The Indonesian Employers Association (Apindo) has warned that a 44 percent increase in the Jakarta minimum wage next year, might force companies to lay-off staff to cut costs.

Employer groups have also expressed fears the new Jakarta minimum wage of Rp 2.2 million (US$228) a month, approved by Governor Joko Widodo (Jokowi) yesterday, would prompt similar pushes for wage increases across the country.

“The government forgets that by making a populist decision, employers will suffer losses. The consequence is that the employers will massively cut back employment,” said Apindo chairperson Sofjan Wanandi, as quoted by the English daily J akarta Globe today.

Sofjan said Jakarta’s manufacturing industry employed more than three million workers in factories, making shoes, clothes and other household goods.

The textile and garment industry alone employed 2.5 million people while shoe manufacturers hired 500,000 workers, he said.

“Take pity on (small business owners), the shoe and garment industry (and) all labour-intensive (industries).

“They cannot afford this wage hike. Salaries are already 30 percent of the costs. With electricity and gas price hikes, how can we compete next year?” he asked.

Under previous regulations, Jakarta’s workers earned a minimum Rp 1.5 million a month. The new minimum wage is Rp220,000 more than the amount sought by Apindo, but Rp590,000 less than the amount sought by labour unions.

Meanwhile, an economist from Padjajaran University in Bandung, Kodrat Wibowo, said workers’ demands for higher wages should match an increase in productivity, given Indonesian productivity lagging behind that of neighbouring countries.

International Labour Organisation data from 2010 shows that Indonesia’s labour productivity - measured in annual gross domestic product per working person - was US$10,587, as compared to US$25,058 in Malaysia and US$12,593 in China.

Kodrat said Indonesian labour productivity was lower than others in the region, not because of a lack of education or lack of training but due to “poor work ethics”.

- Bernama