Labour Intensive Minimum Wage: Executive Discretion on Regulated Labour (Part I)

When it was issued a few months ago, West Java Governor Decision about certain labour intensive-garment industry minimum wage (garment sector minimum wage) initiates debates in the labour realm. The high point of the debate is the amount of the minimum wage in question which is lower than the city/regency minimum wage. On the sideline of the focus is on the due process of the establishment of the Decision that heavily influenced by what the state assert as administrative discretion.

Some claim that the garment sector minimum wage that applies in four cities/regencies in West Java (Kabupaten Purwakarta, Kabupaten Bogor, Kota Depok and Kota Bekasi) is necessary to sustain the country position as one of the leading producers in the ever-complex international garment supply chains. They assert that the minimum wage regulatory construction does not recognize minimum wage for the labor-intensive industry. It only put all types of industry in one group with one general label: industry (employer). Thus, regulated minimum wage, in this case, provincial or municipal minimum wage, is industry blind. It does not consider the financial constraint inherently to labour intensive industry as their labour cost is higher than capital-intensive industry. Higher labour cost, they assert, has caused the Indonesian labour intensive industry its competitive value compared to other (cheaper) manufacturing countries in the international market.

The opponents, however, argue that the regulatory rationale of the Decision only stems from economic efficiency idea. Statutory instruments that centered on efficiency theory often creates bias in favour to those who have capitals and does not address the distribution of welfare discourse. They also argue that such regulatory product dismisses the inherently unequal bargaining power in the market. Instead of protecting the rights of those who have lesser bargaining power, the regulation emphasized the uneven power relations and undermined wider social interests in the distribution of justice (welfare). Additionally, the regulatory foundation that is used to produce the Decision is clearly classified sector-based minimum wage that amount should not be lesser than the prevailing provincial or municipal minimum wage.[1]  Thus, it is asserted that the Governor Decision distort legal certainty of the superior regulatory instruments.

Despite dissenting opinion, obscured legal standing and regulatory objective behind the Governor Decision, one thing for sure is that a first labour intensive minimum wage would not be established without the central government influence. This raises the question how immense the executive power intervention on regulated labour. It also begs the question of legal certainty and of regulation effectiveness to address competing market interests.

 

[1] See Minister of Manpower and Transmigration Regulation No. 7 Tahun 2013

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