Jakarta, CNBC Indonesia – A total of 34 provinces announced the size of the provincial minimum wage (UMP) increase which will officially take effect in 2024. The UMP increase this time cannot be more than 10%. This policy is in accordance with the Minister of Manpower Regulation (Permenaker) Number 18 of 2022 concerning Determination of Minimum Wages for 2023.
Based on this UMP size, the average increase in the 2024 UMP will only be between 2% and 5%. Sadly, a number of provinces saw a UMP increase of under IDR 100,000, of which the UMP only increased by IDR 35,750, namely Gorontalo and Aceh’s 2024 UMP increased by 1.38% or IDR 47,006.
It turns out that the increase in the UMP is not commensurate with the increase in prices of food and basic commodities, one of which is rice. Data from the National Strategic Food Price Center (PIHPS) shows that the price of rice increased by 15.07% (year to date/ytd) to IDR 14,900 per kg. This calculation does not include the increase in prices of basic commodities such as chilies, cooking oil and chicken meat.
Indonesian inflation has fallen to 2.28% in September 2023, but domestic inflation has increased to 2.56% in October 2023. From this increase, it appears that volatile food inflation is the highest driver. The increase in food price inflation is volatile, rising to 3.46% (yoy) as of October 2023. The Central Statistics Agency (BPS) revealed that rice will be the driver of inflation in October 2023.
Rice remains the largest contributor to inflation for three consecutive months. In fact, cumulatively from January-October 2023, the contribution of rice inflation to total inflation reached 0.49%, far above the second and third places, namely filtered clove cigarettes at 0.16% and garlic at 0.07%.
Executive Director of the Institute for Development of Economics and Finance (Indef) Tauhid Ahmad estimates that inflationary pressures are still very likely to be very high in the first half of 2024, causing too little increase in people’s minimum wages to only be used up to pay for the pressure on rice prices.
According to him, real wages which will be eroded by inflation will cause people’s consumption to slow down next year, amidst the slowdown in consumption in the third quarter of 2023 which was only 5.06%. As a result, economic growth will return to below 5%, as in 2023, which Indef estimates will only grow at 4.9%.
President of the Confederation of Indonesian Trade Unions (KSPI) Said Iqbal expressed workers’ rejection of the 2024 Jakarta UMP determination because the increase in value was smaller than for Civil Servants (PNS). In fact, it is workers or private employees who ‘pay’ civil servants through taxes. Moreover, the increase in the cost of living necessities has also been too high recently.
“You civil servants have increased by 8%, the general public has increased by 3.6%, where are your brains, Governors and Ministers? Nowhere in the world have civil servant salaries increased higher than private sector salaries. Agree that civil servant/TNI/Polri salaries have increased like that, but How come people who pay taxes have their salaries increased lower than people whose salaries are paid from taxes? Even though the price of rice has risen by 40%, eggs have gone up by 30%, transport from fuel has gone up by 30p, boarding house rents have gone up by 30%, that’s for mass workers an increase of 3.6 %,” said Said Iqbal.
[Gambas:Video CNBC]
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