7 February 2011

Decline in workers' purchasing power threatens consumption, national industry

Kompas - February 4, 2011

Inflasi - Daya Beli Buruh Bakal Kian Merosot – Kompas. Jumat, 4 Februari 2011.

Jakarta -- The government should be more serious about controlling the rising rate of inflation. If the situation continues, people's purchasing power, especially fixed-income labor groups, will continue to decline and impact on national consumption levels.

The decline in domestic consumption will further weaken the resilience of national manufacturing industries that are already reeling under the impact of imported products. Declining domestic purchasing power will result in the national economy being more vulnerable to crisis.

This was the common threat expressed by the chairperson of the Indonesian Employers Association (Apindo) Sofjan Wanandi and the secretary general of the All Indonesia Workers Organisation (OPSI) Timboel Siregar, who were contacted separately on Thursday February 3. Both were asked for their views on the inflation rate in January 2011 of around 0.89 percent and the annual inflation rate of 7.02 percent.

"The purchasing power of workers will decline further due to rising prices of basic goods so that real wages will continue to decline", said Siregar.

This will result in workers being unable feel the gains from provincial minimum wage increases (UMP) in 2011. Of the 29 provinces that have a provincial minimum wage, in 2011 only eight have set this to 100 percent or more of the reasonable living cost index (KHL).

Siregar gave the example of Jakarta, which has set the 2011 provincial minimum wage at 1.29 million rupiah per month, up from 1,118,009 rupiah in 2010. However this is still below the reasonable living cost index of 1,404,829 rupiah per month.

The continuing increase in the price of basic commodities is making it hard for workers to enjoy the efforts of their hard work. A single worker spends about 45 percent of their wages for renting a room or house and transportation costs plus an additional 30 percent more to eat each day.

Wanandi warned the government that it must control inflation. "I am really worried about the current situation when the government is not seriously taking care of manufacturing. The UMP has now risen by 10-15 percent. In fact it should have been increased by 2-3 percent more because of inflation", said Wanandi.

The Ministry of Labour and Transmigration has received requests for a postponement to the imposition of the minimum regional wage from 82 firms with 4149 workers. These requests came from two companies from Papua, 21 from Central Java, 60 from West Java and two from East Java. (Ham)

[Translated by James Balowski.]

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