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Jakarta minimum wage hike is 'too small', economist says

Tempo - November 22, 2023

Novali Panji Nugroho, Jakarta – Acting Governor of Jakarta Heru Budi Hartono officially announced that Jakarta's 2024 minimum wage is now Rp5,067,381, or a 3.38 percent increase from this year's minimum wage.

The increase in the minimum wage is based on the regulated formula set in Government Regulation (PP) No. 51 of 2023, an implementing regulation of the Job Creation Law.

An economist from the Center for Economic and Law Studies (Celios) Bima Yudhistira believes the minimum wage hike in Jakarta is still too small.

"The ideal [minimum wage increase] is over ten percent considering the significant rate of inflation," he said when called on Wednesday, Nov. 22. As of October 2023, the food product inflation in Jakarta reached 4.92 percent and is expected to continue rising until next year.

According to Bima, if the minimum wage rises less than 5 percent, workers will not be able to face this level of inflation.

Bima also believed that the key to a resilient economy is the workers' purchasing power since the government is still relying on it to tide the economic growth over.

"With increased wages, the economic rotation will also rise. More people will have purchasing power which will affect Jakarta's local revenue," he said. Meanwhile, a 3.38 percent increase will negatively impact local economic growth.

Earlier, the Jakarta Manpower, Transmigration, and Energy Office along with the Wages Council convened to discuss the minimum wage in Jakarta last week on Friday.

The meeting resulted in three recommendations to be proposed to Heru Budi. These recommendations include:

1. The members of the Jakarta Wages Council from the entrepreneur organizations element proposed a 2024 UMP of Rp5,043,068 derived from the calculations of alfa 0.20 from local economic growth.

2. The members of the Jakarta Wages Council from the worker's union element proposed a 15 percent rise in UMP, amounting to Rp5,637,068. It calculated the inflation (1.89 percent), the economic growth (4.90 percent), and the particular index (8.15 percent).

3. The members of the Jakarta Wages Council from the government element proposed Rp5,067,381 for 2024 UMP, calculated with alfa 0.30 from local economic growth.

Source: https://en.tempo.co/read/1799996/jakarta-minimum-wage-hike-is-too-small-economist-say