BETWEEN WAGES AND PRODUCTIVITY

Assuming there was this following question: “increase salary first, and workers productivity would increase”, or “productivity of workers increase first and salary increase would follow” it would be hard to state which of the two statements was right. If fact it is a matter of working ethos.

Once upon a time there was a story about working ethos among workers in Company A. it was told that they had accomplished their task and they reported to the company’s manager follows: “We report: task accomplished, is there anything else to do?” The Manager told them to go home and return the next day.

What would be a typical example of the above case in Company B? The Company B workers would report to their Manager as follows: “We report, task accomplished, we must go home” As the task was accomplished, they used their right to go home. A distinct difference between Company A and Company B workers. Small wonder that investment flow to Company a kept increasing, as investment flow to company B tend to decline.

The above story was a portrait of working ethos. Good working ethos would enhance high productivity. In case of company B, the point under question was the we mindset and attitude of local workers. If the attitude of local workers tend to be provocative, investors would be reluctant to invest in Indonesia as the risk was high.

Lately, the cast of workers demand in terms of wages increase had become a discourse in local and foreign companies including Joint venture companies. They believed that a too-high demand would cause company’s production and operational cost to increase, which would result in cost increase being burdened on consumers.

Companies rated workers’ plan to demand wages increase by up to 50% was over-demanding. Last year they demanded increase of nearly 50% and had been fulfilled by companies. So if workers demanded another increase it would be too heavy for companies and might injure consumers. Companies claimed that demand for wages increase exceeding reasonable level would over burden companies especially of the labor intensive industry.

It must be understood that increasing prices were contributive to inflation process. In the end it was the consumers who would be burdened as budget soared up. However the company’s management delegated the case to the tripartite forum to discuss. As business people, they always coordinate with associations in solving labor problems.

The Association of Indonesian Textile Association [API] Ade Sudradjat mentioned that if the minimum wages increase to Rp.3.7 million was fulfilled many companies would relocate their bases to another region or even abroad. It was just like chasing away labor intensive industry from Greater Jakarta and the relocation was not even guarantee that all would go well.

The illustration was like this: a pharmaceutical producer moved from Jakarta to allocation in Central Java. In terms of labor cost it could be lower, but in terms of other cost, let’s say transportation cost and imported auxiliary materials would certainly be more expensive.

Obviously the imported content must be transported from Tanjung Priok Harbor in Jakarta and on to Central Java, and the transportation cost was bound to be high. There were other problems: if factory workers refused to move to Central Java, would the local workers be ready to replace them? Apparently relocation of industry was no solution to a problem but create new problem instead.

Admittedly to demand wages increase was workers’ right. But again, back to the business people: could they afford to meet workers’ demand? The demand of wages increase by 50% on the average triggered objections especially by business people and the Government.

As known, the Confederation of Indonesian Labor Unions [KSPI] were determined to fight for the demand especially in Jakarta to be Rp 3.7 million. KSPI also rejected the policy package concept being adjusted to inflation increase. In principle workers did not wish to return to the cheap labor regime. In the past low wages served as selling point to attract investors to Indonesia; investments were expected to propel national economy and promote people’s welfare.

In reality, the low-wages policy was accused as being advantageous to capital owners and had no positive impact of the distribution of wealth. What actually happened was that investments swelled up while workers got stuck in misery. On the other hand, grievances of business people was based on calculation of production cost. Too high salary would mean high operational cost which would be burdened on consumers.

Ever since industrialization began, the two poles: employers and employees were hard to come to terms and meet at one point of agreement. The industry, particularly labor intensive industry, never made it to escape from wages problem. In fact the dilemma could be overcome if the Government had serious commitment to stop the law-salary regime.

Calculation of wages on the basis of decent living standard must be the base of every investment activities. Hence production calculation would boil down to rational corridor. Both sides must be willing to listen to the counterpart’s view. Companies were expected not to ignore workers’ wages for the sake of rational production cost, while workers while workers must not force to have their claim accepted.

In view of the entire system, the salary system must be improved so the concept of cheap labor would no longer exist. To look at the matter more closely, businesspeople could easily close their business resulting in their workers losing their jobs. The businesspeople could still live well as they were in possession of wealth, while the fired workers would suffer in their joblessness. There were many job seekers who would gladly replace the dismissed workers.

So if both sides were persistent in their bargaining, the “advantaged” party was still businesspeople as employers. This was the one point frequently over looked by workers so they demanded something beyond reasonable standard. Hence within the context of salary system, aspiration of employers and employees must be accommodated. The Board of Salary Management must serve as facilitators to arrive at Win-Win solution between employers and employees. If both sides had good intention, there should be no problem which could not solved for both sides interest. 

Business News - September 18, 2013