Indonesia Girds for Millions Protesting for More Wages: Economy

By Herdaru Purnomo

Photographer: Dimas Ardian/Bloomberg

Indonesia’s President Joko Widodo, known as Jokowi, faces an opposition-led parliament... Read More

Indonesia’s capital is girding for a potential turnout of millions of protesters asking for a bigger increase in minimum wages in the world’s fourth most-populous nation, a test of President Joko Widodo’s pro-business image.
The two-day national protest, starting Dec. 10, will involve four trade union groups, Muhammad Rusdi, a secretary general at the Indonesian Trade Union Confederation, or KSPI, said by phone in Jakarta yesterday. Workers have seven demands including renegotiating last month’s minimum-wage deal and scrapping outsourcing in state-owned companies, he said.
Jokowi, as the president who took office in October is known, has
pursued a two-pronged economic strategy of addressing income inequality and boosting Indonesia’s appeal for investment. Faster wage gains would erode a competitive advantage against China as manufacturers look for alternate production locations, and contribute to inflation as Jokowi boosts fuel costs.

Minimum Wages

“Limiting how much wage costs go up remains an important toolkit to keep Indonesia relatively competitive across the region,” said Wellian Wiranto, a Singapore-based economist at Oversea-Chinese Banking Corp. “Labor productivity remains low.”

Photographer: Dimas Ardian/Bloomberg

Morning commuters wait to board a TransJakarta bus at a station in the business... Read More

The planned strike and protest follows smaller demonstrations against the move to raise gasoline prices about 30 percent last month, with the president’s ability to weather the opposition hinging on convincing the public that billions of dollars in savings will be spent to improve their lives. Minimum wages in Jakarta are set to rise 11 percent next year, less than unions wanted.

‘Can’t Accept’

“We can’t accept the decision on minimum provincial wages,” said Rusdi. “It can’t cover the fuel price rise.”
Jakarta Governor Basuki Tjahaja Purnama last month approved a 2015 minimum wage of 2.7 million rupiah ($219) a month, while unions were seeking at least 3 million rupiah. Such levels would spur job cuts as companies can’t afford the labor cost, the country’s main employer group has said.
A labor representative on the Jakarta Wage Council, Dedi Hartono, said at least five million workers will join rallies, including outside the offices of the governor and president. The unions want to add phone credit, refrigerators and perfume to essential items in a basket of goods used to calculate worker living costs.
Widodo took office after campaign pledges to scale back fuel subsidies and reduce inequality by investing the proceeds in rural infrastructure. While the fuel move has been welcomed by investors, efforts to raise prices over the years have often been met by public outrage, forcing plans to be diluted or canceled.
“The government will likely stand pat on the issues,” said Wiranto. “There should not be any backtracking on the fuel price rise as well. It will be too detrimental to the whole ‘Here comes Jokowi and he means business’ reform hopes.”