The Rise of Economic, The Fall of Labour Rights
At the end of 2010, the Gross Domestic Product (GDP) of Indonesia reached 6.1 percent, exceeding the government’s target of 5.8 percent. With this, the Indonesian government also took credit for successfully reducing the unemployment rate from 9.1 percent to 7.14 percent, and the poverty rate from 16.6 percent to 13.5 percent, out of the 237.6 million Indonesian population. Meanwhile, the Investment Coordinating Board (BPKM) said that up to 463,012 people had been employed during 2010.

Towards the end of 2010, the increases in minimum wages were calculated by the Wage Boards. Was the skyrocketing GDP then a blessing for workers and trade unions?

Wage Degradation
The minimum wage is determined by the governor, mayor, or regent upon the recommendation of the Wage Board, which provides advice and considerations to them in determining the minimum wage. For that, the Wage Board, as a tripartite advisory institution, conducts a survey based on 46 components of the basic needs of workers.

The minimum wage is determined annually, and applies to single workers with under one year of working experience. For workers with over a year working experience, wages are negotiated exclusively between labourers or unions, and employers.

In general, the minimum wage (UMP) set for 2011 had been increased by an average of 8.69 percent. But, only 8 provinces (out of a total 33 provinces) were able to increase the wage as high as or higher than the Proper Living Needs (KHL) rate. In most provinces, the minimum wages have not met the KHL.

The above illustrates how the wage gap is maintained. First, the gap between the minimum wage rate with the workers’ actual spending. Workers’ actual spending during 2011 skyrocketed due to rising prices of basic needs, as reflected in the inflation rate. Inflation occurs in food prices by 3.5 percent, with housing, water, and electricity by 1.01 percent. Overall, in December 2010, the national inflation rate reached 6.96 percent with the first quarter of 2011 estimated at 7 percent.

Table 1- Comparison of Union Demands

Demands1st uarter20104th Quarter 20101st Quarter 2011
Basic Rights : (minimum wage, annual leave, worker’s insurance, employment status, severance)159113102
Freedom of Unions241024
Government Policy777642

*  Demands of wages above government version’s of minimum wage

According to the Indonesia Workers Organization (OPSI), 45 percent of single workers’ wages are only just enough to hire a room or house and to pay for the transportation cost, while another 30 percent for daily food needs, all due to inflation. The rest of the wages are unable to meet the needs of education and health. In fact, the Centre for Social Studies Akatiga found that the new minimum wage can only cover 62.4 percent of workers’ actual spending, estimated at an average of 1.467 million IDR (Indonesian rupiah) per month (US$168, at the end of March 2011 rate of US$1= 8,713 IDR).

As the result of low wages, workers have to work longer with overtime or side jobs, reduce consumption and nutrient intake, and take on debt. LIPS also found that many employers impose the minimum wage as  maximum ones.

Second, wages that only meet a few percent of the KHL rate also get threatened with wages suspension. At the beginning of 2011, proposals of wage suspension continue to emerge, among them: 29 companies in East Java, West Java (60), Central Java (21), and Papua (2). Meanwhile in the district of Tangerang, Tangerang City, and South Tangerang City (all located in Banten Province), the Indonesian Entrepreneurs Association (Apindo) filed a lawsuit against the local government, trying to lower the determined minimum wage. In reality, the number of wage suspension proposals may be greater than estimated because of weak surveillance systems by the government.

Why do employers continue to bargain over paying the minimum wage rate? As reported in mass media during the first quarter of 2011, they claimed that business was not productive due to the hit of the financial crisis, the flood of illegal products, the domestic market takeover by products from China, high interest rates, and expensive raw materials.

Ironically, at the same time, the number of investment in Indonesia continues to rise. In 2010, the realization of investment jumped from 135.2 trillion IDR (US$15.5 billion) to 208.5 trillion IDR (US$23.9 billion). Foreign Direct Investment rose from 97.4 trillion IDR (US$11.1 billion) in 2009 to 148 trillion IDR (US$17.0 billion) in 2010. Domestic investment rose from 37.8 trillion IDR (US$4.34 billion) to 60.5 trillion IDR (US$6.94 billion). Meanwhile, the value of exports increased 42.34 percent in November 2010. Total imports of raw materials during January-November 2010 increased compared to 2009: imports of capital goods rose 35.20 percent. In particular, the manufacturing industry during 2010 is expected to reach a record high in the last five years.

