Private Compliance Initiative: Neo-liberalism Approach on Regulated Labour (Part II)

B. Private Compliance Initiative

Economic globalization has led to the shift of supply chains to less developed countries where cheaper prices and cheap labour are abundant. In the past 30 years, garment industry, for example, significantly expands their production and distribution to less developed countries such as China, Bangladesh and Turkey (Turker and Altuntas, 2014). This has its own risks that are associated with weak regulation and labor inspection in the supply countries, primarily of issues such as working conditions and human rights violations.

Social Compliance Initiative of the international garment industry is fueled by the emergence of media campaigns and the demands of non-governmental organizations, trade unions and customers towards unethical sourcing practice in the global supply chains. These external stakeholders view the international garment business practice has unfairly exploited workers by hiding behind the absence or weakness of regulations and state control over labour issues. Stakeholders also argue that multinational garment corporations have responsibility to ensure workers who make their products are protected and that their universally basic rights are recognized even if they are of other companies within the corporation’s supply chains.

Basically private social compliance initiative aims to encourage ethical sourcing, transparency, and compliance across the supply chain (Mayer and Pickles, 2010). Efforts made outside of these state institutions are voluntary efforts to extend corporate responsibility to the global supply chain. Due to pressure from stakeholders significantly affecting the company’s image that impacts customer confidence and sales volume (O’Rourke, 2003), international garment companies establish an integrated corporate responsibility system in their global sourcing practice and cover all production chains. Opponents of the system argue that the initiative is established only to protect corporation’s image and alleviate the pressure of the external stakeholders. However, the proponents assert that the system not only encourage compliance to the state regulation but also foster a socially responsible market on which sometimes state regulation falls short.

At the beginning of the formation of the social compliance system, international garment companies based their system on the concept of a three-dimensional model principles, policies and processes that evolved as the concept developed. Private social compliance system generally comprises of assessment standards, audits/assessments and corrective actions. In general, the assessment standard or better known as Code of Conduct (CoC) is a summary of the International Labor Organization’s international core labor standards comprising values of child labor protection, recognition of workers’ right to freedom of association, anti-discrimination, anti-forced labor, working time and rest periods, compensation and safe and healthy working conditions (Esbenshade, 2004). Environmental protection is also one of the main concerns of some international garment buyers and covered by their CoCs. The CoCs also include a norm of respecting the National Labour and Environment Regulations.

CoC becomes the main reference in conducting audit or assessment. Assessment can be done by an external party that is an independent audit company or internally by the corporation employees (Welford and Frost, 2006). Assessors and auditors use triangulation method when conducting their work. The method includes document and records checks, interview with workers and management, and production floor observation. The data obtained during the assessment process will be compared with the CoC and concerned National Regulations to determine the compliance level of the supplier. Assessment reports are then used by the auditees to determine remedial measures and by international buyers to weight on their current and future order and production strategies at the assessed suppliers.

Corrective action actions are generally undertaken by the management of garment suppliers under the supervision of international buyers’ representatives. In other words, the plan and implementation of remedial actions are solely the responsibility of the employer, without the involvement of their stakeholders. In this stage of improvement the buyer establishes the time standard of corrective action, provides important information about acceptable corrective action, monitors and periodically measures the results of the improvement. Nike, for example, has teams in countries where the production of goods is conducted that monitors compliance levels and improves working conditions (Carroll, et al., 2013). In a certain period of time, audit or assessment will be conducted again to measure compliance levels and latest working conditions improvement at the suppliers.

B. Prakarsa Kepatuhan Swasta

Globalisasi ekonomi menyebabkan berpindahnya rantai pasokan ke negara-negara yang kurang berkembang dimana harga produkai lebih murah dan pasokan tenaga kerja murah berlimpah. Sektor garmen, misalnya, secara signifikan memperluas produksi dan distribusi barang ke negara-negara kurang berkembang seperti China, Bangladesh dan Turki dalam jangka waktu 30 tahun terakhir (Turker dan Altuntas, 2014). Perpindahan rantai produksi ke negara-negara kurang berkembang memiliki resiko tersendiri terkait dengan lemahnya peraturan dan pengawasan ketenagakerjaan yang menimbulkan masalah-masalah ketenagakerjaan dan hak asasi manusia di supplier-supplier garmen.

