Indonesia: Worker Solidarity Gets Results

A strike by 2 million blue-collar Indonesian workers over wages and job outsourcing resulted in government promises to improve worker pay and restrict the use of workers subcontracted through labor agencies.

The one-day walkout in October halted work on more than 80 industrial “estates” (sites) mainly throughout Java and the island of Batam, across from Singapore. Union leaders vowed to press ahead with industrial action if the government did not take action. In response, Chief Economics Minister Hatta Rajassa said the government would seek to increase worker pay and issue a new regulation designed to better enforce rules regarding subcontracting.

In Indonesia, where 16 million workers—roughly 40 percent of the country’s formal labor force—are labor agency employees, “outsourcing” is similar to U.S. subcontracting practices. But there are key differences. In Indonesia, outsourced workers are recruited by third-party agencies or individuals to work on production lines side by side with a company’s employees. Their “employer” is the middleman, who takes a cut out of each pay check. The worker often receives less than the minimum wage and no benefits.

Manpower and Transmigration Minister Muhaimin Iskandar has said he will facilitate meetings between employers and labor unions to solve these crucial issues.  He also said he would ensure that employers comply with laws covering outsourcing and wages so the country would be a better place for the workers and foreign investors.

Mudhofir, president of the Confederation of Indonesian Prosperous Labor Unions (KSBSI), said that the strike was unavoidable because the government had breached a September 15 deadline set by union leaders to review outsourcing practices and revise the wage system. But workers now plan to wait and see if the government acts on its promises. According to Said Iqbal, president of the Confederation of Indonesian Trade Unions (KSPI), “We are not planning any more strikes…until after dialogue with the government and the employer associations. Then we’ll see if the results are satisfactory.”

Wages in Indonesia, which are among the lowest in South Asia, are a draw for labor-intensive manufacturers. Union leaders say Indonesian minimum wages have never been sufficient for workers to support themselves and their families. Annual minimum wage hikes over the past decade have not kept up with inflation, and workers’ purchasing power is declining every year. During the strike, workers called for the government to speed up implementation of last year’s new social safety net law that, in part, mandates health care coverage to all Indonesians.

The strike also moved local governments to act. West Java Governor Ahmad Heryawan circulated a notice informing regents and mayors about work contracts, including the use of the outsourcing system. Batam’s local government and the Batam Free Trade Zone Authority (BPK-FTZ) have agreed to no longer promote low-wage labor to investors who wish to do business in Batam. Instead, they will promote the quality of human resources, manpower and infrastructure, according to news reports.

The strike fostered employer discussions around worker rights.  In news reports, business leaders said the government must guarantee that workers receive social benefits, including health insurance, even if they are outsourced and short-term contract laborers.