As a flare-red sun set, a group of laborers in their 20s and 30s gathered on the bare floor of a battered house wedged beneath power lines in an industrial part of Jakarta. They were members of a confederation of multi-sector workers, one of the largest trade unions in Indonesia, whose slogan is: “Young, brave, militant.”
The men — all employees of the biggest hypermarket chain in the nation, run by the French retail giant Carrefour — said the company was violating their rights by paying them as contract workers, unprotected by strict Indonesian labor laws.
“Cheap wages and outsourcing, these are the main issues in Indonesia,” said Abdul Rahman, a Carrefour employee and the secretary-general of the union, known as KASBI, which represents about 130,000 workers.
He and others have been negotiating with the company for improved contracts since a strike by 1,000 workers in late August, but talks have gone nowhere. The same cycle has played out repeatedly since Carrefour entered Indonesia in 1998, said Rahman, 33, who has worked at the company for 11 years.
United by discontent, Rahman and his fellow activists are far from alone.
Indonesia, the largest economy in Southeast Asia, is among the top 20 economies in the world, with growth this year of about 6 percent. More than half of its 240 million inhabitants have entered the middle classes, according to the World Bank, which defines the middle classes as those who spend US$2 to US$20 a day. Still, many of them toil for barely a living wage, offering some of the cheapest labor in Asia.
In recent years, though, this labor force has watched certain sectors grow wealthy on rising commodity prices and booming domestic demand, and increasingly it is pushing for a greater share of company profits.
The greatest pressure has come from workers employed by Freeport-McMoRan, which is based in the US state of Arizona and controls the world’s largest recoverable gold and copper reserves in Timika, Papua. This month, its workers’ union agreed to a 37 percent increase in wages after a three-month strike.
Affordable labor is the main reason investors are attracted to Indonesia, in part to offset wage increases in China, said Indonesian Minister of Trade Gita Wirjawan, who was formerly the head of the country’s investment coordinating board.
However, recent strikes for higher wages by mine workers and supermarket clerks, not to mention pilots of the state-owned airline, Garuda, have disrupted business operations — and they could potentially deter foreign investments.
The Indonesian Manpower Ministry says there were 53 strikes in the first seven months of last year, the last period for which figures are available. By comparison, in 2008, the International Labor Organization recorded five apiece in the nearby countries of Thailand and the Philippines.
University of Indonesia economist Mohammed Chatib Basri, the director of the Institute for Economic and Social Research, said that frequent and prolonged strikes reduced profit margins and competitiveness. Sluggish Indonesian industries, such as garment manufacturing, are starting to pick up as wages rise elsewhere, he said, but if the costs of dealing with unrest and lengthy union negotiations increase, that could stem growth in a country that will depend on labor-intensive industries for productive employment for the foreseeable future.
Basri said that legally mandated high severance payments were another deterrent to investment.
“The labor law acts like a hiring tax, so many companies don’t want to absorb permanent workers because if there is downsizing, they have to pay out a lot of money,” he said.
Many companies get around that regulation by hiring contract workers, like the men of KASBI demanding better benefits from Carrefour. However, typically, big foreign concerns have a more difficult time evading the law in that way and others are also facing worker unrest.
Union representatives at Freeport’s large mine in Papua said they had agreed to the latest deal amid concerns about the living conditions of workers, who had gone three months without pay.
Workers, who were demanding a wage increase from the lowest rate of US$1.50 an hour to US$7.50, had rejected Freeport’s last offer of a 35 percent salary increase over two years, calling it an inadequate reflection of their contribution to company earnings.
For now, the agreement appears to be a win for both sides, but Juli Parorongan, a spokesman for the Confederation of All Indonesian Workers’ Unions, which represents the striking miners, said workers would continue fighting for a fairer deal.
“This is not the end of our struggle,” he said, anticipating future problems over the welfare of workers, who will remain among the lowest paid of any at Freeport’s global operations.
What initially caused the strike, Parorongan said, was the realization that employees in the US receive hourly wages 10 times greater than those of the low-level laborers at its Timika operations, which bring in about 30 percent of the company’s global revenue. Last year, Freeport’s Grasberg mine in Papua brought in more than US$5 billion, but losses mounted this year because of the strike and damage to pipelines caused during civil unrest.
In late October, the company suspended production to concentrate on repairing those pipelines, Freeport spokesman Eric Kinneberg said.
He said the company was losing 907,185kg of copper and 85kg of gold in daily production.
In a company statement, Freeport chief executive Richard Adkerson said he was pleased the parties had reached “a mutually satisfactory resolution.”
Adkerson, who was in Jakarta to help negotiate an end to the strike, had called earlier pay demands of US$30 to US$200 a day “excessive.”
The deal is likely to end months of violence at the remote, sprawling mountaintop mine — one worker was killed in October and at least six were wounded when they clashed with police while trying to enter the mine site. However, analysts say the strike’s success could encourage a fresh wave of labor disputes.
“My concern is this will trigger a domino effect,” Basri said.
“I understand there is a justification for the rise in wages,” he said, referring to the discrepancy between Freeport’s revenue and the amount it spends on workers’ salaries. “But it may trigger pressure for a rise in wages that not all companies can afford.”
Basri said there was a political element to the Freeport case that distinguished it — the company operates in a remote region plagued by a simmering separatist movement.
However, factors that galvanized the work stoppage there — better access to information, and a more sophisticated and organized labor movement — extend to all sectors, analysts say.
“Workers in Indonesia are learning from the current situation,” said Soeharjono, a program officer in Indonesia with the International Labor Organization.
They are getting information from the Internet and spreading their messages through social networks, such as Facebook and Twitter.
Meanwhile, Rahman continues working in a Carrefour bakery, making bread for the families that Toyota, Unilever and Nestle are focusing on as sales of cars and consumer goods reach record highs in Indonesia. On his monthly earnings of US$175, he cannot afford such products.
Firms outsourcing production to workers without even formal contracts are setting the stage for deeper resentment, he said.
“New employees, who are young and ready to enter the workforce, will take whatever pay they can get, but every time they negotiate a new contract, their pay drops,” Rahman said. “If we try to look for different work or move to another company, we must start the fight from the beginning.”
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