Prakarsa kepatuhan sosial industri garment internasional dipicu oleh munculnya kampanye media dan tuntutan lembaga swadaya masyarakat, serikat pekerja dan customer terhadap praktek bisnis yang tidak etis di rantai pasokan global. Pemangku kepentingan industri garmen internasional tersebut melihat bahwa praktek bisnis industri garmen internasional secara tidak adil telah mengeksploitasi manusia dengan berlindung dibalik ketiadaan atau lemahnya peraturan dan pengawasan negara terhadap isu ketenagakerjaan. Para pemangku kepentingan juga berargumentasi bahwa perusahaan-perusahaan garmen internasional memiliki tanggung jawab untuk memastikan pekerja-pekerja yang membuat produk mereka terlindungi dan terpenuhi hak-hak dasarnya yang diakui secara universal,  walaupun secara organisasi pekerja-pekerja tersebut adalah pekerja dari perusahaan lain di rantai supplai mereka.

Pada dasarnya private social compliance initiative bertujuan untuk mendorong ethical sourcing, transparansi, dan kepatuhan di seluruh rantai pasokan (Mayer dan Pickles, 2010). Upaya yang dilakukan di luar lembaga negara ini merupakan upaya yang bersifat sukarela untuk memperluas tanggungjawab korporasi ke rantai pasokan global. Dikarenakan tekanan dari para pemangku kepentingan secara signifikan mempengaruhi citra perusahaan yang berdampak pada tingkat kepercayaan customer dan volume penjualan (O’Rourke, 2003), perusahaan-perusahaan garmen internasional membentuk sistem tanggungjawab korporasi yang terintegrasi dalam global sourcing practice dan mencakup semua rantai produksi. Penentang sistem tersebut berpendapat bahwa prakarsa kepatuhan sosial hanya dibentuk untuk melindungi citra perusahaan dan mengatasi tekanan para pemangku kepentingan. Namun, para pendukung menegaskan bahwa sistem tidak hanya mendorong kepatuhan terhadap peraturan negara tapi membangun pasar yang bertanggung jawab sosial yang kadang-kadang peraturan negara gagal dalam mencapai tujuan tersebut.

Pada awal pembentukan sistem social compliance, perusahaan-perusahaan garmen internasional mendasarkan sistem mereka pada konsep model tiga dimensi mengenai prinsip, kebijakan dan proses yang berevolusi seiring perkembangan konsep tersebut. Sistem private social compliance yang dibentuk terdiri dari pembentukan standar penilaian, audit atau penilaian kepatuhan dan tindakan perbaikan. Pada umumnya standar penilaian atau lebih dikenal dengan nama Code of Conduct (CoC) merupakan ringkasan dari the International Labour Organization international core labour standards yang terdiri dari nilai-nilai perlindungan buruh anak, pengakuan hak pekerja akan kebebasan berserikat, anti diskriminasi, anti kerja paksa, waktu kerja dan waktu istirahat, kompensasi serta kondisi kerja yang sehat dan aman (Esbenshade, 2004). Perlindungan terhadap lingkungan hidup juga menjadi salah satu pusat perhatian beberapa perusahaan pembeli garmen internasional dan menjadi salah standar yang tercakup dalam CoC mereka.

CoC menjadi acuan utama dalam melakukan audit atau penilaian. Penilaian dapat dilakukan oleh pihak eksternal yaitu perusahaan audit atau secara internal oleh perwakilan perusahaan pembeli garmen internasional (Welford dan Frost, 2006). Penilai menggunakan metode triangulasi yaitu pemeriksaan dokumen, wawancara dengan sampel pekerja dan manajemen perusahaan produksi garmen, serta observasi lapangan. Data yang diperoleh selama proses penilaian akan dibandingkan dengan standar CoC untuk menentukan tingkat kepatuhan suatu supplier garmen. Laporan penilaian kemudian digunakan oleh supplier garmen untuk menentukan tindakan perbaikan dan oleh pembeli internasional untuk memutuskan strategi pesanan dan produksi.

