Thursday, May 14, 2015

The Indonesian Workers' Woes

Indonesia’s wealth gap has widened over the years, with the country’s Gini index – a ratio measuring wealth distribution on a scale of 0-1 – increased from approximately 0.36 in 2012 to 0.41 in 2014.

An estimated 28 million people live below the poverty line, and half of all households are grouped at or below the poverty line, set at 292,951 rupiah (24.4 dollars) per month, according to the World Bank. The country continues to be plagued by high infant and maternal mortality ratios, with 228 infant deaths and 190 maternal deaths for every 100,000 live births. Meanwhile, only 68 percent of the population has access to improved sanitation facilities, far short of the MDG target of 86 percent. With 153.2 million people – or 62 percent of the total population – living in rural areas without easy access to medical, educational and financial institutions, experts say there is an urgent need for the country to devise schemes that will allow a more equitable sharing of wealth among its people.

The nation’s average minimum wage is around 1.5 million rupiah, the equivalent of 115 dollars. Each province or district sets their own minimum wage in line with the amount needed for workers to achieve a decent standard of living. The current rate for the capital city is 2.7 million rupiah per month, about 206 dollars, a figure that labour unions argue is not in line with the rising costs of basic needs.

“Thailand has a minimum wage equivalent to 3.2 million rupiah (244 dollars), Philippines at an equivalent of 3.6 million rupiah (274 dollars) and in Malaysia it’s more than three million rupiah (228 dollars),” explains Said Iqbal, the chairman of the Indonesian Trade Union Confederation (KSPI), who joined thousands of workers in Jakarta this past May Day to demand higher wages.

In a January 2015 report by the International Labour Organisation (ILO), one in three regular employees – or 33.6 percent of the total workforce engaged in full-time work – receives a low wage. While low wages in some emerging economies can symbolise a workforce about to move into a higher income bracket, “for many Indonesian workers low-wage employment tends to be the norm, rather than a springboard,” the ILO found. The report also found that 45.9 percent of regular wage employees were “receiving wages below the lowest wage that is permissible by law in August 2014.”

Sharan Burrow, the general secretary of the International Trade Union Confederation (ITUC), , who was in Jakarta for the May Day celebrations, pointed out “The unions here have fought the low-wage culture for many years […]; it is still not a wage on which people can live with dignity against rising costs for basic needs. Likewise, social protection is still not deep enough and is not universal.”

Some say Indonesia’s low wages act as a magnet for investment, business insiders disagree.
“The business community is aware that low wages are no longer the attraction they used to be,” says Keith Loveard, a senior risk analyst with Concord Consulting in Jakarta, adding that increased inequity over the past decade has seen the bottom 50 percent of the population make very few gains.” According to Loveard, “Indonesia’s logistics costs make up more than a quarter of production costs and the only way companies can deal with that is to squeeze workers. So realistically, until you lower logistics costs with better infrastructure and cut the red tape, it’s very difficult to do business in areas such as manufacturing that create lots of jobs.”

Employment growth has been slower than population growth, while public services remain inadequate by middle-income standards. Health and infrastructure indicators are also poor, and the country is a ways off from achieving the Millennium Development Goals (MDGs), the United Nation’s poverty-reduction blueprint that is set to expire at the end of the year.


The World Bank say that unless the country adopts social protection programmes for the poorest people, and invests in infrastructure that will enhance their productive capacity, Indonesia will find itself losing social, political and political cohesion in the years to come.

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