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As a flare-red sun set, a group of laborers in their 20s and 30s gathered on the bare floor of a battered house wedged beneath power lines in an industrial part of Jakarta. They were members of a confederation of multisector workers, one of the largest trade unions in Indonesia, whose slogan is “Young, brave, militant.”

The men — all employees of the biggest hypermarket chain in the country, run by the French retailing giant Carrefour — said the company was violating their rights by paying them as contract workers, who are unprotected by strict Indonesian labor laws.

“Cheap wages and outsourcing, these are the main issues in Indonesia,” said Abdul Rahman, a Carrefour employee and the secretary general of the union, known as Kasbi, which represents about 130,000 workers.

He and others have been negotiating with the company for improved contracts since a 1,000-person strike in late August, but talks have gone nowhere. The same cycle has played out repeatedly since Carrefour entered Indonesia in 1998, said Rahman, 33, who has worked at the company for 11 years.

Indonesia, the largest economy in Southeast Asia, is also among the top 20 economies in the world, with growth this year of around 6 percent. On Thursday, the ratings agency Fitch upgraded the country to investment-grade status. More than half of its 240 million inhabitants have entered the middle class, according to the World Bank, which defines that as those who spend $2 to $20 a day. Still, many of them toil for barely a living wage, offering some of the cheapest labor in Asia.

In recent years, though, this labor force has watched certain sectors grow on rising commodity prices and booming domestic demand, and increasingly it is pushing for a greater share of company profits. The biggest pushback has come from workers employed by Freeport McMoRan, which is based in Arizona and controls the world’s largest recoverable gold and copper reserves in Timika, Papua. On Wednesday, its workers’ union agreed to a 37 percent increase in wages after a three-month strike.

Affordable labor is a main reason investors are attracted to Indonesia, in part to offset wage increases in China, said Gita Wirjawan, the country’s trade minister and a former head of its investment coordinating board. But recent strikes for higher wages by mine workers and supermarket clerks, as well as pilots of the state-owned airline, Garuda, have disrupted business operations — and could potentially deter foreign investment.

According to the Manpower Ministry, Indonesia had 53 strikes in the first seven months of 2010, the latest period for which figures are available. By comparison, in 2008 the International Labor Organization recorded five apiece in the nearby countries of Thailand and the Philippines.

Muhammad Chatib Basri, an economist at the University of Indonesia and the director of the school’s Institute for Economic and Social Research, said frequent and prolonged strikes reduced profit margins and competitiveness. Sluggish Indonesian industries like garment manufacturing are starting to pick up as wages rise elsewhere, he says. But if the costs of dealing with unrest and lengthy union negotiations increase, that could stem growth in a country that will depend on labor-intensive industries for productive employment for the foreseeable future.

Basri said legally mandated high severance payments were another deterrent to investment. “The labor law acts like a hiring tax, so many companies don’t want to absorb permanent workers because if there is downsizing, they have to pay out a lot of money,” he said.

Many companies get around that regulation by hiring contract workers, like the men of Kasbi demanding better benefits from Carrefour. But typically, big foreign concerns have a more difficult time evading the law in that way, and others, too, are facing worker unrest.

Union representatives at Freeport’s huge mine in Papua said they agreed to the latest deal amid concerns about the living conditions of workers who had gone three months without pay. Many on the predominantly Christian island of Papua worried they would not be able to afford Christmas celebrations.

Workers, who were demanding a fivefold wage increase, from the lowest rate of $1.50 an hour to $7.50, had rejected Freeport’s last offer of a 35 percent salary increase over two years, calling it an inadequate reflection of their contribution to company earnings. For now, the agreement appears to be a victory for both sides, but Juli Parorongan, a spokesman for the Confederation of All-Indonesian Workers’ Union, which represents the striking miners, said workers would continue fighting for a fairer deal.

“This is not the end of our struggle,” he said, anticipating future problems over the welfare of workers who will remain among the lowest paid of any at Freeport’s global operations.

What initially set off the strike, Parorongan said, was the realization that employees in the United States received hourly wages 10 times greater than those of the low-level laborers at its Timika operations, which bring in around 30 percent of the company’s global revenue. In 2010, Freeport’s Grasberg mine in Papua brought in more than $5 billion, but losses have mounted this year because of the strike and damage to pipelines caused during civil unrest.

In late October, the company suspended production to concentrate on repairing those pipelines, according to a spokesman, Eric Kinneberg, who said that the company was losing two million pounds of copper and 3,000 ounces of gold in daily production. In a statement released Wednesday, Richard C. Adkerson, the president and chief executive of Freeport, said he was pleased the parties had reached “a mutually satisfactory resolution.” Adkerson, who has been in Jakarta to help negotiate an end to the strike, had previously called pay demands of $30 to $200 a day “excessive.”

The deal is likely to end months of violence at the remote, sprawling mountaintop mine — one worker was killed in October and at least six wounded when they clashed with the police while trying to enter the mine site. But analysts say the strike’s success could encourage a fresh wave of labor disputes.

“My concern is this will trigger a domino effect,” said Basri of the University of Indonesia. “I understand there is a justification for the rise in wages,” he said, referring to the discrepancy between Freeport’s revenues and the amount it spends on workers’ salaries. “But it may trigger pressure for a rise in wages that not all companies can afford.”

Basri said there was a political element to the Freeport case that distinguished it — the company operates in a remote region plagued by a simmering separatist movement.

But factors that galvanized the work stoppage there, like better access to information and a more sophisticated and organized labor movement, extend to all sectors, analysts say.

“Workers in Indonesia are learning from the current situation,” said Soeharjono, a program officer in Indonesia with the International Labor Organization. He said they were getting information from the Internet and spreading their messages through social networks like Facebook and Twitter.

Meanwhile, Rahman from Kasbi continues working in a Carrefour bakery making bread for the families that Toyota, Unilever and Nestle are focusing on as sales of cars and consumer goods reach record highs in Indonesia. On his monthly earnings of $175, he cannot afford such products.

Businesses outsourcing production to workers without even formal contracts are setting the stage for deeper resentment, he said.

“New employees who are young and ready to enter the work force will take whatever pay they can get,” he explained. “But every time they negotiate a new contract, their pay drops. If we try to look for different work or move to another company, we must start the fight from the beginning.”

International Herald Tribune