Wage Determination in Jakarta: Before, During, and After the Pandemic (Navigating the Evolving Landscape of Minimum Wage in Indonesia's Capital)

The determination of wages, especially the minimum wage, is a crucial issue that significantly impacts the livelihoods of workers and the overall economy. In Jakarta, Indonesia's bustling capital city, the wage determination process has significantly changed, particularly after the COVID-19 pandemic. 

This article explores the dynamics of wage determination in Jakarta before, during, and after the pandemic. It examines the factors influencing wages, workers' challenges, and the latest policy developments. Additionally, it includes insights from workers in Jakarta and Tangerang about their experiences and expectations regarding wages.

Wage Determination in Jakarta During the COVID-19 Pandemic

The COVID-19 pandemic created significant challenges for Jakarta's economy, disrupting businesses and affecting employment. During this time, determining wages became more complex due to the following factors:

• Economic Slowdown: The pandemic-induced economic slowdown resulted in job losses and reduced business activity, leading to lower wages.
• Government Support: The government implemented various programs to assist workers and businesses, including wage subsidies and social support, which impacted wage levels.
• Health Concerns: The pandemic also raised concerns about workplace safety and health, influencing wage negotiations and working conditions.

Wage Determination in Jakarta After the Pandemic

As Jakarta emerges from the pandemic, the focus shifts towards economic recovery and addressing the impact on workers' livelihoods. Wage determination in the post-pandemic period is characterized by:

• Recovery and Adjustment: The gradual economic recovery has led to renewed demand for labor, but wages may not have fully recovered to pre-pandemic levels.
• Inflationary Pressures: Rising inflation has eroded the purchasing power of workers, putting upward pressure on wages.
• Policy Changes: The government has introduced new policies, such as Government Regulation (PP) Number 51 of 2023, to address the challenges of wage determination in the post-pandemic era.

Comparison of Wage Setting in Jakarta Before and After the Pandemic

When comparing wage settings before and after the pandemic, several vital differences emerge:

• Economic Context: The period before the pandemic saw steady economic growth, while the post-pandemic period faced challenges of recovery and inflation.
• Policy Framework: Government Regulation (PP) Number 51 of 2023 introduces new factors in calculating minimum wages, such as the alpha index.
• Worker Expectations: The pandemic has increased awareness of workers' rights and the need for fair wages, influencing wage negotiations.

Condition of Jakarta Residents and Workers During the Pandemic

The pandemic has profoundly impacted the lives of Jakarta residents and workers, leading to job losses, reduced income, and increased economic hardship. It has also highlighted the inequalities and vulnerabilities among low-wage and informal sector workers.

Latest Policy on Minimum Wage

In November 2023, the Indonesian government introduced a significant change in determining minimum wages through Government Regulation (PP) Number 51 of 2023. This regulation incorporates new factors, including an index with a limit of between 0.01 and 0.03, determined by the Provincial Wage Council or City/District Council. The aim is to ensure that minimum wages better reflect economic conditions and the needs of workers.

BPS Data and Labor Expenditure Survey

Data from the Central Bureau of Statistics (BPS) provides insights into Jakarta's cost of living and wage levels. However, there is a notable discrepancy between official BPS data and the findings of surveys conducted by labor organizations. For instance, the BPS reports the actual living expenditure of the Indonesian population in 2023 to be around Rp990,833 per month, while a survey by the Decent Living Committee shows a much higher figure of Rp3,428,186.69 per capita per month for laborers. This discrepancy underscores the need for a more comprehensive understanding of workers' living costs.

Labor Conditions in Jakarta and Tangerang: Workers' Voices

Workers in both Jakarta and Tangerang are grappling with the rising cost of living. Interviews with workers in both cities reveal a shared concern: the minimum wage is not keeping pace with expenses.

Rina, a worker from Tangerang, shared a detailed breakdown of her expenses: "The cheapest boarding house costs around Rp 800,000. Meals per day Rp 50,000 x 30 days = Rp 1,500,000. Transportation Rp 20,000 x 30 days = Rp 600,000. Total: Rp 2,900,000." While she acknowledges that the current minimum wage might be enough for a single person, she emphasizes that "if I have a family, the dependents of living expenses increase, it will not be enough."

This sentiment is echoed by Balkis, an accounting staff member in Tangerang, who states that the current minimum wage is "insufficient because the needs of life continue to increase." She hopes for a "more prosperous" future where wages reflect a "decent livelihood for humanity."

Farhan, another worker from Tangerang, points out a critical issue: "The word 'minimum' in UMR or UMP is just a display, even though many people are still given salaries below the minimum with qualified skills and high education."

In Jakarta, workers express similar concerns. Mirna, an account manager, highlights that while the UMP increase is intended to improve welfare, "this positive impact cannot be felt significantly" due to the simultaneous rise in the cost of living. Romi, a sales manager, and Dina, a project manager, both believe that the current UMP needs to be improved to meet Jakarta's living costs.

Ira, a project cost controller in Jakarta, provides a poignant perspective: "The unevenly distributed privileges for the poor are one reason this discrepancy is happening." She calls for the government to "evaluate the actual living conditions of the people of Jakarta," considering factors such as high demand, high prices, and taxation.

These firsthand accounts highlight the urgent need for wage policies reflecting workers' realities in Jakarta and Tangerang.

Addressing the Wage Gap: Potential Government Solutions

The interviews with workers in Jakarta and Tangerang paint a clear picture: the current minimum wage, even with recent adjustments, is struggling to keep pace with the rising cost of living. This disparity calls for proactive government intervention to bridge the gap and ensure workers can afford a decent standard of living. Here are some potential solutions the government could consider:

A. Re-evaluating the Minimum Wage Formula:

• Incorporating Real Living Costs: While improved by PP No. 51 of 2023, the current formula could be refined to reflect workers' living costs more accurately in different regions. This might involve conducting more comprehensive and localized surveys on living expenses, considering factors like family size, dependents, and access to affordable housing and healthcare.
• Regular Reviews: The minimum wage should be reviewed more frequently, perhaps annually or biennially, to ensure it remains relevant amid fluctuating economic conditions and inflation.

B. Strengthening Enforcement and Monitoring:

• Crackdown on Underpayment: Farhan's observation about the prevalence of wages below the minimum highlights the need for stricter enforcement. The government should increase inspections and impose penalties on companies that violate wage regulations.
• Protecting Vulnerable Workers: Informal sector workers often need more protection from minimum wage laws. The government could explore strategies to extend minimum wage coverage or provide alternative social protection for these workers.

C. Addressing Cost of Living Drivers:

• Controlling Inflation: Rising inflation erodes the purchasing power of wages. The government should implement measures to stabilize essential goods and services prices, such as targeted subsidies or price controls.   
• Affordable Housing and Transportation: These are significant expenses for workers. The government could invest in affordable housing initiatives and improve public transportation to reduce these costs.

D. Promoting Social Dialogue and Collective Bargaining:

• Empowering Workers: Strengthening labor unions and promoting collective bargaining can give workers a stronger voice in wage negotiations.
• Tripartite Collaboration: The government should facilitate dialogue between workers, employers, and government representatives to find mutually agreeable solutions to wage-related issues.

E. Investing in Human Capital:

• Upskilling and Reskilling: Providing opportunities for workers to acquire new skills can increase their productivity and earning potential.   
• Education and Training Subsidies: The government could offer subsidies for education and training programs, particularly for low-wage workers, to enhance their employability and income prospects.