Indonesia minimum wage – Foreign investors, every year, may watch CNN or BBC worryingly when they display labor demonstrators on main streets in Jakarta or other cities.
Thousands of workers, together walking down on Thamrin or Sudirman streets is a scenery that becomes common and regular seen, especially on the Labor Day, May the 1st. It can be expected to see big mob of workers in many type of uniform marching to the main target, Presidential Palace or House of Representative.
A worrying time for Indonesians, foreign tourist, and also foreign investors or potential investors.
Indonesians will grumbles as the traffic are affected. Long traffic jam can be expected. Foreign tourist will be anxious about their safety as well as whether they can catch their flights.
Meantime, investors frowns their forehead. Their mind surely starts to calculate the risk and possible reduced profit as the result of higher salary to be paid. Possibilities to remove their current company in Indonesia to countries that offer cheaper labor cost is an option in their mind.
The same situation can be predicted to occur every year.
Why do Indonesian labors ask for increased Indonesia minimum wage every year? Aren’t their wage enough?
I do believe the same situation happens also in many other countries. Developed, developing, or under-developed is not a question.
Every human being will always dream for better life. Nowadays, to have better life will definitely need money. With an inflation every year, prices of anything are, inevitable, higher than last year.
This means everybody should have more income to cover all of that. That’s humane. Nothing is wrong with that.
That’s also the reason labours marching on streets. They want to at least keep their level of life. Unfortunately, they don’t think the yearly increase given is not enough for what they want.
So, demonstration is one way to give pressure to Indonesian Government to issue a decision about minimum wage that is on their side.
Why Indonesia Government not the owner of the companies? How Indonesian Minimum Wage is decided?
Indonesia minimum wage is not a result of negotiation between labor of one company with the owner only. The size of the increase must follow minimum percentage stated by government.
There is a regulation or law in this country that a company must pay minimum sum of money to their workers. Failure to comply with this is considered a crime and a business/company owner can be punished.
The percentage of the minimum increase is based on inflation percentage level and many other factors. This will be announced central government and apply nationally.
Once the announcement of this is made, it doesn’t mean all is over. There are still several other steps before the new minimum wage can be decided.
The province government, later on, will issue the derivative law of raised minimum wage for their province. It will be in money amount not percentage. They issue this after a meeting or discussion with representatives of labor union representatives and business owners.
Is that all?
No. One other step, not too long after province circulated the new minimum salary, the city or regency government will do the same for workers in the city they govern. The city local representatives will surely have hard debate in the meeting.
Just after a mayor or regent announced the city minimum salary, the labor union of one company and the owner can decide what will be the new salary for workers in the company.
Why does it take so long to come to a decision?
Probably, the question is raised to see the fact that labor demonstration starts quite early and not only near the end of year. The answer to that is because it takes quite a long process to come to satisfying conclusion for all parties as above description.
Besides, representatives of all parties must also talk about many things. The Indonesia minimum wage has at least 60 components that they may argue on each point. So, it is not only about inflation.
The 60 components are things that are considered to be essential to make decent living for workers. These includes soaps, shocks, kitchen knife, deodorant, bra, TV upto vacations.
So, you can imagine how long the discussion will become. One part may think it is important for their life but the other think in opposite way.
How much is Indonesia Minimum Wage?
Since every city has their own standard, then it will be difficult to list up all. However, this may show you how much money can be brought home by workers in Indonesia (2016).
| PROVINCE | MIN WAGE IN RP | MIN WAGE IN US$ |
|---|---|---|
| Riau Islands | 2,178,710 | $163.81 |
| West Kalimantan | 1,789,400 | $134.54 |
| West Nusa Tenggara | 1,482,950 | $111.50 |
| West Sumatera | 1,800,725 | $135.39 |
| Jambi | 1,906,650 | $143.36 |
| Nanggroe Aceh Darussalam | 2,118,500 | $159.29 |
| South Kalimantan | 2,085,050 | $156.77 |
| Banten | 1,784,000 | $134.14 |
| Gorontalo | 1,875,000 | $140.98 |
| Bali | 1,807,600 | $135.91 |
| North Sumatera | 1,811,875 | $136.23 |
| Bangka Belitung | 2,341,500 | $176.05 |
| Central Kalimantan | 2,057,550 | $154.70 |
| North Sulawesi | 2,400,000 | $180.45 |
| Central Sulawesi | 1,670,000 | $125.56 |
| Maluku | 1,775,000 | $133.46 |
| West Papua | 2,237,000 | $168.20 |
| West Sulawesi | 1,864,000 | $140.15 |
| Bengkulu | 1,605,000 | $120.68 |
| Riau | 2,085,000 | $156.77 |
| Jakarta | 3,100,000 | $233.08 |
| East Kalimantan | 2,161,253 | $162.50 |
| South Sulawesi | 2,250,000 | $169.17 |
| North Kalimantan | 2,175,340 | $163.56 |
| Lampung | 1,763,000 | $132.56 |
| Southeast Sulawesi | 1,850,000 | $139.10 |
| North Maluku | 1,681,269 | $126.41 |
| West Java | 2,250,000 | $169.17 |
| East Nusa Tenggara | 1,425,000 | $107.14 |
| South Sumatera | 2,206,000 | $165.86 |
| Papua | 2,435,000 | $183.08 |
Those are the minimum wages. This apply to all workers but for the ones who already has higher salaries, the increase usually is decided by percentage from their current salary.
Is Indonesia minimum wage competitive enough compared to South East Asia Countries?
Many says that Indonesia is no longer attractive for investment. One of the reason is because the labor salary has increased too high.
Is it true?
Let see a little comparison in the same year with two other countries at the same size in Southeast Asia, Vietnam and Thailand.
Thailand : the country has decided to start new mnimum wage of 350 Bath perday. This mean almost US$ 10/day . See the source here.
Vietnam : the minimum wage in this country is between US$ 107-156/month. See the source here.
Suitable for your business or not, it will be up to you but seeing those facts, the Indonesia Minimum Wage is at the same level as Vietnam and lower than what Thailand decided for 2016.
That is all I can share about Indonesia Minimum Wage.