Jakarta Governor Joko Widodo approved a proposed 44 percent minimum wage hike on Tuesday in what is widely seen as a populist move amid heavy lobbying from Indonesian businesses.
“It has been signed, the amount is Rp 2.2 million,” Joko was quoted saying by Detik.com. “I have hammered the gavel.”
The move attracted a chorus of critics who claimed that rising labor costs would cause massive layoffs in the capital’s manufacturing sector. Under previous regulations, Jakarta’s minimum wage workers earned some Rp 1.5 million ($155) a month. The new minimum wage was set at Rp 2.2 million a month, nearly Rp 240,000 more than the Indonesian Employer Association (Apindo) hoped to pay.
“The government forgets that by making a populist decision, employers will suffer losses,” Apindo chairman Sofjan Wanandi said.
Jakarta’s manufacturing industry employs more than more than 3 million workers in factories making shoes, clothes and other household goods, Sofjan said. The textile and garment industry alone employs some 2.5 million people, he said.
“Take pity on [small business owners], the shoe and garment industry [and] all labor-intensive [industries],” he said. “They cannot afford this wage hike. Salaries are already 30 percent of costs. With the electricity and gas price hikes how can we compete next year?”
Joko dismissed the criticism, saying that the increase was appropriate for all sides.
“I think this is fair enough,” he said.
The Ministry of Manpower and Transmigration agreed with the move, adding that increased wages could help productivity.
“The workers got a good raise, so hopefully the rising wage will be balanced with good productivity,” minister Muhaimin Iskandar told Detik.com. “We support the Jakarta governor’s decision.”
The ministry will work to ensure the wage hike is enforced, the minister added.