The Meaning of Jakarta’s New Minimum Wage

From China Daily:

With a middle class said to number around 35 million out of a total population of more than 260 million, the vast army of workers see the new-found prosperity having little impact on their lives.

 

In Jakarta and other major industrial centers, strikes have become an everyday occurrence as workers demand better pay and conditions.

 

On Jan 1, new minimum wages, determined by region, were introduced across Indonesia. The minimum wage in Jakarta goes up by 44 percent from 1.53 million rupiah to 2.2 million rupiah ($158-$228) a month. This was part of an election pledge last year by Jakarta’s new governor Joko ‘Jokowi’ Widodo in a bid to quell growing industrial unrest in the capital where some of the world’s leading sportswear companies have their factories.

 

Economist Chris Manning says the announcement of the rise in minimum wage was greeted as a “victory” by the union movement, especially among the city’s 3 million employees who earn this or less.

 

“Needless to say, most businesses have opposed the magnitude of the increases,” says Manning, an adjunct associate professor at the Arndt-Corden Department of Economics at the Crawford School of Public Policy, Australian National University.

 

By implementing the 44 percent increase, Jakarta governor Joko Widodo has taken a controversial step not only for his city but also, indirectly, for the country.

 

Around the country, employers are battling with demands for increased wages while trying to remain competitive in a fiercely competitive global marketplace.

 

According to a report in the Jakarta Globe, 47 companies have been exempted by the government from paying employees the new minimum wage.

Manpower Minister Muhaimin Iskandar said 941 firms had applied for the exemption.

 

The minimum wage for 2013 has been the center of a heated national debate after substantial increases were agreed upon in key areas such as Jakarta and West Java, where there are high concentrations of labor-intensive industries.

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