Strike Demonstrates Indonesian Labor’s Clout

The 2 million-odd workers on the streets across Indonesia, demanding a 50 percent minimum wage increase, are an indication as 2014 elections approach of the growing strength of the country’s labor movement. There is even talk of a Labor Party being formed for the 2019 general elections.

In Depok, south of Jakarta, three retailers — Giant, Carrefour and Tip Top — were closed due to the strike. Tip Top, a supermarket, reopened in the afternoon. Violence flared briefly workers attacked a shoe factory near Jakarta, destroying machinery and forcing reluctant workers to join them. Workers in 20 of Indonesia’s 34 provinces joined the strike, according to labor leaders. Jakarta Police Senior Cmdr. Rikwanto said 17,276 officers had been assigned to manage traffic and maintain orderly conduct.

Despite the clamor, Jakarta Governor Joko Widodo today set the capital’s minimum wage for 2014 at Rp2.4 million ($213) per month, well below the Rp3.7 million demanded by the city’s workers. Widodo said he had agreed on the new minimum wage after balancing the country’s economic growth with the cost of living for its low-paid workers.

Although the government refused to accede to the full demands, the movement’s clout has made it into a powerful voting bloc, with some of the bigger labor confederations aligning themselves with the major political parties with the potential to deliver substantial numbers of voters.

This growing power is concerning both domestic and international investors, who have vainly sought changes in the 2003 labor law passed in the wake of Suharto’s fall. The law makes it almost impossible to lay off incompetent or unwanted workers. A dismissed worker is eligible to receive 32 months' worth of wages.

That resulted in employers “outsourcing” jobs to contract workers who weren’t covered by the 2003 law. However, in yet another show of force, last year organized labor forced the government to ban a variety of outsourcing jobs. They are demanding additional protection from outsourcing as a part of the current two-day labor action, which started yesterday.

With freedom to organize guaranteed by the constitution written after Suharto’s fall, the number of unions has exploded. The presence of so many proliferating labor groups frustrates employers as they often have to deal with more than one, sometimes dozens in negotiating collective agreements. It takes only one union to break any deal, which happens often.

Although the Association of Indonesian Employers has demanded that the government register the unions to determine which ones are legitimate, the unions have successfully pushed aside the claim.

Workers also won a big concession this year with the establishment of a new national agency to manage social security, paving the way for the implementation of the 2004 law on social security in 2014. Employers and the government had hoped in vain that would soften the unions’ opposition to amending the labor law. They also pushed President Susilo Bambang Yudhoyono to grant a May 1 holiday in line with the international May Day leave, starting next year.

While the labor organizations claim they represent all of Indonesia’s 125 million workers, in a population of 248 million, in fact they don’t represent anywhere near that number. Up to 90 percent of Indonesia’s workers are in the informal sector, in small, makeshift businesses and shops, or in factories and other businesses where managers keep the workers off the books with the connivance of government officials. Formal employment is actually only estimated at around 44 million – about third of what the unions claim.

While the government last year pushed through the regulation on restricting employment in outsourcing to a handful of occupations, most observers believe the new restriction has only discouraged further formal employment and has driven a bigger wedge between wages, discouraged labor-intensive businesses and impeded structural change.