Tindakan perbaikan atau corrective action secara umum dilakukan oleh manajemen supplier garmen dengan pengawasan perwakilan pembeli internasional. Dengan kata lain, rencana dan implementasi tindakan perbaikan semata-mata merupakan tanggungjawab dari pihak pengusaha, tanpa keterlibatan pemangku kepentingan lainnya. Dalam tahap perbaikan tersebut perusahaan pembeli menentukan standar waktu perbaikan, menyediakan informasi penting mengenai acceptable corrective action, memonitor dan mengukur secara berkala hasil dari perbaikan. Nike, misalnya, memiliki tim di negara-negara dimana produksi barang-barang dilakukan yang melakukan pengawasan terhadap tingkat kepatuhan dan perbaikan kondisi kerja (Carroll, et al., 2013). Dalam jangka waktu tertentu, audit atau penilaian akan dilakukan lagi untuk mengukur tingkat kepatuhan dan perbaikan kondisi kerja terbaru.

Private Compliance Initiative: Neo-liberalism Approach on Regulated Labour (Part I)

Over the period of three decades, private labour compliance initiative has been a part of doing business globally. The concept comes from the Corporate Social Responsibility idea that has been evolved since the industrial revolution era in the 19’s century that highlighting, among others, poor working condition and unfair treatment in the workplace. At the earlier stage of CSR development, state either had not yet regulated labour and working condition or established a comprehensive and detail regulatory strategy on labour. Thus, it seems corporation and industry were the primary director, if not at the very least the primary player, of labour and social progress. However, with the continuous growth of  state interference on labour regime, cross cutting between the private and state regulatory approach is inevitable. On the notion of financial power and economic influence, global corporation initiative likely more effective compare to state policy. However, whether it is perceived as competing or complementing the existing state policy may influence the general intended objective of labour compliance that is improving working conditions.

A. Development of Corporate Social Responsibility Concept

The origin of the concept of Corporate Social Responsibility (CSR) can be traced back to an industrial revolution in the late 19th century where many businesses and manufacturing are emerging and growing. The emergence of various business sectors raises concerns and criticisms about working conditions, especially on exploitation of women workers and child labour issues. At that time, reformers in Britain and America perceived systems of processing or manufacturing as the source of various social problems including labour unrest, poverty, and child labour and unfair treatment of women in the workplace. Business and industry at that time were not familiar with social concepts. In the industrial revolution, even today, employers sometimes find it difficult to determine what is the reason and objective of establishing  business, that is, to make workers more productive or of social reasoning such as to meet the needs of workers, make their lives better and increase the number of individuals who can contribute in society (Carroll, 2008).

According to Daniel A. Wren, CSR during the industrial revolution was an unbalanced mixture of humanitarianism, philanthropy and business intelligence (Carroll, 2008). Wren also argues that since philanthropic concepts were known earlier than the CSR concept, it is hard to tell whether the philanthropic activities committed by famous entrepreneurs of the time were personal philanthropy or business philanthropy. Nevertheless, the financial or charitable contributions made by entrepreneurs with social objectives such as giving charity to an orphanage can essentially be considered socially responsible action.

Since the industrial revolution up to the 1950s, the concept of CSR varies according to organizational needs and focuses more on actions and activities that benefit the company or shareholders with minimal consideration of the interests of (external and internal) stakeholders. In this period, there are two concepts of CSR that is what is known as profit maximizing management where CSR action is a way that companies take to maximize profits by concentrating donations or financial aid on certain communities or charities that support the company’s business progress. The second concept named trustee management that emerged in the 1920s and 1930s. In this concept, the company has the responsibility to maximize shareholder wealth, and create and maintain a fair balance for other stakeholders such as customers, workers and the community.

The idea of business philanthropy in the industrial revolution period until the late 1940s spearheaded the development of modern CSR idea. According to H.R. Bowen in his book Social Responsibilities of the Businessman published in 1953, which later became the label of the CSR concept in the 1950s, CSR is the obligation of employers to pursue policies, to make decisions or follow the desired line of action in the sense of as (end) goal and (obey) the values of society. The definition of this concept is also explained by K. Davis and William C. Frederick who define CSR as a business contribution to the community (UN ESCAP, 2012). When carrying out its operations to achieve the economic objectives of corporate profits, there is an obligation or responsibility of company to pay back to the community. In other words, within economic goal there are social goal that fulfillment becomes the responsibility of the company as part of the community. William C. Frederik summarized the development of CSR in the 1950s into three core ideas: corporate managers as a public trust through shareholding systems, balanced claims from stakeholders for corporate resources and the acceptance of business philanthropy within CSR (UN ESCAP, 2012).

