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Indonesian Unions Demand 30% Wage Hike; Stage Nationwide Demonstrations

Indonesia is the latest developing nation to be roiled by contention over minimum wages for factory workers. Following Cambodia’s lead, a group of labor unions organized massive demonstrations last week  demanding superior pay and benefits.

As many as 30,000 workers took to the streets, representing, according to a spokesman from IndustriALL, a major union, the 10 million workers still deprived both a living wage and access to adequate health care. While wages in Indonesia are up 19 percent from last year, the current rates are still less than 50 percent of what the unions were requesting.

The  disgruntled workers seem emboldened by the wave of protests that have swept across South Asia. Jyrki Raina, secretary general of IndustriALL, said, “Last year, we saw increasing minimum wages in many countries around Asia. Unions in Bangladesh managed to get a 77% increase in 2013, and the minimum wage in China is already higher than in Indonesia. It is high time that Indonesian workers and their families get their share of the profits they actually help create.”

The minimum wage has been a point of contentious dispute in Indonesia for over a year. While its massive supply of low-cost labor has been a point of attraction for Western retailers, low wages have ignited civil unrest, with workers taking to the streets in huge numbers protesting their alleged exploitation. Only months ago, 12 province governors were compelled to increase minimum wages by an average of 19 percent, in response to persistent strikes that were stymieing business. In 2012, there was a similar adjustment of the salary structure, raising the minimum wage by as much as 40 percent, depending upon the province in question. This pegs the minimum wage somewhere between $80 and $160 dollars per month in Indonesia.

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But many see signs of progress, as Indonesia struggles to balance the need for discounted labor and the demands of workers. Since 2011, Indonesia has been a participating member of the International Labor Organization’s Better Work program. According to the Better Work website, there have been discernible advances made. “Still in its early years, the programme has been successful in encouraging the participation of enterprises and international buyers, taking the lead in engaging with Korean multinational suppliers, which make up a large percentage of investors, and innovating worker outreach with a pilot social media project.” It has also promoted the Freedom of Association protocol, an accord designed to support workers’ rights, signed by international buyers like Adidas, Nike and New Balance.

Indonesia, nonetheless, continues to attract attention as a rising star. The E.U., U.S. and Japan already import a considerable amount of Indonesian products each year, especially apparel. More than 36 percent of all the ready-made garments produced by Indonesia are destined for U.S. shores, with another 16 percent headed to the E.U. and 5 percent percent for Japan. The total value of Indonesia’s exports to the U.S. reached nearly $12.5 billion in 2012.

The potential for Indonesia is undeniable, though, with its 260 million people, investment-friendly business environment and laser-like focus on textile and garment production. The government has also demonstrated a twin commitment to political reform and infrastructural modernization. While it doesn’t want to be pigeonholed as an alternative to Bangladesh, there are certainly new opportunities in the wake of the Rana Plaza tragedy for it to assert itself on the global economic stage.

However, a speedy resolution to the wage dispute doesn’t seem forthcoming. Since Indonesia’s primary attraction at the moment is low-cost labor, the government can only afford to raise the minimum wage so much. This is especially the case since its regional competitors also offer cheap, and sometimes more skilled, labor. Indonesia faces stiff competition from China and rival ASEAN nations, and has found China’s fiber, textiles and garment exports particularly difficult to counter, especially after the passage of CAFTA.