The government’s unwillingness to raise wages to meet the KHL rate and its willingness to grant the suspension of the minimum wage, indicate the government paradigm that wages should have a comparative advantage to attract investment. In fact, based on BKPM data, in 2009, Indonesia’s wage rate is the lowest compared to Malaysia, China, Thailand, India, and Philippines. This hypothesis is strengthened by the plan to spur further investment. Government targets for domestic and foreign investment realization in 2011 amounted to 240 trillion IDR (US$27.5 billion), an increase of 15 percent compared to 2010, which had amounted to 208.5 trillion IDR (US$23.9 billion).

But during 2010, from total investment in Indonesia, only 16 percent of them was direct investment; the rest was hot money. Most of the real investment was focused on export industry sectors. Portfolio investment, as capital finance, just looks for capital accumulation opportunities and has no effect on employment.

The government’s strategies to overcome unemployment and poverty are not much different from the New Order era: it relies on foreign capital with export-oriented industries. The government continued to prepare a set of rules that benefit investors while reducing workers’ rights. It was seen in late December 2010, when government and employers tried to expand the recruitment of contract workers and reduce severance payments through the revision of labour laws.

Basic (Worker’s) Rights
In the first quarter of 2011,  demands for basic rights counted as much as 102 times, lower than the previous quarter. Demands for freedom to form unions counted as much as 24 times, an increase from the fourth quarter of 2010. Layoff rejections is 25 times higher than previous quarter, but still a decreased from first quarter of 2010.

Workers’ demands for basic rights indicate a very high rate of basic labour rights violations, such as rights of menstruation leave being denied, workers with no social security, workers with under minimum wage payroll, workers with contract status in violation of labour law, and workers being laid off without severance pay.

Basic rights violations indicate the government’s low responsibility to protect the basic rights of workers.

Repression of Union Freedom
During the first quarter of 2011, there were 33 cases of dismissals, layoffs, or threats of dismissal. Dismissal victims reached 22,180 people, a decrease from the fourth quarter of 2010, which reached 37 cases, a total sacrifice of 33,887 people’s jobs. But it was still an increase from the first quarter of 2010 with 14 cases of 2,379 victims. (See Table 2 below.)

Ministerial Decree No. SE-907/MEN/PHI-PPHI/X/2004 on the Prevention of Mass Layoffs stated that the layoffs are a last resort after a reduction of the workers’ wage and top level executive’s privileges. Apparently, the decree was ignored.

At PT Framas Plastic Technology Bekasi, West Java, an outsole shoe company for Adidas, out of eleven labour union officials, nine of them were fired and one resigned. The company uses demotion patterns against union activists who demand improved working conditions. The dismissals were used against union member workers as well as non-member workers. The company claimed it was for more efficiency. However, at the same time it continued to recruit temporary workers. The company even shamelessly advertised the vacancies in a national daily newspaper.

Table 2- Layoff Class Comparison

Quarter 1 2010Quarter IV 2010Quarter 1 2011
Number of CasesVictimsNumber of CasesVictimsNumber of CasesVictims

According to the Jakarta Legal Aid Institute (LBH Jakarta), for five years, the freedom of unions has been disturbed by changes of union officials, layoffs, sanctions due to involvement in union activities, as well as efforts to criminalize union officials and activists. There are strong suspicion that the layoffs, with its variety of patterns, along with a tendency to suppress trade unions, is the entrance to massive labour flexibility.

The state is more assured to continue the programmes of trade liberalization, labour liberalization, and privatization of state-owned enterprises, while the basic rights of workers continue to be ignored.

During 2010, several labour unions were trying to build unity and offer a way out from this dire situation. In Sukabumi, the unions conducted a wage survey – the unions’ version. Meanwhile in Jakarta the unions keep an eye on the wage survey conducted by the Wage Board. In Bekasi, West Java, the union members engaged in ‘patrolling activities’ when the Wage Board was conducting wage negotiations. As a result, wages in the three regions are relatively better. At the national level, several unions are cooperating with NGOs to conduct research on proper living wages and the harmful effects of contract workers’ practices.

In the midst of various obstacles, unions still continue to improve their organizations’ internal capacity and network expansion. However, the less principled and often underestimated problems keep disrupting such efforts, even weakening the labour movement. What we all must think is how to solve these problems.

Sources: Roundup by Syraif Arifin, LIPS, 21 April 2011, with information compiled from nine national mass media clippings and eleven local mass media, field observations and discussions with trade unions by LIPS. Also: Jurnal Sedane, Dinamika Perburuhan Semester II 2009, Vol. 8 No. 2, 2009; Learning Forum Dokumen, LIPS, 2010;