The development of CSR in the period of 1960s and 1970s is distinguished by the rapid growth of the labor advocacy movement, consumer protection and environmental conservation. During this period, labor issues transitioned from special interest status to the object of formal government regulation (Carroll, 2008). The concept of CSR became more comprehensive by incorporating ideas on corporate responsibility, stakeholder interests, social issues in business conduct, as well as legal rules and ethical values. In 1979, Archie B. Carroll proposed a three-dimensional conceptual CSR model consisting of corporate responsibility, social business issues and corporate action. Furthermore, corporate responsibility is manifested into four types of economics, law, ethics and philanthropic where the order of the four types of responsibility indicates the relative importance of each type (Carroll, 2008). Meanwhile, according to H. L. Johnson, instead of only striving for greater returns to shareholders, corporations are also responsible for calculating the interests of its employees, suppliers, dealers, local communities and the nation as a whole (UN ESCAP, 2012).

The development of the CSR in the 1980s and 1990s adopted the previous concept related to the principles and practical processes in social performance which in line with industry demands and changes of challenges faced by stakeholders. S.L Wartick and P.L. Cochran for example adopted the three-dimensional concept of CSR proposed by Archie B. Carroll in 1979 with focus point on the process by taking more action to address various social problems and simultaneously responding to changes in the community’s challenges (UN ESCAP, 2012). The three-dimensional concept of CSR is then continued by D.J. Wood in 1991 with an emphasis on the results or performance of CSR initiatives. Wood introduced the concept of four types of corporate responsibility: economics, law, ethics and philanthropy related to the three institutional levels of legal, organizational and individual, while at the same time extended corporate actions for assessment, shareholder management and implementation management (UN ESCAP, 2012 ). This CSR concept is known as institutional framework and extended corporate actions.

The period of 2000s was dominated not by a new idea but the empirical research linking CSR to other relevant variables and the implementation of CSR initiatives (Carroll, 2008). In 2003, M. S. and A.B. Carroll introduced the concept of three domain approaches: economics, law and ethics (UN ESCAP, 2012). This concept is a subtraction of Carroll’s earlier concept of introducing four domains of approaches: economics, law, ethics and philanthropy. In this period, the definition of CSR is simplified, but the processes and implementation of CSR initiatives are expanded. The European Commission (2011) defines CSR as a process to integrate social, environmental, ethical, human rights and consumer concerns in business operations and core strategies within the company through close collaboration with stakeholders.

Selama periode tiga dekade, inisiatif privat mengenai kepatuhan ketenagakerjaan telah menjadi bagian dari melakukan bisnis secara global. Konsepnya berasal dari ide Corporate Social Responsibility yang telah berkembang sejak era revolusi industri di abad ke 19 yang menyoroti antara lain kondisi kerja yang buruk dan perlakuan tidak adil di tempat kerja. Pada tahap awal pengembangan CSR, negara belum mengatur tenaga kerja dan kondisi kerja atau menetapkan strategi peraturan yang komprehensif dan rinci tentang ketenagakerjaan. Dengan demikian, tampaknya korporasi dan industri adalah pengarah utama, jika tidak paling tidak pemain utama, dalam kemajuan ketenagakerjaan dan kemajuan sosial. Namun, dengan terus berkembangnya campur tangan negara terhadap ketenagakerjaan, saling silang antara pendekatan peraturan privat dan peraturan negara tidak dapat dihindari. Atas gagasan tentang kekuatan finansial dan pengaruh ekonomi, prakarsa perusahaan global cenderung lebih efektif dibandingkan dengan kebijakan negara. Namun, pandangan-pandangan mengenai apakah inisiatif tersebut menyaingi atau melengkapi kebijakan negara yang ada dapat mempengaruhi tujuan umum kepatuhan ketenagakerjaan yaitu memperbaiki kondisi kerja.

