Minister Of Manpower Ida Fauziyah Says Setting Minimum Wage Too High Triggers Layoffs

JAKARTA - The setting of minimum wages that are not in accordance with the new laws and higher has the potential to hamper the expansion of job opportunities, trigger layoffs and encourage industrial relocation to areas with lower wages.

This was conveyed by the Minister of Manpower (Menaker) Ida Fauziyah online as reported by Antara, Tuesday, November 16.

"If it is set higher than the regulation, it will potentially hamper the expansion of job opportunities, the possibility of substitution of workers to machines will also be high. We do not expect layoffs, because this triggers layoffs."

Not only that, other impacts can encourage relocation from locations that have high district/city minimum wage values (UMK) to locations or areas that have lower UMK values.

The Minister of Manpower Ida added that a disproportionate increase in the provincial minimum wage (UMP) and UMK could cause companies to close during the current pandemic situation, in addition to narrowing the dialogue space for wage agreements and the application of the structure and scale of wages in companies.

Ida explained that the determination of the minimum wage based on the formula in Government Regulation Number 36 of 2021 is intended to reduce the wage gap between regions and achieve wage equity.

For this reason, in the new regulation, the determination of the 2022 minimum wage will only be carried out for the UMP and UMK, while the sectoral minimum wage (UMS) will not be determined. Exceptions are made for UMS set before November 2, 2020 which is valid until the term has expired or when the UMP/UMK in the area has exceeded the UMS.

He reminded local governments that do not follow the new minimum wage setting regulations, they can get administrative sanctions.