Wages clash looming in Indonesia?

After the recent focus on electoral politics in Indonesia, culminating in the victory of Joko Widodo’s (Jokowi’s) presidential campaign, trade unions look set to return to the streets. The underlying issue facing workers hasn’t changed that much since Jokowi’s election victory in July: the cost of living is rising, particularly in urban regions, and this is eating into real wages. In Jakarta, an indication of this is that the number of people officially below the poverty line actually increased last year due to food and fuel price inflation. Unions have led several large strikes and street marches in recent years to campaign for higher wages and other issues like restrictions on company outsourcing. In October last year, about two million workers participated in a general strike.

On 2 October, about 50,000 workers marched in cities across Indonesia demanding higher wages, better and free medical insurance and an end to ‘outsourcing’, i.e. hiring through labour-hire firms. Unions have threatened to call much larger protests in the next 4-6 weeks unless their demands are taken seriously. In Jakarta, unions are threatening a two-day strike by the end of October unless the minimum wage is increased to Rp 3.2 million per month (about $AU 300). The current minimum wage in Jakarta is less than Rp 2.4 million ($AU 225). In Batam, an Indonesian island off Singapore’s coast and a key ‘Free Trade Zone’, unions are pushing for a 50 per cent increase in the minimum wage. Most firms in Batam are electronics manufacturers headquartered in Singapore.

At the heart of these protests is the leadership of the Federation of Indonesian Metalworkers Union (FSPMI), which forms the core of the Congress of Indonesian Trade Unions (KSPI) and organises thousands of manufacturing workers. Union organisation in Indonesia is divided into three competing peak bodies that remain mutually distrustful while many unions remain reliant upon specialist advice from labour NGOs and funding from unions in Europe and the United States (see Ford, 2009, for the best analysis of Indonesian unions in the post-Suharto era). The KSPI, which split from the still-active Suharto-era ‘official’ union (KSPSI) several years ago, has arguably played the key role in rebuilding the labour movement. With significant financial and institutional support from the International Metalworkers Federation and legal/strategic support from the Trade Union Rights Centre (a labour NGO funded by the Confederation of German Trade Unions DGB), FSPMI has become a well-organised union with a substantial dues-paying membership concentrated in the manufacturing zones of West Java and Batam. In many ways, FSPMI has become the key labour union in the country given the massive concentration of manufacturing investment in cities like Bekasi, Tangerang and Karawang that link into the Greater Jakarta urban region.

While I’m certainly no expert on Indonesia, I spoke to several FSPMI unionists in Jakarta in February and their achievements are impressive. For example, the union has a major presence in the auto industry (which is one of my main areas of research). Indonesian auto production is dominated by Japanese firms, especially Toyota which has operated in a partnership with local manufacturer Astra International since 2003. Toyota Astra has six factories, mainly based on Bekasi, and employs about 35,000 workers as well as substantial links to auto parts makers who employ thousands more. As well as Toyota, other key firms include Honda, which has factories in Bekasi and Karawang, Nissan, Daihatsu, Suzuki and, since September, Tata Motors from India. (For some reason, there is still relatively little investment from European and American carmakers.)

Remember that one of the Indonesian economy’s defining features during the Suharto era was ‘light’ manufacturing, focused on export-led investment in textiles, clothing and footwear. One of the signs of Indonesia’s economic development since the 1990s is that capital-intensive manufacturing like the car industry has been on the rise, leading to some economic rivalry with Thailand and Malaysia. Higher wages have seen many labour-intensive manufacturers relocate to even lower-wage Asian countries like Vietnam and Cambodia although significant light manufacturing remains in Indonesia and, importantly, the country remains predominantly rural-based. Nevertheless, by 2011, Indonesia could produce about three million cars and 4-5 times more motorcycles and scooters.