A. Perkembangan Konsep Tanggungjawab Sosial Korporasi

Asal mula konsep Corporate Social Responsibility (CSR) dapat dilacak kembali ke masa revolusi industri di akhir abad 19 dimana banyak usaha dan manufakturing yang bermunculan dan berkembang. Kemunculan berbagai sektor usaha meningkatkan perhatian mengenai pekerja dan memunculkan banyak kecaman mengenai kondisi kerja terutama mengenai pekerja perempuan dan pekerja anak. Pada masa tersebut, reformis-reformis di Inggris dan Amerika mempersepsikan sistem pengolahan atau manufakturing sebagai sumber berbagai masalah sosial termasuk kerusuhan tenaga kerja, kemiskinan, tenaga kerja anak dan perempuan. Sektor usaha dan bisnis pada saat itu belum mengenal konsep sosial. Pada masa revolusi industri, bahkan hingga sekarang, kadang kala pengusaha mengalami kesulitan untuk menentukan apa yang menjadi alasan dan tujuan dibentuknya suatu usaha, yaitu membuat pekerja lebih produktif atau ada alasan sosial seperti untuk memenuhi kebutuhan pekerja, membuat kehidupan mereka lebih baik dan meningkatkan jumlah individu yang dapat berkontribusi dalam masyarakat (Carroll, 2008).Menurut Daniel A. Wren, CSR pada masa revolusi industri merupakan suatu konsep campuran yang tidak seimbang antara humanitarianisme, filantropi dan kecerdasan bisnis (Carroll, 2008). Wren juga berargumen karena konsep filantropi dikenal lebih dulu daripada konsep CSR, sulit dibuktikan apakah aksi-aksi filantropi yang dilakukan oleh pengusaha-pengusaha terkenal masa itu adalah filantropi pribadi atau filantropi bisnis. Meskipun demikian, kontribusi finansial atau derma yang dilakukan oleh para pengusaha dengan tujuan sosial seperti memberikan derma kepada panti asuhan, pada dasarnya dapat dianggap sebagai socially responsible action.Sejak masa revolusi industri hingga tahun 1950an, konsep CSR bervariasi sesuai kebutuhan organisasi dan lebih menitikberatkan pada tindakan dan aksi yang lebih menguntungkan perusahaan atau pemegang saham dengan pertimbangan minimal terhadap kepentingan stakeholders. Pada periode ini, ada dua konsep CSR yaitu apa yang dikenal dengan profit maximizing management dimana aksi CSR perusahaan adalah cara yang diambil perusahaan untuk memaksimalkan keuntungan dengan memusatkan donasi atau bantuan finansial pada komunitas-komunitas atau badan amal tertentu yang mendukung kemajuan usaha perusahaan. Konsep kedua adalah apa yang disebut dengan trustee management yang muncul pada tahun 1920 dan 1930-an. Dalam konsep ini, perusahaan memiliki tanggung jawab untuk memaksimalkan kekayaan pemegang saham, dan menciptakan dan memelihara keseimbangan yang adil bagi pemangku kepentingan lainnya seperti pelanggan, pekerja dan masyarakat.Ide mengenai filantropi bisnis di periode revolusi industri hingga akhir 1940-an menjadi ujung tombak pengembangan konsep CSR modern. Menurut H.R. Bowen dalam bukunya yang berjudul Social Responsibilities of the Businessman yang diterbitkan pada tahun 1953, yang kemudian menjadi nama dari konsep CSR di 1950-an, CSR adalah kewajiban pengusaha untuk mengejar kebijakan, untuk membuat keputusan atau mengikuti garis tindakan yang diinginkan dalam pengertian (sebagai) tujuan (akhir) dan (mematuhi) nilai-nilai masyarakat. Definisi konsep ini juga dijelaskan oleh K. Davis and William C. Frederick yang mendefinisikan CSR sebagai kontribusi bisnis terhadap komunitas (UN ESCAP, 2012). Ketika menjalankan operasionalnya untuk mencapai tujuan ekonomi yaitu keuntungan perusahaan, terdapat kewajiban atau tanggung jawab perusahaan untuk membayar kembali kepada komunitas atau masyarakat. Sehingga dapat diartikan di dalam tujuan ekonomi terdapat tujuan sosial yang pemenuhannya menjadi tanggung jawab perusahaan sebagai bagian dari komunitas. William C. Frederik meringkas perkembangan CSR di tahun 1950-an menjadi tiga gagasan inti yaitu manajer perusahaan sebagai wali publik melalui sistem kepemilikan saham, klaim yang seimbang dari para pemangku kepentingan untuk sumber daya perusahaan dan diterimanya filantropi bisnis di dalam konsep CSR (UN ESCAP, 2012).Perkembangan CSR di periode 1960 dan 1970-an dibedakan oleh pesatnya pertumbuhan sosial gerakan advokasi hak-hak buruh, perlindungan konsumen dan pelestarian lingkungan. Selama periode ini, isu-isu perburuhan mengalami transisi dari status minat khusus menjadi objek peraturan pemerintah formal (Carroll, 2008), sehingga konsep CSR menjadi lebih komprehensif dengan memasukan ide-ide mengenai tanggung jawab perusahaan, kepentingan stakeholders, isu sosial dalam prilaku bisnis, serta peraturan-peraturan hukum dan nilai-nilai-nilai etika. Di tahun 1979, Archie B. Carroll mengusulkan sebuah model konseptual CSR tiga dimensi yang terdiri dari tanggung jawab perusahaan, isu-isu sosial bisnis dan aksi korporasi. Selanjutnya tanggung jawab perusahaan diwujudkan ke dalam empat jenis yaitu ekonomi, hukum, etika dan filantropis dimana urutan keempat jenis tanggung jawab menunjukkan kepentingan relatif dari masing-masing jenis (Carroll, 2008). Sementara menurut H. L. Johnson, alih-alih berjuang hanya untuk pengembalian yang lebih besar kepada pemegang saham, perusahaan juga bertanggung jawab untuk menghitung kepentingan karyawan, pemasok, dealer, komunitas lokal dan bangsa secara keseluruhan (UN ESCAP, 2012).

