Jakarta – The Ministry of Manpower announced yesterday it will increase minimum wages by an average of 15 percent from August 1. The move is intended to arrest the decline in real wages caused by soaring inflation, Director General of Industrial Relations and Labor Standards Mohammad Syaufii Samsuddin said.

Acknowledging that the hikes barely made up for the massive increases in prices since the last increase in April 1997, Syaufii said workers should nevertheless find them helpful in the present time of economic crisis.

The government traditionally increases minimum wages on April 1. This year, the increase was frozen by the government of then president Soeharto because of the economic crisis, a decision widely criticized by trade unions.

The nominal minimum monthly wage for a single worker in Greater Jakarta (Jakarta, Bogor, Tangerang and Bekasi) will increase to Rp 198,500 (US$14.10) from Rp 172,000. The minimum wage level in the industrially designated zone of Batam, including the islands under the Batam Development Authority, will be hiked to Rp 270,000 from Rp 235,000 a month. Batam has the highest minimum wage level on account of the high cost of living there. Yogyakarta still has the lowest minimum wage level, at Rp 122,500 a month.

Syaufii said that because of soaring inflation, the increases would still leave the average minimum wage across the country far lower than what was officially perceived as sufficient to meet the minimum physical requirements, or the subsistence level. The minimum physical requirements are calculated on the basis of the cost of a daily intake of 3,000 calories for a single worker. "The minimum wage will fall to 75.8 percent of the minimum physical requirement from 95.32 percent last year," he said.

Syaufii said the increase was the result of negotiations involving representatives of the government, employers and workers, with the final proposals coming from all the provincial governors. Syaufii said companies who felt the increase was too burdensome could apply for exemptions but they would have to allow their books to be audited by outsiders before being granted the relief.

"Companies who feel unable to raise their workers's wages in accordance with the new decree can apply for exemptions but they have to secure the agreement of their workers, " he said. He urged all companies that were not severely hit by the economic crisis to give the mandated wage increases.

Under the current manpower law, failure to pay the minimum wages is punishable by up to three months imprisonment and a fine of Rp 100,000. But in the new manpower law which will come into effect in October the maximum punishments have been raised to two years imprisonment and a fine of Rp 200 million.

Representatives of trade unions and employers gave the news a lukewarm welcome yesterday. Wilhelmus Bokha, deputy chairman of the Federation of the All Indonesian Workers Unions, said his organization had proposed an increase of at least 30 percent. "It's better than nothing. We could not force employers to meet our demand because of the economic crisis," he said.

Poerbadi Hardi Prajitno, secretary-general of the Association of Indonesian Employers (Apindo), said that since representatives of both employers and unions were consulted, both should give their support to the wage increases. "Apindo backs the government's decision reached through democratic deliberations involving representatives of workers, employers and the government," he said. Poerbadi regretted that the decision to increase the minimum wages by 15 percent across the board did not take into account regional differences.

The economic conditions and consumer prices in Yogyakarta were different from those in Batam, so that the increase in minimum wages should also have been different, he said, citing an example. "The increase in Batam should have been higher than in Yogyakarta. This was actually reflected in the original proposals submitted by provincial governors."

Poerbadi suggested that employers who could not award pay hikes because of the economic crisis should make their books more transparent to ensure workers could accept their reasoning and prevent them from going on strike.