Damiana Ningsih & Agustiyanti – Business leaders are protesting a proposal from labor unions that have called for a 50 percent increase in monthly wages for 2014, saying the demand is irrational, especially as companies are shouldering the rise in costs from the subsidized fuel price increase and higher interest rates.
Erwin Aksa, the Indonesian Chamber of Commerce and Industry's (Kadin) deputy chairman for small and medium enterprises, said the proposal for an increase in labor wages should be made in such a way that would not disturb companies while accommodating the needs and interests of employees.
"If too much of a burden is placed on operational costs expansion will be hurt. Demanding a 50 percent increase, I think, it is too high," he said.
"There is a formula already, using inflation as the base and the cost of living in a province," said Erwin who is also the chief executive at Bosowa Corporindo, a Makassar-based conglomerate with diversified businesses, including automotive, cement, energy and property.
Ade Sudrajad, the chairman of the Indonesia Textile Association (API), echoed Erwin's concern, saying the labor unions' recent proposal would have a devastating impact on the nation's industries especially the textile product sector.
The textile industry is a particular concern among business owners as it is typically a labor-intensive sector that requires a large workforce, he said.
Ade emphasized, however, that it is "not only the labor-intensive industries, but also other industries that do not have enough capital to cover the increasing wages who could face closure."
The chairman called for labor unions to propose a moderate wage increase but was not specific on the criteria.
Said Iqbal, president of the Confederation of Indonesian Workers Unions (KSPI), and Nining Elitos, the chairwoman of the Confederation of Congress of Indonesia Unions Alliance (KASBI), confirmed that both of their unions plan to ask the government for a 50 percent rise in the minimum monthly salary for 2014.
Responding to the business leaders' arguments the pair defended the wage demand, citing the recent rise in the subsidized fuel price.
The increase in the subsidized fuel price is expected to accelerate inflation and in turn hurt the purchasing power of many Indonesian laborers whose salaries are lower than the average worker in regional markets such as in Malaysia, Thailand and other Southeast Asian nations, Nining said.
Bank Indonesia has forecast inflation to reach 7.5 percent following last month's subsidized fuel price increase. Inflation quickened in June to 5.90 percent from 5.47 percent in May.
Said was persistent with the unions' demand. "Renting house costs, transportation costs, the price of food and beverages have increased sharply. Laborers do not receive the government's temporary direct cash assistance program (BLSM)," Said told Investor Daily. "That makes the laborers vulnerable to falling below the poverty line."
Nining agreed that the rise in wages must correlate with rising productivity, but she called employers to also consider the vital role of laborers play as the backbone to their companies' operations.
In Indonesia, the minimum wage is determined by negotiations in a tripartite forum, between three major stakeholders – the labor unions, employers and local governments.
Despite the involvement of the three, the business community in Indonesia often protests the local government's tendency to favor the side of the workers in an attempt to gain popularity and win votes.
The Jakarta administration succumbed to union pressure this year by adjusting the minimum wage to Rp 2.2 million ($220) per month for 2013, a 44 percent increase. Not until 2012 has the minimum wage been higher than the basic cost of living, at 102 percent.
Other authorities have followed suit across Indonesia in raising monthly minimum labor rates. In West Java, home to big manufacturers and factories, minimum wages increased by an average 25 percent in its 26 districts and cities. Inflation, though, was significantly lower than the minimum wage rise. West Java Statistics Bureau show inflation in seven of West Java's cities averaged 3.86 percent last year.