Perkembangan konsep CSR di tahun 1980 hingga 1990-an mengadopsi konsep CSR di dekade sebelumnya terkait dengan prinsip-prinsip dan proses-proses praktis dalam performa sosial sesuai tuntutan industri dan perubahan dalam tantangan yang dihadapi oleh pemangku kepentingan. S.L Wartick and P.L. Cochran misalnya mengadopsi konsep tiga dimensi CSR yang diusulkan oleh Archie B. Carroll di tahun 1979 dengan penekanan titik fokus pada proses dengan melakukan tindakan lebih untuk mengatasi berbagai masalah sosial dan secara bersamaan menanggapi perubahan dalam tantangan masyarakat tersebut (UN ESCAP, 2012). Konsep tiga dimensi CSR ini kemudian dilanjutkan oleh D.J. Wood di tahun 1991 dengan penekanan terhadap hasil atau kinerja inisiatif CSR.  Wood mengenalkan konsep empat jenis tanggung jawab perusahaan yaitu ekonomi, hukum, etika dan filantropis yang terkait dengan tiga tingkat kelembagaan yaitu hukum, organisasi dan individu, pada saat yang bersamaan aksi korporasi diperluas untuk penilaian, manajemen pemegang saham dan manajemen pelaksanaan (UN ESCAP, 2012). Konsep CSR ini dikenal dengan nama institutional framework and extended corporate actions.

Periode tahun 2000-an didominasi bukan oleh konsep-konsep baru dari CSR melainkan penelitian empiris yang menghubungkan CSR ke variabel-variabel lain yang relevan dan implementasi dari inisiatif CSR (Carroll, 2008). Di tahun 2003, M. S. dan A.B. Carroll memperkenalkan konsep pendekatan tiga domain yaitu ekonomi, hukum dan etika (UN ESCAP, 2012). Konsep ini adalah pengurangan dari konsep Carroll sebelumnya yang memperkenalkan empat domain pendekatan yaitu ekonomi, hukum, etika dan filantropi. Pada periode ini, definisi CSR disederhanakan, tetapi proses serta implementasi dari inisiatif CSR diperluas. The European Commission (2011), mendefinisikan CSR sebagai suatu proses untuk mengintegrasikan konsep sosial, lingkungan, etika, hak asasi manusia dan kepedulian konsumen dalam operasi bisnis dan strategi inti dalam perusahaan melalui kerjasama erat dengan para pemangku kepentingan.

 

2018 Minimum Wage Forecast

The Minister of Manpower just issued a notice to all Governors in Indonesia on 13 October 2017 regarding the 2018 minimum wage fixing. The letter contains a reminder to set the minimum wage in accordance with Government Regulation No. 78 of 2015 which includes:

1. Simultaneously announce the provincial minimum wage on 1 November 2017
2. Set and announce the minimum wage of the city/regency no later than 21 November 2017
3. Set the minimum wage according to the formula stipulates by the Government Regulation in question, which is to base it on the yearly inflation rate and gross domestic product (GDP) growth factors.

