Job creation omnibus law may shrink labour market: Businesses

Indonesian Employers Association chairperson stated that a move like this would risk increased unemployment rate for the inexperienced workers.

Fadhil Haidar Sulaeman and Yvette Tanamal

Fadhil Haidar Sulaeman and Yvette Tanamal

The Jakarta Post


Putting their foot down: Members of a factory union stand behind a banner protesting the recently passed omnibus bill on job creation during a strike on Wednesday, October 7.2020 at the sports footwear factory of PT Panarub Industry in Tangerang. The banner calls on workers to answer to the “challenge”: “Don’t let them silence you. Reject and challenge the omnibus law on job creation.” JP/Dhoni Setiawan(JP/Dhoni Setiawan)

January 5, 2023

JAKARTA – Both laborers and businesses have expressed their concerns over government regulation in lieu of law (Perppu) on job creation, with the issues of minimum wage and job security remaining contested.

In a press briefing held on Tuesday, Indonesian Employers Association (Apindo) chairperson Hariyadi Sukamdani said that businesses were surprised by the sudden announcement of this regulation, as he said that his association was not involved in its discussion.

As a result, Apindo needs more time to “comprehensively” assess more than one thousand pages of the new regulation, which spans to 10 clusters including the ones on manpower issues.

Although stating that Apindo understood the government decision, he said that the new minimum-wage formula in the Perppu, which includes both inflation and GDP growth rate, would shrink the job market.

He said that businesses would prefer to take experienced workers with only slightly higher pay margins, thus risking an increased unemployment rate for the inexperienced workers.

Investment would instead flow drastically to capital-intensive industries, he said, but not to labor-intensive industries, due to the higher minimum wage compared to the rest of Southeast Asia, in which Indonesian minimum wage was estimated to be the highest in 2025.

In regards to layoff risk, he said that it was not specifically due to the Perppu and it was “relative” to the situation within each sector, as factors varied from slow recovery from the COVID-19 pandemic to a hit in export demand.

“The shrinking job market will continue for some time,” Hariyadi told reporters.

Speaking at the same event, Indonesian Palm Oil Producers Association (Gapki) chairperson Joko Supriyono said that he supported the advice of Apindo concerning the issue of the Perppu, particularly since the crude palm oil (CPO) sector was a labor-intensive industry.

He said that manpower expenses composed around 40 to 45 percent of operational costs and CPO industries compensated wages with non-money benefits, such as housing, electricity and water facilities.

“We are struggling to avoid layoffs,” Joko told reporters.

Laborers’ diplomatic actions

In a virtual press conference held on Monday evening, Labor Party chairperson Said Iqbal announced that “diplomatic actions” would be taken to convince President Joko “Jokowi” Widodo to “not enforce the Perppu”, believing that the President would heed to labor’s voices.

“Because the party that made this [Perppu] was not Pak President Jokowi, but the team from the Office of the Coordinating Economic Minister,” Said told reporters, even assuming that the Manpower Ministry is not involved in the decision-making process.

If negotiations did not work out, the Party would file a judicial review to the Constitutional Court (MK), but noting that such actions would need to be consulted with legal experts first, particularly on whether Perppu could be brought to the court in the first place.

Regarding large-scale demonstrations, Said told reporters that his party had yet to mobilize the laborers as he was currently awaiting response from the executive and legislative branch of the government.

“Madness, this is madness,” Said continued. “I pity the President; the Office of Coordinating Economic Ministry should take responsibility.”

Indonesian Workers Union Association (ASPEK) president Mirah Sumirat also called for the government to repeal the Perppu and instead introduce another Perppu that would nullify the job creation law.

She said that the Perppu content was almost similar to the Job Creation Law, the regulation that laborers have been asking the government to repeal due to its perceived bias to very pro-employers, while revision has been kept insignificant.

One of the main issues that disappoints her was the continuation of using a government implementing regulation (PP) as a derivative rule, which she believed lacks checks and balances.

“The Indonesian people have always been an object of exploitation to the capital owners, where they use the House of Representatives and the government [for this exploitation],” Mirah said.

Previously, Jokowi argued on Friday that the Perppu was needed because Indonesia had been “threatened” by global uncertainties, noting the warnings made by the International Monetary Fund, even as the country’s current economic situation “looks fine”.

The Perppu was a solution to provide legal certainties, Jokowi asserted, that were key to attract both domestic and foreign investors, adding that the main fronts of economic growth in 2023 are “investment and export”.

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