, and are adjusted according to the annual inflation rate.
However, the exact figure of wages – which should have been set in October – has not been established yet as a number of worker unions at the local level disagree with standards proposed by local labor councils, which represent related stakeholders including firms, labor unions, local governments and academics.
Hariyadi Sukamdani, the head of Apindo's wages and social security division, said that negotiations for next year's wages were still under way as there had been disagreement over some items in the KHL such as house rent rates and the cost of household items.
He cited the case of the Bekasi municipality and regency administrations where workers demanded a minimum wage of Rp 1.35 million next year.
This year, the regional minimum wage for Bekasi, which complied with the West Java provincial wage standards, was Rp 732,000, which was a 9 percent rise from 2010.
Haryadi said that the spike of minimum wage would cause a higher inflation rate next year.
Despite the stellar macro-economic conditions, the nation still struggles with poverty and unemployment, and overcoming these problems is a priority for related stakeholders before raising standard of wages for workers, Haryadi said.