The Institute for Economic and Social Research of the Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI), has released a report highlighting the low wages earned by millions of workers. Approximately 14 million workers in Indonesia are still receiving wages below the Provincial Minimum Wage (UMP) and the Regency/Municipal Minimum Wage (UMK). Notably, the majority of these low-wage workers come from white-collar occupations, including university graduates.
Responding to the report, a lecturer at the Department of Social Development and Welfare, Faculty of Social and Political Sciences, Universitas Gadjah Mada (Fisipol UGM), Dr. Hempri Suyatna, stated that the phenomenon of low minimum wages affecting university graduates cannot be separated from labor market disparities.
According to him, one of the leading causes is the limited number of job opportunities compared to the number of job seekers.
“The labor market situation shows an imbalance because the number of available jobs is far smaller than the number of job seekers, weakening workers’ bargaining positions,” he said on Wednesday (Jan. 7).
Dr. Suyatna explained that the scarcity of job opportunities leaves job seekers with limited choices, which in turn forces workers to accept lower wage standards.
Beyond labor market factors, he also pointed to macroeconomic conditions that have further exacerbated the decline in job availability.
Deindustrialization in the textile, garment, and even digital industries has indirectly reduced companies’ capacity to provide decent wages to workers.
“From the companies’ perspective, weakening economic conditions mean they are not strong enough to increase wages,” he explained.
In addition, income disparities across different segments of the workforce are also influenced by company type, worker skills, and job risk.
Although high-risk jobs generally offer higher wages than low-risk jobs, employment opportunities do not necessarily favor higher-education graduates.
“Skill levels play a crucial role in determining whether someone earns a high or low salary,” he noted.
He also highlighted wage regulation practices, pointing out differences in approaches between the formal and informal sectors.
While minimum wage policies are indeed difficult to strictly enforce in the informal sector, the government and companies still bear responsibility for providing optimal social protection for all workers.
According to him, such protection can help improve welfare, as equalizing wages across all worker groups would face significant challenges.
“What matters most is social protection, such as health insurance and social security for informal workers,” he said.
As a recommendation, Dr. Suyatna emphasized the importance of promoting economic democracy as a long-term solution.
He argued that workers should not only be seen as laborers but also as part of corporate decision-making.
“The solution lies in economic democracy, where workers can provide input and even hold shares in the company,” he stated.
Furthermore, he encouraged companies to become more transparent and go public, allowing corporate policies to better align with workers’ interests.
According to him, this step could help the state create a fairer labor system.
Author: Ika Agustine
Editor: Gusti Grehenson
Post-editor: Rajendra Arya
Illustration: Freepik