APINDO wants wage system changed

The Jakarta Post, Jakarta

Amid a nationwide clamor for minimum-wage increases, a powerful employers' grouping has argued the need for wage levels to be tied to productivity.

"Provincial, regency and municipal administrations should be deprived of the right to set the minimum wage as they don't assess worker productivity," Sofjan Wanandi, who chairs the Indonesian Employers Association (APINDO), said Tuesday on the sidelines of a seminar on productivity and remuneration.

"Workers need be paid salaries that are commensurate to their skills and productivity. And, in this regard, their employers know best."

Under the current arrangements, minimum-wage levels are determined jointly by regional governments, labor unions and employers.

Also present at Tuesday's seminar was Japan's deputy ambassador to Indonesia, Satoru Sato, and representatives of the Nippon-Kaidanren International Cooperation Center (NICC), which provides advice to entrepreneurs.

NICC executive advisor Tosio Suzuki said, "An increase in productivity, which is a major issue in most labor intensive industries, should mean price decreases, not wage hikes."

"We need to increase worker productivity in order to alleviate poverty."

As a first step toward realizing its goal of linking wages to productivity, APINDO plans to adopt the international standard for measuring total factor productivity (TFP), which assesses the productivity of human resources, capital, output and costs as part of a single formula.

Assessments will be carried out jointly with experts from Japan, Malaysia, Singapore, Norway and the Netherlands, and will also involve local governments and labor representatives.

"We (APINDO and the NICC) are still at the initial stages, holding discussions and workshops so that companies can learn about TFP," Sofjan said.

"The rigid minimum wage system must be changed, particular as regards labor intensive industries. Otherwise, about half of our manufacturers will be forced to close down in the next five to 10 years."

Currently, Japan is the country's largest foreign investor with more than a thousand companies providing some 200,000 jobs.

Achmad S. Ruky, an expert on wage bargaining, said Indonesian workers, together with those in the Philippines, had the lowest levels of productivity of all Southeast Asian countries.

Based on 2003 figures, he said, Indonesian and Philippine workers in the manufacturing sector were able to finish their tasks in eight hours, and earned 33 U.S. cents per hour. This compared to Thai workers, who earned 92 U.S. cents per hour, but were able to finish the same tasks in two hours and 45 minutes.

Meanwhile, in Singapore and Malaysia, workers could finish the same tasks within 11 minutes and an hour and five minutes, respectively.

"This clearly shows the low level of productivity of Indonesian workers," said Ruky.

"What we need is a system that allows employers to pay their workers based on their performances, a skills-based remuneration system and different wage scales for different positions within a company." (06)
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