Jan 20, 2018 Last Updated 3:31 AM, Jan 6, 2018

United in disappointment

Published: Jan 27, 2016

 Teri L. Caraway and Michele Ford

When Jokowi was running for the presidency, he promised that workers would prosper under his government. To counter Prabowo’s 10-point political contract with unions, Jokowi promoted his ‘trilayak’ pledge: decent work, decent pay, and a better standard of living. When campaigning in worker communities, Rieke Diah Pitaloka – an immensely popular PDIP representative renowned for her dedication to labour causes – was often at his side. Two major union confederations endorsed his candidacy and used the trilayak pledge to encourage their members to vote for him. 

But since entering office Jokowi has been luke-warm on labour. He has made overtures to trade union leaders – including Said Iqbal, who supported Prabowo in the lead-up to the election – and engaged in formal dialogue with labour movement representatives. But not only has he failed to make any strong statements on core issues such as freedom to organise or the need to ensure that employers respect labour law, his government has taken away unions’ right to negotiate a living minimum wage. 

Giving away the ministry

The fact that formal sector workers were not a priority for the new government was confirmed when Jokowi appointed his cabinet. Despite having three strong candidates for the Ministry of Manpower within his party and his campaign team, political expediency won out. It was not Rieke Diah Pitaloka, Teten Masduki – or union leader and PDIP member, Andi Gani – who was appointed to the ministry. Instead, Jokowi installed Hanif Dhakiri, the Secretary General of the National Awakening Party, the party that had last held the post.

Hanif has a history as a student activist with an interest in labour. And as minister he’s demonstrated a strong commitment to improving conditions for Indonesians working overseas. He has personally attended surprise inspections on migration agents, migrant labour holding centres and the migrant worker terminal at Soekarno-Hatta international airport, as well as negotiating with governments in the region on migrant workers’ behalf. But he had little to say on formal sector workers in Indonesia before suddenly moving to shut the unions out.

Shutting out the unions

Since the fall of Suharto, minimum wages have been set annually at the district level by tripartite wage councils composed of unions, employers and representatives of local government. Under pressure from demonstrating workers, these wage councils have recommended – and governors have approved – large increases in many industrial centres. When employers in low-wage sectors cried foul, the government responded by issuing a regulation changing the wage-setting mechanism. Government Regulation No.78/2015 on Wage Determination, which Jokowi signed in October 2015, eliminates the annual wage negotiation process, which it replaces with a formula set by the central government.

According to the government, the existing system had resulted in unpredictable and overly generous wage increases that harmed Indonesia’s investment climate. But the actual minimum wage increases since 2003 tell a different story. For many years, minimum wage increases basically mirrored the inflation rate, meaning that real wages were effectively stagnant. Things only began to change when unions began to flex their political muscle to convince local governments to support workers in wage negotiations. Since 2011, there have been real increases in the minimum wage, finally bringing wages in line with the government-defined minimum living standard in some industrial localities. This eventually had a knock-on effect, with minimum wage increases that outstripped inflation being approved in some non-industrial areas. 

The Jokowi government is right to be concerned about the competitiveness of low-wage industries. But minimum wages in core industrial areas in Indonesia are still lower than many competing nations, including Thailand, the Philippines, China, and Vietnam. What’s more, according to the International Labour Organization’s (ILO) 2014-15 Global Wage Report, at US$183 per month, average montly wages in Indonesia are well under a third of those in China.

So it’s not because they are paying higher average wages that Indonesian employers can’t compete. The government could take action on other measures that arguably have a much larger effect on the cost of doing business in Indonesia. According to the World Bank’s Doing Business report, Indonesia is one of the worst countries in the world for starting a business, enforcing contracts and paying taxes. One reason for Indonesia’s low ranking on these indicators is the corruption that permeates almost every state institution. 

But attacking these problems would require profound changes to Indonesia’s political system. Rather than embarking on the necessary reforms, the Jokowi government has decided instead to appease investors by taking away workers’ right to bargain for a living wage. 

Diminishing democracy

These changes to the minimum wage determination system are not just taking money out of workers’ pockets. They are also threatening Indonesia’s standing with the ILO, the international body composed of employers, governments and trade unions that sets international labour standards. According to the International Trade Union Confederation, the regulation contravenes ILO Convention No. 131 on Minimum Wage Fixing, which requires governments to consult with unions and employers on the mechanisms used for wage determination.

Even more seriously, the changes have diminished Indonesia’s democracy. The wage councils have been an important mechanism for building economic and political citizenship at the local level. In a context of rising cynism about democracy in Indonesia, they are perhaps the only place where working-class actors get a seat at the table with employers and the government, and where their needs are addressed through an institutionalised mechanism. Replacing the councils with bureaucratic procedures that prevent meaningful participation will destroy that, leaving unions with no choice but to resort to mass actions.

It’s little surprise, given that Jokowi has broken his promises to workers, that they have voiced their dismay: even the unions that supported his candidacy have taken to the streets to demand that the regulation be rescinded. Ironically, then, the biggest achievement with regard to labour of Jokowi’s first year in office was to unify Indonesia’s divided trade union movement in its opposition to him and his government.

Teri L. Caraway (caraway@umn.edu) is Professor of Political Science at the University of Minnesota (Twin Cities) in the United States. Michele Ford (michele.ford@sydney.edu.au) is Professor of Southeast Asian Studies and Director of the Sydney Southeast Asia Centre at the University of Sydney. Teri and Michele are currently completing a major research project on the re-emergence of political labour in Indonesia, funded by the Australian Research Council.

Inside Indonesia 123: Jan-Mar 2016

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