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Cablegate: East Java Minimum Wage Levels Disputed

VZCZCXRO3912
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJS #0122 3571059
ZNR UUUUU ZZH
R 231059Z DEC 09
FM AMCONSUL SURABAYA
TO RUEHJA/AMEMBASSY JAKARTA 0498
RUEHC/SECSTATE WASHDC 0508
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 0227
RUEHWL/AMEMBASSY WELLINGTON 0195
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEHJS/AMCONSUL SURABAYA 0521

UNCLAS SURABAYA 000122

SIPDIS

DEPT FOR DRL/LAB JUNK
DOL FOR DOL/ILAB

E.O. 12958: N/A
TAGS: ELAB ECON ID
SUBJECT: EAST JAVA MINIMUM WAGE LEVELS DISPUTED

This message is Sensitive but Unclassified. Please protect
accordingly.

1. (SBU) Summary: Local governments revise the monthly minimum
wage on an annual basis. Revisions are based on annual cost of
living surveys conducted by Wage Councils. The Wage Councils
represent government, business, labor, and academia. In East
Java, labor is concerned that the 2010 minimum wage is too low.
The East Java government plans to introduce a tiered minimum
wage system in 2011.End Summary

2. (SBU) Due to decentralization, local governments at the city
and regency level determine the monthly minimum wage. The
minimum wage is re-evaluated annually. Each regency or city has
a Wage Council that submits a proposed minimum wage to the mayor
or regent for review. The Wage Councils perform an annual cost
of living survey to determine the proposed minimum wage. The
survey focuses on the price of 46 goods and services at several
low-cost markets in the regency or city. The list of goods and
services considered in the survey is mandated by national law.
The survey focuses on the cost of living for an individual.
Mayors and regents submit the suggested wage to the provincial
governor for final approval. While regents and mayors will
occasionally alter the Council's proposal, or even choose
between competing proposals that come out of the Council,
governors generally approve regents' and mayors' suggestions.

3. (SBU) The Wage Councils consist of representatives of
government, business, labor, and academia. While there is no
regulatory requirement regarding the number of members on the
Council, by law, the ratio of government, business, and labor
representatives must be 2:1:1. There is no restriction on the
number of academics on the Council. The relevant government
institutions choose the government representatives, local
business associations choose the business representatives, labor
union organizations choose the labor representatives, and the
mayor or regent chooses the academic experts. Council members
serve for three-year terms.

4. (SBU) The provincial government announced the 2010 minimum
wages for East Java in November. Wages are scheduled to
increase in every city and regency in the Province. The
increase varies from 1% in Magetan Regency to 20% in Pamekasan
Regency, as compared to the 2009 wage. The highest wage
continues to be in Surabaya City, at $109 per month. The lowest
wage, $66 in Pacitan Regency, is the lowest in Indonesia. The
chairman of the East Java Business Association (APINDO), Alim
Markus, said that APINDO accepted the minimum wage increases
since the process followed the proper procedure.

5. (SBU) However, the East Java Labor Alliance (KASPI) has held
demonstrations protesting the 2010 minimum wage as being too
low. Jamaludin, the coordinator for KASPI, said that his
organization performed an independent cost of living survey and
found that the proposed wage for Surabaya should be $120 per
month. He also said that the average 2010 minimum wage in East
Java, at $83, is much too low when compared to Jakarta's average
of $118 and West Java's average of $90. Syaiful Aris, the
director of Surabaya Legal Aid, argued that the minimum wage
formulation frequently does not accommodate labor's interests
because of the low number of labor representatives on the
Council.

6. (SBU) In an effort to address these concerns, the East Java
governor is planning to apply a tiered system to determine the
upcoming 2011 minimum wage. Under the new system, there will be
minimum wage tiers based on the type of job and the education
and skill levels of the employees. The wage at the lowest tier
would be based on the current minimum wage levels. The Vice
Governor of East Java, Saifullah Yusuf, said that this tier
system will address the concerns caused by the current system.
However, Jamaludin expressed concern that, under the new system,
the lower tier wages would fall behind increases in the cost of
living. He pointed out that many workers in East Java are
uneducated and unskilled. The East Java Manpower Department's
data shows that 60% of East Java's work force has an elementary
level education, or lower. Jamaludin said that the government
should remember that the minimum wage is part of government's
social program and should be based solely on the cost of living
and not on the skill or education level of the workers.

MOBLEY

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