The Constitutional Court (MK) of Indonesia recently granted part of a judicial review concerning Law Number 6 of 2023, which stipulates the enactment of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation (Job Creation Law).
This ruling is believed to positively impact workers’ welfare, as sectoral minimum wages are generally higher than the Regency/City Minimum Wage (UMK) or the Provincial Minimum Wage (UMP).
Professor Ari Hernawan, a Labor Law Professor at UGM’s Faculty of Law (FH UGM), believes that the Constitutional Court’s decision has the potential to improve workers’ welfare.
One of the key decisions highlighted by the public and labor unions concerns the minimum wage, with the reintroduction of sectoral wages, which are typically higher than the UMK or UMP.
Professor Hernawan argues that this development could benefit workers, as sectoral minimum wages are more valuable than UMK and UMP.
“In my opinion, this decision is quite positive because the highest wage is indeed the sectoral minimum wage. During the implementation of the Job Creation Law, the absence of sectoral minimum wages was questioned—what was the rationale? There was no clear answer. It has reappeared because in terms of quality, the lowest level is the provincial minimum wage, followed by the regency/city minimum wage, and above that is the sectoral minimum wage,” Professor Hernawan explained on Wednesday (Nov. 13).
Elaborating further on the Constitutional Court’s decision, Professor Hernawan discussed how the ruling regarding foreign workers entering Indonesia could also impact job opportunities available for Indonesian workers.
Previously, the Job Creation Law facilitated easier access for foreign workers to domestic jobs. With this ruling, Indonesian workers could have easier access to jobs if government components properly implement the Court’s decision.
“Now, there are some changes, although I don’t think they’re very fundamental for foreign workers. There are also statements about prioritizing the employment of Indonesian workers. However, in practice, this will also depend on the Executive Branch,” Professor Hernawan explained.
He also added that the Constitutional Court’s decision on the Job Creation Law could influence the attractiveness of foreign investment.
This is because foreign investors will consider wage policies and foreign worker regulations when making investment decisions.
Additionally, Professor Hernawan mentioned that investors require legal certainty and stable policies.
“Investors need policies that don’t change frequently. The problem is if policies keep changing, it scares investors.
Especially when changes happen very quickly, investors need certainty—not just for their workers, but also for their companies,” he emphasized.
Professor Hernawan hopes that all parties will monitor the Constitutional Court’s decision to ensure proper implementation. He also expressed hope that the Court would consider the perspective of businesses to ensure the effective execution of the decision.
“The Constitutional Court’s decision must be monitored; from the worker’s perspective, it needs to be overseen. However, for effectiveness, the business sector must also be considered. Both sides need attention,” he added.
As widely known, the Labor Party, the Indonesian Metal Workers Federation (FSPMI), the Confederation of All Indonesian Workers Unions (KSPSI), the Indonesian Workers Confederation (KPBI), and the Indonesian Labor Unions Confederation (KSPI) filed judicial reviews of the Job Creation Law.
The ruling was delivered by the Constitutional Court on Thursday (Oct. 31) and was welcomed by labor organizations.
Author: Hanif
Editor: Gusti Grehenson
Post-editor: Afifudin Baliya
Photo: AFP