FSPMI’s automotive division, SP-AMK (Serikat Pekerja – Automotif Mesin dan Komponen), claim about 80,000 members in over 230 auto plants. In February, I met with their local president in Bekasi, Rustan ST, and secretary Heryanto Achmad. They claimed that 46 per cent of the auto industry is covered by union-negotiated collective agreements, which usually last for two years. While SP-AMK mainly has a presence in the auto supply chain where most auto employees work, KSPSI, the Suharto-era union, has a stronger presence in the assembly factories of Toyota, Honda Motorcycles and Daihatsu. SP-AMK also has members in Yamaha, Suzuki, Hino trucks, Mitsubishi, Nissan, Kawasaki, Honda parts and Isuzu. About half of SP-AMK’s current membership came from the KSPI split with KSPSI after 1998, with the rest recruited through organising drives. Clearly reflecting the influence of German/European unions, SP-AMK’s leaders have a clear industrial strategy based on organising drives for collective wage agreements. They wait until 60-70 per cent of workers in a plant are convinced before engaging employers in collective bargaining. The main problem, according to Pak Rustan is workers who lack the ‘skills’ to negotiate rather than employer hostility. (This is quite different to my research in India where auto employers are usually deeply hostile to recognising unions). Thus, there is a mindset of ‘worker education’, based on a Western-style collective bargaining strategy, which underpins SP-AMK’s work.

But collective bargaining is only part of FSPMI’s approach. Led by Said Iqbal, who is now also KSPI president, the confederation has often taken to the streets to challenge government policies on minimum wages and outsourcing. FSPMI also remains pragmatic about official politics: controversially, Iqbal supported Prabowo Subianto’s presidential bid, although the union as a whole had differing opinions. In different areas, unionists ran as candidates for various, often competing political parties. With the elections over for now, it seems that attention has turned back to the streets and workplaces. One of the long-term demands of the movement is to widen the number of goods included in inflation calculations, which are used to influence minimum wage decisions, from 60 currently to 84. Thus, the issue is not just the level of minimum wages which act as guidelines for manufacturing workers’ wages in Indonesia, but the method of calculation.

Authorities have resisted these demands, especially in Jakarta, and have tried to focus the debate on the level of wages rather than how they are calculated. The Jakarta government’s ‘wage council’ has promised to restrict the minimum wage to a 10 per cent increase in 2014/15, well below union demands for a 30 per cent rise. In fact, the city government led (at the time) by Jokowi gave permission for 14 firms, each with over 1000 employees, to pay sub-minimum wages in January. It is important to remember that Jokowi is basically representative of business. He was a furniture businessman in his hometown, Solo in Central Java, and led his local employers’ association before entering politics and successfully running as the local governor. His campaign reflected the frustrations of small-and-medium sized firms with the corruption and inefficiency that plagues big business and state institutions in Indonesia. Partly for this reason, and partly because he was running against the despicable Prabowo for Indonesian president, many Indonesians and Indonesia watchers around the world regard Jokowi as somehow ‘progressive’. While he no doubt stands on some sound principles, he is not, and has never been, friendly to unions or workers. If Indonesian authorities, nationally and at a local level, continue to resist the KSPI/FSPMI-led push for living wages and better employment conditions, then industrial conflict could well become one of the hallmarks of Jokowi’s nascent presidency.


Ford, M. (2009) Workers and Intellectuals: NGOs, Trade Unions and the Indonesian Labour Movement, Honolulu: University of Hawaii Press

Elsewhere in Indonesia…

While protesting in Jakarta on 2 October, the KSPI also raised the plight of workers at the Freeport gold mine in Papua province (West Papua). In late September, four workers at the American-owned mine, the world’s largest gold mine and the third largest copper mine, were killed in an accident involving a mining vehicle. Workers blockaded the main road to the site for several days until the company finally agreed to act to improve safety conditions. The brief civil disobedience of the Freeport workers, and the solidarity from KSPI workers in Jakarta, is a reminder both of the vast scale and spread of Indonesia’s working class as well as the appalling conditions under which workers are employed in Indonesian mines. In July, nine more gold miners died in a separate accident in Papua and this month 18 workers were killed in a gold mine collapse in the province of Kalimantan.

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