Minister Of Manpower Ida Fauziyah's Reply To Labor's Statement: Minimum Wage In Indonesia Is Too High, Difficult For Employers To Meet

Indonesian Minister of Manpower, Ida Fauziyah. (Photo: Doc. Ministry of Manpower)

JAKARTA - The Minister of Manpower Ida Fauziyah said that the minimum wage in Indonesia is too high. According to her, this is difficult for entrepreneurs in the country to reach.

She said that in determining the minimum wage there is a method called the Kaitz Index to measure it. The Kaitz Index is a method that is internationally used to measure the level of a minimum wage in an area by comparing the applicable minimum wage with the median wage.

Furthermore, Ida said that the current minimum wage in almost all regions in Indonesia has exceeded the median wage. In fact, said Ida, Indonesia is the only country with a Kaitz Index greater than 1. Where according to Ida, ideally it is in the range of 0.4 to 0.6.

"This condition of a minimum wage that is too high has caused most of our employers to be unable to reach it and will have a negative impact on implementation in the field," she said in a virtual press conference, Tuesday, November 16.

According to Ida, it is very visible that the minimum wage is used as an effective wage by entrepreneurs. So that wage increases tend to only follow the minimum wage without being based on individual performance.

"This is also what makes friends who are trade unionists, labor unions are more likely to demand an increase in the minimum wage compared to discussing performance or productivity-based wages. Only based on region, namely the provincial minimum wage and the district/city minimum wage, there is no longer any determination of the minimum wage based on sector," she said.

Furthermore, Ida said that the sector minimum wage (UMS) that had been set before November 2, 2020, would still apply until the UMS ended or the provincial minimum wage or the district minimum wage in the region after it was higher. Thus the UMS remains valid and must be implemented by entrepreneurs.

"I also want to convey that the Ministry of Manpower has submitted data sourced from BPS in determining minimum wages to all governors and we also ask governors to submit to regents, mayors in the governor's area so that all regional heads can set minimum wages according to the rules," she said.