The letter also include the percentage of the yearly inflation rate and GDP growth that the Governors should refer: 3.72% inflation rate and 4.99% of GDP growth.

The letter indicates that minimum wage increase on 2018 will be within the range of 8-10%. Industries located in the provinces where the regional government always strictly follow the central government recommendation could expect minimum wage increase of 8.71%.

This increment rate would not directly affect the sector-based minimum wage, although the provincial or municipal minimum wage is the base value used by employer association and trade union when negotiating sector-based minimum wage.

Menteri Ketenagakerjaan baru saja mengeluarkan pemberitahuan ke semua gubernur di Indonesia pada tanggal 13 Oktober 2017 mengenai penetapan upah minimum 2018. Surat tersebut berisi pengingat untuk menetapkan upah minimum sesuai dengan Peraturan Pemerintah No. 78 tahun 2015 yang meliputi:

1. Secara bersamaan mengumumkan upah minimum provinsi pada tanggal 1 November 2017
2. Menetapkan dan umumkan upah minimum kota / kabupaten selambat-lambatnya tanggal 21 November 2017
3. Menetapkan upah minimum sesuai dengan rumusan yang diatur dalam Peraturan Pemerintah yang bersangkutan, yang mendasarkan pada tingkat inflasi tahunan dan faktor pertumbuhan produk domestik bruto (PDB).

Surat tersebut juga mencakup persentase tingkat inflasi tahunan dan pertumbuhan PDB yang harus diacu oleh Gubernur: tingkat inflasi 3,72% dan 4,99% dari pertumbuhan PDB.

Surat tersebut mengindikasikan bahwa kenaikan upah minimum pada 2018 akan berada dalam kisaran 8-10%. Industri yang berada di provinsi dimana pemerintah daerah selalu mengikuti rekomendasi pemerintah pusat dapat mengharapkan kenaikan upah minimum sebesar 8,71%.

Tingkat kenaikan ini tidak secara langsung akan mempengaruhi kenaikan upah minimum sektoral, walaupun upah minimum provinsi atau kota adalah nilai dasar dalam negosiasi upah minimum sektoral antara asosiasi pengusaha dan serikat pekerja/buruh.

Indonesian Labour Regulations Profile: Child Labour (Prototype)

We are building a complete Indonesian Labour Regulations Profile (ILRP) that could be used by compliance auditor/assessor, corporate responsibility, sustainability and compliance professional, human resources specialist, academics and general public. This document consists of main topic, the concerned law or regulations and the statutory conditions.

We are trying out the profile by posting the first two pages of the document with the topic of Child Labour.

The document could be downloaded from below link.

ILRP Child Labour WM

 

 

 

Child Labour: the Hidden Issue

Child labour refers to the employment of children that socially, mentally and physically harms them, deprives children of their childhood or keeps them away from attending school. In the extreme, child labour includes children that being enslaved, exploited and exposed to serious hazards and illnesses.[1] According to the International Labour Organization (ILO), not all work done by children constitutes child labour. Work that does not affect children’s health and personal development or interfere with their schooling is generally viewed as positive.[2] Activities such as helping their parents around the home, assisting in a family business or earning pocket money outside school hours and during school holidays considered as activities that not only contribute to their family welfare but also to children’s development.[3] They provide children with experience and skills that could help to prepare them to be productive members of society. [4]

The ILO recently released a report that estimates about 152 million of children between 5 to 17 years were subject to child labour.[5] Child labour remains concentrated primarily in agriculture (70.9 per cent), 17.1 per cent work in the services sector and 11.9 per cent of child labourers work in the industry.[6] In Indonesia, the 2016 statistic shows that at least 2 million children between 15 to 17 years are engaged in employment.[7] In addition, the ILO estimated that there are 3.2 million children between the ages of 10 – 17 years old in Indonesia engaged in employment with some involved in the worst forms of child labour.[8] What is more, over the last decade the number of reported working children in Indonesia hovers between 1 to 3 million. This number could be greater if it includes children who work as domestic workers, involves in the informal sector or working on the street. Looking at the statistic, it is safe to say that child labour is a persistent issue.

