Minimum Wage Setting Reform and Collective Bargaining in Indonesia

Abstract

This paper discusses recent reforms in Indonesia’s minimum wage-setting regime and relate these to the perspective of free collective bargaining and the strengthening of the country’s collective institutions. It is an extended and updated version of a recent book contribution of the author. The paper introduces Indonesia’s post-1945 economic development and labour relations as well as its main labour market features, before focusing on developments in formal minimum wage-setting. Through the 2015 reform, the Widodo I administration aimed to ‘depoliticise’ minimum wage-setting, although the new system would have generated higher minimum wage increases than its predecessor. By eliminating the sectoral minimum wage and the decent living needs (KHL) weighting factor, under the Widodo II administration the 2020 ‘Omnibus’ Law and the 2021 Regulation on wages have taken away key functions of the Provincial Minimum Wage Council: with all existing constraints on collective bargaining, virtually the only forum left for many unions to show their functionality. In conclusion, it is unlikely that Indonesia’s more restrictive decision-making on minimum wages along the lines of the recent reforms would spark free collective bargaining.

This paper is an extended and updated version of the author’s contribution to: Van Klaveren, M. (2021) Chapter 9. Minimum Wages in Indonesia. Informality, politics and weak trade unions in a large middle-income country, in Dingeldey, I., Grimshaw, D., Schulten, T. (eds) Minimum Wage Regimes. Statutory Regulation, Collective Bargaining and Adequate Levels. London / New York: Routledge, 191-205 

This publication has no pdf download available. The full publication can be purchased as E-book (Kindle) or as hardcover at the link below:

• https://www.routledge.com/Minimum-Wage-Regimes-Statutory-Regulation-Collective-Bargaining-and-Adequate/Dingeldey-Grimshaw-Schulten/p/book/9781138392380