Jakarta – Workers earning the minimum wage in Jakarta may have to wait to find out how much they will take home in 2015 after the city's government admitted on Thursday that no deal had been reached in advance of the Nov. 1 deadline.
"There's a potential delay on the decision because no agreement has been reached," Priyono, the head of the Jakarta Manpower and Transmigration Agency, told the city government's official news portal beritajakarta.com.
Minimum wages are set at the provincial level in Indonesia in annual negotiations between individual governors and the country's unions. Monthly wages in 2014 were set at Rp 2.4 million ($198) for Jakarta, up 10 percent on the previous year.
This year's wage increase was, however, modest in comparison to the minimum wage hike in 2013, which was bumped up 45 percent by Jakarta's erstwhile governor, Joko Widodo, in response to the increase in the price of subsidized fuel.
Wages in Indonesia are low by regional standards and have seen little of the runaway growth in China in recent years. Unions are naturally keen to emphasize that Rp 2.4 million is a pittance on which to live in a capital city where housing, fuel and food are becoming more expensive.
Business groups such as the Indonesian Employers Association (Apindo) have, by contrast, consistently trumpeted the opportunity costs to Indonesian businesses' competitive advantage wrought by raising wages too quickly. National wage growth is outpacing the country's gains in productivity, they say.
Employers' groups have also repeatedly asserted that businesses will move out of Jakarta if wages rise too high too fast. They have not produced any evidence so far of companies packing up and setting up elsewhere. The unions respond by saying that repeated warnings of unnamed firms upping sticks to Cambodia or Vietnam is an easy straw man to deny the country's workers from receiving a better deal.
There are structural problems in Indonesia's labor market that extend beyond pay. The World Bank and others point to the worryingly high number of Indonesians working in the informal sector, and say that hefty double-digit pay awards introduced too quickly will cause employers to continue to take people on informal contracts. This will, they say, slow the transfer of poorly protected workers from low-production casual work into permanent work where training, productivity and access to social security is far greater.
In Jakarta's case the main bone of contention appears to be a measure known as the Decent Living Index (KHL), an approximation of the minimum amount needed to afford a "decent" standard of living. The government had set this at Rp 2.3 million a month.
Jakarta's Acting Governor Basuki Tjahaja Purnama is understood still to be negotiating the fine print of this measure with the unions. The unions feel the government has significantly underestimated the per liter price of accessible water, for example, as well as other specific items that contribute to the gross figure.
Sarman Simanjorang, a member of the Jakarta Wage Council, said the announcement could be made after Nov. 1.
Workers in Jakarta recently staged a typically animated rally to call for the minimum wage for 2015 to be set at Rp 3 million, a 25 percent pay rise.
At a May 1 Labor Day rally in Jakarta's Bung Karno stadium, the leader of one of Indonesia's largest unions came out in support of Prabowo Subianto in exchange for a pledge by the losing – as it turned out – presidential candidate that he would support a 30 percent wage rise for 2015.
Basuki has said that he will increase wages, but the rise will not be as high as the unions have demanded.