Minimum Wage

Topics: Minimum wage, Wage, Supply and demand Pages: 4 (1297 words) Published: June 13, 2013

Comprehensive Analysis on Minimum Wage in Indonesia

“Comprehensive Negative Impacts Analysis of Minimum Wage for DKI Jakarta”


Andhika Putra Sudarman

Fakultas Hukum Universitas Indonesia

“If the Minimum Wage of DKI Jakarta is set to Rp10.000.000,00, will everybody prosper?”

Laborers in DKI Jakarta demonstrating for an increase of minimum wage[[1]][[2]] is not a rare thing to see. The reason is because they can no longer meet their needs with their current wage. However, minimum wage has been raised for many times since it was first introduced in the 1970s. So, what exactly is going wrong in our beloved country, or the problem is within the minimum wage itself?

In this essay, the vision of why minimum wage should not be put into implementation in DKI Jakarta shall be given, for not only minimum wage law do not bring welfare to the people, instead it will cause unemployment and limit the workers’ productivity. In other words, the problem lies in the minimum wage itself.

Minimum Wage Does Not Solve Poverty
If the purpose of the minimum wage is a protection to the workers so that they can prosper, it is precisely with the minimum wage system that the workers will never prosper. An increase of minimum wage equals to an overall-income increase of all workers. This means that the prices of goods and/ or services in the market are subjected to increase because as people hold more money, they demand more. This escalation of demand will eventually lead to the escalation of the price[[3]]. The prices of goods and/ or services may also rise because of cost-push inflation[[4]], whereas the businesses will try to compensate the revenue by raising the prices of goods and/ or services, hoping to receive the same revenue along with the rising wage[[5]].

These ways, the previous additional wage will mean nothing as the inflation follows. This then encourages the formation of a cycle that will never end – the workers demand...
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