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【Employment condition in Indonesia】 No. 124 “What will the minimum wage be this year?”



OS Selnajaya Masahiro Hagusa

Every year at this time, people become to pay attention to the minimum wage of the following year. There is a data that 68% of Indonesian workers receive the minimum wage, and the raise of the minimum wage forces companies to adjust and raise other level of employees’ salaries as well. Therefore, companies in fact hope to hold down the minimum wage as much as possible. On the other hand, the Labor Union has held demonstrations in each region by taking the chance of salary raise on the pretext of fulfillment of the need for decent living standard. As a result, the minimum wage in Indonesia has risen by 2 digits of percentage in recent years.

Practically, provincial minimum wages are supposed to be announced on November 1, but the government regulation 2015 No.78 was enforced under the signature of President of R.I., Djoko Widodo on October 23, last month. This regulation is a revision of the provision concerning wage protection that had been effective for more than 30 years since 1981. This provision stipulates wage composition, overtime wage, special paid leave, etc., but the point which draws people’s attention most is the part concerning minimum wage.

The minimum wage until today had been decided by the governor or mayor based on the proposal of the wage council formed by representatives of employers, workers, and government, but this time’s revision changed the system to calculate the minimum wage based on nation’s price inflation rate and economic growth rate instead of wage determination based on the need for decent living standard. The formula is shown below.

Previous year’s minimum wage +{(Previous year’s price inflation rate+Previous year’s economic growth rate)× Previous year’s minimum wage}

Companies appreciate this new regulation because it is easier to predict the increase of minimum wage in the future, but the Labor Union objects to the regulation saying that it is inappropriate because of the centralized system and economic growth differs in each region. Prefectural and municipal minimum wage are scheduled to be announced at the end of November, but it is still undeniable that the new regulation can be withdrawn or partially revised as the difference of economic growth rate in each region is inevitable to consider. We need to keep a close watch on this issue.

(Posted on Jiji Press Indonesia)

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