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Indonesia: Wage Hike Follows Labor Strike

After a nationwide wage strike across Indonesia early this month, 12 province governors agreed to increase monthly minimum wages for 2014 by an average of 19 percent, which falls short of the 50 percent hike workers and labor unions were seeking.

Wage rates vary by province and factor in things like local cost of living, economic growth and employers’ ability to pay. In Jakarta, the country’s capital and currently the city with the highest minimum wage in the nation, monthly salaries will increase by 11 percent.

Jakarta governor Joko Widodo announced that the wage rate would go up to Rp 2.44 million ($211) from Rp 2.2 million ($190), which follows a 44 percent increase that took effect at the start of 2013.

According to the Jakarta Post, workers surrounded the Jakarta administration office Nov. 1 to protest their displeasure and fight for their requested Rp 3.7 million ($320) wage hike, citing that the new rate still doesn’t adequately cover the cost of living.

Said Iqbal, chairman of the Confederation of Indonesian Workers Union (KSPI), said, “Workers will challenge the administration’s decision in the State Administrative Court [PTUN] and they will continue to stage protests in front of the City Hall until their demand is met.”

Fears of future protests aside, employer representatives fear owners won’t be able to afford to pay the new wages as the country has struggled over the past year, losing investors as doing business in the nation became more costly and complicated.

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said, “Last year, the small businesses requested a waiver because they could not afford to pay [increased wages]. This year, they will likely ask for another waiver or they will be forced to shut,” the Jakarta Post reported.

This and the concern over potential future wage hikes this sharp could force companies out of the nation and into neighboring countries where they can cut costs on labor, something employer representatives are urging the Jakarta administration to consider.

The remaining provinces are expected to settle on their wage hike plans soon.