The Wage Council Conclusion

41 E D I S I 0 2 T A H U N X V I I 2 0 1 1

3. MINIMUM WAGE AND YOUTH EMPLOYMENT OF INDONESIA

The increases in the minimum wage observed in Indonesia are caused by a number of weaknesses in the process of fixing minimum wage. The determination of the index is less cautious since the enactment of local autonomy lacks the guidelines on how to use other criteria for fixing the minimum wage and the low participation of key stakeholders in the process of wage determination. Minimum wage setting process becomes more complicated since the delivery of minimum wage fixing authority to local governments in the era of autonomy. Theoretically, labor demand is strongly influenced by wage levels. A problem that often occurs in terms of wages is a difference between understanding and interest in wages between employers and employees. Government policy is needed to overcome the differences of interest. One of the factors that support the development of a country is the improvement of wages. Wage improvements will increase revenue for the community, which in turn affects the purchasing power. Increase in demand for goods and services caused by the increase in income led businesses to grow faster.

3.1. The Wage Council

The wage council is an institution who has the function of formulating the minimum wage that became the basis for setting minimum wages by the regional head. The wage council is a tripartite structural organization responsible for providing advice to the head of the blood in setting minimum wages and regulating the system of wages and materials to prepare the formulation of wage system. The council consists of a balanced tripartite representation model that talks every year to determine the value of the minimum wage. The main basis for the increase in rates in the minimum wage is a survey of the market price of the living minimum requirements. In 2000, the wage council significantly changed, both in its composition and wage-setting mechanisms. This is related to the implementation of regional autonomy and freedom of association. A previous member of wage council is dominated by government representatives from various agencies. At that time, workers represented by a union, trade unions all over Indonesia, while business associations represented by the association of Indonesian businessmen. The model composition dominated by representatives of the governments do not pay commissions more as a tool of government control of the provisions on wages to comply with the policies formulated by the government of Indonesia, especially those associated with low-wage policy to attract investors. The impact of that is the minimum wage which is produced by provincial wage commissions more supportive of policies that instead of paying attention to improving working conditions. The dominance of government in the provincial wage commissions reinforced by the minimum wage fixing authority conducted by the minister of labor, thus legalizing the formation of provincial wage council of government intervention on the provision of minimum wages in accordance with their interests. At the present, the wage council is using a model representation of a balance composition. Each element of the tripartite has the same number of representatives in the council of wage. Increasing the number of representatives of trade unions in wage council is related to the ratification of the conventions of the International Labor Organization on freedom of association. The trade union registered in the provincial labor office has the right to become a member of the wage council. The more the number of registered trade unions will increase, the more the number of union representation on the wage council. Increasing the number of trade union representatives will be accompanied by an increasing the number of employers and government representatives, so the composition remains balanced representation. These changes provide opportunities for workers to participate in decision- making in wage council so that workers can take advantage of the wage commissions to fight for better conditions. The other changes occur in the wage setting mechanism. Based on Ministerial of Labor decree No. 2262000, the provincial and district minimum wage fixing authority was delegated to the governor. Devolution of this authority is the actualization of the regional autonomy policy. On the dimensions of decentralization of public services at the local level, the government as a public servant will be closer to the community and be able to understand and absorb the aspirations and interests of local people as the subject of service. It actually can provide an opportunity for the central government and more oriented to the interests of local communities. In other words, the governor can set wages in accordance with the aspirations of local communities whose results are expected more in line with actual conditions.

3.2. Minimum Wage Setting: mechanism and procedure