Page 10 - e-KLIPING KETENAGAKERJAAN 5 NOVEMBER 2020

Continuing with the mass demonstrations would not only heighten the risk of COVID-19 infection
and street violence, but also undermine productive activities and scare off new potential investors
in labor-intensive industries.

The intermittent bouts of labor unrest would also further hamper the economy that is already
trapped in a deep recession. If trade unions continue to behave and act in a radical manner,
potential investors will shun Indonesia.

For the estimated 90 million workers, or 70 percent of the national workforce, still laboring in
the informal sector, this added uncertainty would also kill their chances of finding jobs in the
formal economy. Workers in the informal economy are often paid twice as low as the legal
minimum wage and are not protected under the labor laws.

It would be grossly irresponsible for union leaders to incite further unrest or demonstrations,
considering the glutted labor market and the fact that almost 80 percent of job seekers have
only completed secondary school and do not have marketable skills.
Labor leaders should instead fight for stronger enforcement of all prevailing labor laws and
regulations, because labor is actually one of the most regulated and protected sectors in the
country.

The regulatory context for employment is provided by the 2003 Manpower Law. Most recently,
the new 2020 Job Creation Law revises provisions on such labor issues such as minimum wage,
social security, dismissals, severance pay, contract and outsource workers.

Indonesia also has specific laws on trade unions (Law No. 21/2000), industrial disputes and
settlements (Law No. 2/2004) and social security (Law No. 40/2004).

The effectiveness of labor inspection to support the protection of workers’ rights has been limited
due to resource constraints, whereas employee bargaining power is quite weak.

Stronger labor inspection is needed to increase employer compliance with the regulated
standards on workplace norms, freedom of association, minimum wage, social security, and
occupational health and safety. The procedures at the Industrial Relations Court, which settles
labor disputes, also need improving in terms of credibility.

Likewise, it is rather futile for union leaders to protest the minimum wage freeze for 2021, as
the economy is projected to contract by 1 to 2 percent, while inflation forecast is below 2 percent
this year. The 2015 minimum wage regulation has stipulated that provincial wages are adjusted
to annual economic growth and inflation.

The 2015 minimum wage regulation ensures that formal workers get fair wage hikes according
to the productivity rate and, at the same time, protects them against inflation.
The fixed formula provides certainty for employers in calculating production costs and thereby
helps stimulate investment, despite the complex economic conditions and varying needs of
workers and their families in the vast population across the Indonesian archipelago.

Union leaders should realize that, in the long run, wage increases that are not supported by a
corresponding increase in productivity would only lead to higher unemployment, as a result of
factories cutting their payrolls or investors shunning labor-intensive industries.

Managing peaceful industrial relations will depend very much on how capable factory or company
trade unions are in developing effective bargaining relationships with their employers.

Employers have no less a vital role in preventing labor disputes. The contentment of their workers
will depend on how forthcoming and transparent management is regarding the company’s
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