Child labour continues to exist even national laws and international standards are in place. It is likely that the current regulatory and standards approach could not effectively stir the underlying issues of child labour. The cause of child labour, though it seems clear to regulators, are lingering in the discourse of poverty. Nearly half of the global population lives on less than US$ 2.50 per day.[9] About 400 million children in the world live in extreme poverty[10]. Although, laws and regulations regime rigidly limit the employment of people below the age of 18, without addressing poverty the policy would not be effective to eradicate the issue of child labour.

Another underlying issue is employment rate. When unemployment rate is relatively high – economy in poor shape and jobs are scarce, families could not make ends meet. It is not surprising that in this condition, children would be the first that negatively affected. They do not only have to drop out from school but also often must lend a hand so that their family could attain basic necessities by engaging in the employment of some sort. On the extreme, children often forced to work and exploited to pay their family’s debt which was used to attain those basic necessities.

Access to education is also an influencing factor to the child labour issue. Education could help children and subsequently communities’ future opportunities. Some argue that public policy of compulsory education is sufficient to tackle the issue. However, it could be argued that compulsory education program is not enough to answer the issue of children education because it still bears a significant cost to poor working families. In Indonesia, the compulsory education is 9 years or until junior secondary school level. Nonetheless, the World Bank estimates that only 55% of children from low-income families enrolled in junior secondary school.[11] This means that 45% of children from a poor working family in Indonesia only have an elementary education. By eliminating cost of education, the possibility of children staying at school could be improved and subsequently better-off their their opportunities.

Social norms could also contribute to the proliferation of child labour. Every so often, very young age children are forced to plunge into the labour market because in some context the practice has been so widespread that it becomes socially accepted. For instance, child labour in the tobacco and cocoa plantation is perceived as normal because for so long children work in plantations to help their families. Education is also a key to break this accepted norm. Not only it increases parents and adult awareness level on the idea of child labour and children welfare but also when the educated children grow up they could make informed decisions on the issue of working children.

Lastly, although some might fail to see the connection, the intensification of the global economy most likely exacerbates the issue. As multinational corporations move across borders, countries often compete for jobs, investment and industry. This competition sometimes decelerates child labour reform for the obvious purpose of lower labour cost. In more moderate perspective, the state provides exemption on the use of child labour in the industry to ease corporation burden on accountability and expanding jobs market to people younger than 15 years of age (or 18 years in the case of Indonesia). Additionally, the complexity of multinational supply chains may intensify the use of child labour. International supply chains often consist of multi-layer suppliers and subcontractors including home workers. Cheaper price, which is the primary reason for using subcontractors and homeworkers, lead to the employment of low-cost labour, and one of the low-cost workers group is obviously children.

Indonesia regulatory regime has a long way to go in order to tackle the underlying issues of child labour. The government should review the inconsistent children-related policy to get a holistic solution. For instance, the state compulsory education program should be expanded so that it includes children between 15-17 years old which the National Labour Regulations deems as children (which bears consequence of child labour label). The state may also want to review its labour policy to ensure decent jobs are available for the working-age people (those 18 years and above). Policy on education, one of the primary vehicles to combat child labour, could be revisited to ensure its accessibility for all children.  In addition to that, establishing robust welfare policy could lighten poverty – issue that has significant relations with the proliferation of child labour. Also, regulator extensive knowledge and analysis about the current and future global economy practice could bring about effective regulatory strategy that likely ease the stubborn issue of child labour in industry.

[1] International Labour Organization, What is Child Labour (viewed on 11 October 2017) < http://www.ilo.org/ipec/facts/lang–en/index.htm&gt;.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] International Labour Organization, Modern Slavery and Child Labour (19 September 2017) <http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_574717/lang–en/index.htm>.

[6] Ibid.

[7] Koran Jakarta, Jumlah Tenaga Kerja Anak Semakin Meningkat (12 October 2016) < http://www.koran-jakarta.com/jumlah-pekerja-anak-terus-meningkat/&gt;.

[8] Schuster Institute, Outline of Production: Palm Fruit to Product (viewed on 11 October 2017) <http://www.schusterinstituteinvestigations.org/indonesias-palm-oil-industry>.

[9] Children International, Global Poverty Facts (viewed on 11 October 2017) < https://www.children.org/global-poverty/global-poverty-facts/facts-about-world-poverty&gt;.

[10] Ibid.

[11] The World Bank, World Bank and Education in Indonesia <1 September 2014) <http://www.worldbank.org/en/country/indonesia/brief/world-bank-and-education-in-indonesia&gt;.