The Indonesian Government Announced The Minimum Wage Formula.

The Indonesian government announced the minimum wage formula, which will take effect in October 23rd.

Free from low wage employment and increased unemployment, and can enter the job market more steadily.

In October 15th this year, the formula for calculating the annual minimum wage (minimum wage) was published in the fourth wave of the economic revitalization plan. Jokowi president signed the relevant regulations (PP No. 78/2015) in October 23rd this year and takes effect as of today.

According to the regulations, the new formula for minimum wage is: the first minimum wage + (the previous minimum wage X * (when the annual inflation rate% + GDP% of annual growth)), the provincial governors should be required to determine the minimum wage of the province in the year November 1st based on the foregoing formula.

The formula does not apply to the 8 provinces in the country with a minimum wage lower than the basic cost of living set by the government. The minimum wage in the 8 provinces in the next 4 years will be increased by 5% annually.

The regulation shows that incorporating inflation into the calculation will ensure a stable purchasing power, while the GDP growth rate considers the overall increase in productivity.

Hanif Dhakiri, Minister of labor in Indonesia, said that the main purpose of the government setting the minimum wage formula is to protect workers from the increase in employment and unemployment with low wages, to enter the job market more steadily, and to help employers expand their businesses and provide more job opportunities.

The annual minimum wage adjustment system in Indonesia has been decided by the provincial governors, the management and the labor parties. The minimum wage has long been the most controversial point between the employers and the employers, and has led to frequent strikes. The business community has reflected that the wage is unable to reach an agreement, which has caused uncertainty in the operation and investment of the enterprises, and has also reduced the production competitiveness of Indonesian labourers. Others criticized the head of the local government as a political means to win more public support on this salary issue, regardless of the increase in operating costs.

Hariyadi Sukamdani, chairman of the Indonesian Employers Association (APINDO), welcomed the release of the Indonesian government.

It is expected that the attrition of labor and capital will be reduced. In other words, the wage cost of labor intensive industries will account for nearly 50% of the total operating cost, while the hotel industry will account for 30%.

Said Iqbal, chairman of the Indonesian trade union union (KSPI), said that the government did not incorporate trade union opinions before the formulation of the formula, strongly opposed the position of the new formula for the minimum wage, and said that the alliance was preparing to submit a judicial review request to the Supreme Court that the policy only considered the stability of the business owners and ignored the welfare of the workers.

The alliance points out that

Purchasing power has slipped 30% since November last year, and the minimum wage should be raised by 22%-25% to make up for the purchasing power of labors.