Page 55 - E-KLIPING KETENAGAKERJAAN 17 NOVEMBER 2021

The government did not raise minimum wages last year to help businesses minimize expenses
amid the pandemic-induced economic slowdown.
The new minimum wage came at a time when Indonesia’s unemployment rate softened by 0.58
percentage points to 6.49 percent in August from a year earlier, BPS data show. This is equivalent
to some 670,000 workers getting jobs.

Despite its improving employment rate, Indonesia’s average actual wage was down by 0.72
percent year-on-year (yoy) to Rp 2.72 million in August, BPS data show. Bangka Belitung Islands
posted the fastest annual growth at 8.54 percent and Jakarta the deepest annual contraction at
4.64 percent.

Manpower Ministry data show that South Sumatra, North Sulawesi, South Sulawesi and West
Sulawesi are among the provinces that have not raised their minimum wages for next year.

The actual average wage in these four provinces is lower than their current minimum wages. In
South Sumatra, for example, the average wage in August was Rp 2.22 million, BPS data show,
lower by nearly 30 percent than the minimum wage.

Regions that leave their minimum wages unchanged were usually facing an economic contraction
or deflation, according to Adi Mahfudz, the head of organization, membership and regional
empowerment at Apindo.

“So if the current minimum wage is not in line with economic growth or inflation, where these
are negative [numbers], governors can set it the same as the last one received [by workers],”
Adi, who represents Apindo at the National Wage Council, told the Post in a phone interview on
Tuesday.

Mohammad Faisal, the executive director of Center of Reform on Economics (CORE) Indonesia,
said the small increase in the minimum wage might allow businesses to hire more people in
response to increasing demand.

But the purchasing power of the workers would fall since the increase in wages was lower than
inflation, according to Faisal, which meant the minimum wage actually declined in real terms.

“The amount of goods and services they can afford will decline,” Faisal told the Post in a phone
interview. “The impact is on purchasing power. If purchasing power falls, economic recovery
slows.”

54