Labour Standards in Global Supply Chains: A Programme of Action for Asia and the Garment Sector in Indonesia

Context

In Indonesia, the garment sector accounts for around 1.4 per cent of total Gross Domestic Product (GDP) and 6.6 per cent of total merchandise exports, corresponding to an export value of around US$ 11.6 billion. More than 4 million people are employed in the garment sector in Indonesia, around 58 per cent of whom are women. There are more than 2,000 medium and large size garment manufacturers in Indonesia.

Wages in the garment sector in Indonesia were around US$ 154 per month in 2016, and have grown in nominal terms by around 8.8 per cent per annum since 2012. The raw gender pay gap in Indonesia’ garment sector is approximately 6.8 per cent. Nearly 60 per cent of workers in the garment sector in Indonesia work excessive hours.

Geographically, employment in the garment sector in Indonesia tends to be concentrated in provinces with the lowest minimum-wage levels. Minimum wages are set at the provincial, district and industry level. In 2017, these ranged from around US$ 266 per month in DKI Jakarta to around US$ 100 in DI Yogyakarta. Dispersion between the highest and lowest provincial minimum has been widening over the past decade.

Objectives

In Indonesia, the two principal objectives of LSGSC project during its third and final phase were to strengthen the capacity of the ILO's tripartite constituents to develop and implement:

• Policies on wages through social dialogue
• Collective bargaining agreements at enterprise and multi-enterprise levels

Highlights

In pursuit of these objectives, amongst other interventions, LSGSC:

• Contributed to strengthening and expanding social dialogue on wage issues. In particular, LSGSC provided technical assistance to Indonesia’s National Wage Council, with a focus on minimum wage monitoring based on a participatory and evidence based approach that tracks the evolution of various indicators at different levels of analysis, such as changes in the wages and its distribution, economic growth, productivity, employment and enterprise creation, amongst other factors.
• Assisted the ILO’s social partners to develop and implement 11 new Collective Bargaining Agreements (CBAs), benefitting an estimated total of more than 50,000 garment factory workers, and their respective employers This was the direct outcome of implementation by LSGSC of an enterprise-level pilot programme on effective collective bargaining. Participants reported positive outcomes including smoother negotiations, and greater clarity on the laws that govern worker-employer relationships in the garment sector in Indonesia.
• Scaled-up and supported institutionalization of a culture of sound industrial relations in Indonesia by supporting the Ministry of Manpower (MoM) to provide training on negotiation skills to more than 150 trainers representing trade unions, APINDO, and government officials.
• Collaborated with Better Work Indonesia (BWI) to develop new research on decent work outcomes of collective bargaining in garment factories in Indonesia, based on preliminary analysis conducted with WageIndicator Foundation.