The Government Ensures Minimum Wage Will Not Decrease Despite Negative Economic Growth

rupiah IDR

The government has officially released Government Regulation (PP) Number 51 of 2023, which pertains to Amendments to Government Regulation Number 36 of 2021 regarding Wages. This significant regulatory update, endorsed by President Jokowi, introduces a novel formula for calculating the Minimum Wage. Notably, embedded within this legislative framework are fresh provisions that establish a safeguard, ensuring that the minimum wage remains resilient even in the face of adverse economic conditions, particularly negative growth.

The recently unveiled PP introduces a proactive approach to economic challenges by stipulating that in the event of negative economic growth, the minimum wage for the subsequent year will be determined at the same level as the ongoing year. This strategic provision is explicitly articulated in an official statement from the Ministry of Manpower, accessible through their Instagram channel, Friday, November 17, 2023.

Delving deeper into the regulatory landscape, Indah Anggoro Putri, the Director General of Industrial Relations and Social Security at the Ministry of Manpower (Kemnaker), provides invaluable insights.

She elucidates that the essence of this regulation is to shield the minimum wage from experiencing a downturn, even in scenarios characterized by negative economic growth or significant inflation spikes that might induce economic strain. The regulation, encapsulated in PP 51/2023, is specifically designed to ensure that the minimum wage remains stable in the face of unforeseen challenges, such as natural disasters.

Indah illustrates the practical implications of this regulation with a hypothetical scenario. In a district impacted by a calamity like a tsunami, resulting in economic tremors and a subsequent drop in growth, the application of PP 51/2023 prevents a reduction in the minimum wage.

Previously, if a worker was earning Rp 4 million per month, the economic turbulence caused by the disaster might have diminished their monthly earnings to Rp 3.9 million. However, under the protective provisions outlined in Article 26 of PP 51/2023, the minimum wage remains constant, mirroring the figures from the current year.

Importantly, the regulatory framework, as encapsulated in PP 51/2023, assures that under challenging circumstances, the minimum wage will neither witness a decline nor an increase. This dynamic approach aligns with the overarching goal of fostering stability and resilience within the wage structure, responding proactively to economic fluctuations while safeguarding the well-being of the workforce.

In essence, the formula embedded in this regulation functions as a strategic mechanism, ensuring that it experiences consistent growth annually.

This occurs provided the economic and labor conditions in a given region do not encounter undue pressure. Importantly, if the economy faces a slowdown, the regulation guarantees that the minimum wage will not witness a decrease, thereby fortifying the financial security of workers.