Background

ILO Regional Office for Asia and the Pacific is implementing a project titled ‘Labour standards in global supply chains: A programme of action for Asia and the garment sector’. The project has activities in Indonesia, Cambodia, and Pakistan, as well as at the regional and global levels. The first year of this project is being carried out under a grant agreement between the ILO and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on behalf of the Federal Republic of Germany.

The project’s objectives include strengthening wage-fixing mechanisms in Indonesia, particularly in the garment sector, and providing stakeholders with information to improve the quality of social dialogue around labour issues. Minimum wages are a particular focus. This labour dialogue is part of the project’s first phase of engagement with tripartite stakeholders around minimum wages.

Minimum wages are an important social and economic issue in Indonesia. Minimum wage adjustment has often been a contentious topic and a source of industrial unrest - as in late 2014, when thousands of workers in major cities in Indonesia took to the street demanding higher minimum wages than those set by various wage councils.

While Indonesia’s minimum wage adjustment processes generally involve a role for the tripartite stakeholders, and to some extent are based on agreed criteria, these processes could be improved. In particular, the range of social and economic criteria that are taken into account could be broadened, to more closely reflect the factors referred to in Article 3 of ILO Convention 131. The social partners’ access to, and use of, reliable independent data to inform dialogue could be improved.

Some stakeholders have expressed dissatisfaction with the existing minimum wage system. In the view of some unions, minimum wages are insufficient to allow workers to attain a decent standard of living. On the other hand, some employers have claimed that the existing system has hampered the competitiveness of Indonesian industry. The adjustment process is seen by some as coloured by political factors.

This event is intended to begin a productive dialogue among the tripartite constituents and other stakeholders as part of a move towards improvements in Indonesia’s minimum wage fixing system.

Objectives

This labour dialogue is part of an ongoing process of engagement with stakeholders. This engagement aims to:

• Promote open and productive dialogue among the tripartite constituents and other stakeholders on the issue of minimum wage fixing and wage policy in general.
• Enhance the understanding of the tripartite constituents and key stakeholders of issues relating to minimum wage adjustment processes, including ILO C.131 and the experiences of other countries in the region.
• Assist the tripartite constituents to identify common problems with the existing minimum wage system and possible solutions to those problems.