Central Government Requests Provincial Governors Not to Raise Indonesia’s Minimum Wages in 2021
Through Manpower Minister Circular Letter No. M/11/HK.04/X/2020, the central government of Indonesia requests all provincial governors not to raise the minimum wages for 2021 as the impact of the COVID-19 crisis on entrepreneurs and business has been severe. The financial pressure (due to missed income) makes it tough for many entrepreneurs to survive. By not raising the minimum wages in 2021, these business-owners would get some air, which means jobs can be saved.
This should help the economic recovery of Indonesia from the ongoing COVID-19 crisis (this recovery is believed to have started in Q3-2020). However, obviously, the labor unions of Indonesia cannot appreciate this central government request as they want workers’ purchasing power improve through higher wages. These unions have already announced protests in the first half of November 2020.
However, there are five provinces across Indonesia that disregard the government’s request, namely Central Java, East Java, Yogyakarta, South Sulawesi, and Jakarta. And indeed the central government does not have the power to force provinces to leave the provincial minimum wage unchanged.
For example, Jakarta Governor Anies Baswedan decided to raise the local minimum wage by 3.27 percent to IDR 4.42 million (approx. USD $304), per month, for 2021. However, Baswedan added that “for those companies that are affected by the COVID-19 crisis, the minimum wages in 2021 will be the same as this year. However, for those companies not affected by the COVID-19 crisis, there will be an increase in the minimum wage; one that is in line with the minimum wage growth formula set in Government Regulation No. 78/2015.”
The trouble with Baswedan’s reasoning, however, is that essentially all companies in Jakarta have been affected by the COVID-19 crisis. Only a minority of companies either thrived (for example telecommunication and e-commerce companies) or did not feel any significant impact from the virus crisis. Moreover, it is very difficult to determine whether or not (and to which extent) a company has indeed been affected by the COVID-19 crisis.
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