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Seminar on Current Wages Policy in Indonesia and its Politics

On 15 December, ISEAS-Yusof Ishak Institute organized a seminar on “Current Wages Policy in Indonesia and its Politics”, with Dr. Max Lane, Visiting Senior Fellow at the Indonesia Studies Programme, as the speaker.

In his presentation, Dr. Lane elaborates on the “political contract” between the-then candidate Jakarta governor and vice governor, Anies Baswedan and Sandiaga Uno, and a coalition of ten labour unions. The main precept of the “contract” was a signed agreement made by Mr. Baswedan, that if he is elected as governor, he would raise wages beyond that which was formalised in the Government Regulation 78/2015. However, upon winning the election this year, Mr. Baswedan immediately announced that the wage increase would conform to the 2015 regulation. As a result, the disgruntled union coalition withdrew their support from Anies Baswedan. Its leader has even openly mentioned how the former governor Ahok was more “courageous” and “chivalrous” in his decisions regarding labour wages.

From Left to Right: Dr Siwage Dharma Negara, and Dr Max Lane (Source: ISEAS – Yusof Ishak Institute)

Prior to 2015, the wages were reviewed annually and decided by governors by taken into account the recommendations of district heads and the Provincial Wages Council, who in turn would consider the assessment by the unions and individual employees on the cost of “decent standard of living”. Starting in 2015, the new formula guarantees an automatic wage increase based on adding together the inflation rate (as percentage) plus productivity growth (as a percentage). This, according to the union, has resulted in an adequate increase.

Dr. Lane made an interesting statement, that although Mr. Baswedan has breached the “contract”, it seemed that the blame has shifted to President Joko Widodo’s government, which was said to have warned the governors against making local policies that are not in accordance to the national policies.

Dr Max Lane shared on wages policy in Indonesia and the politics surrounding the Government Regulation No 78/2015 (Source: ISEAS – Yusof Ishak Institute)

The politics of wages and the political role of labour unions are important to observe, especially approaching 2019, in which the presidential election and parliamentary election will be held simultaneously.

The seminar was attended by 18 participants, including academics, the press and members of the public.