Pancasila Anad It's Connection with Social Event in Jakarta
1.1 Background of the Study The rise of minimum wage in Jakarta approved by the new DKI Jakarta governor Joko Widodo or Jokowi recently is a brave and controversial act. It caught the attention of wider society and is one of the hot topics in our national news. Sure it really please the labor community because this is what thay have been asking for again and again these past few years and it made the pro-Jokowi people satisfied about his performance as new governor to take such a great risk. Some people believe that this is a good step to improve the labor welfare and it is fair to rise their minimum wage. There are also people who disagree with this policy because they think the outcome is not worth many problems that will arise later on in time after the rising has applied in reality. The Jakarta’s provincial minimum wage will be rise from the previous Rp1,5 to Rp 1,7 million range to Rp2,2 million, which is 40% larger than the previous minimum wage. The workers is relief by this decision made by Jokowi, it make them feel safe and secure in term of their necessity fulfillment. In the past few years they have been complaining about how the Rp 1,5 million wage is not enough to have a decent life so this is like a bliss for them.
Beyond the euphoria and credits created by the labors, we should not neglect the wide impact in economical aspect not only in Jakarta itself. Since Jakarta is the capital city of Indonesia somehow it become a barometer for other province all around Indonesia and ofcourse with this event, the labor in other region will demand a rise for their wage too. Other than that, this policy about the rise of minimum wage might trigger other problems such as inflation, termination of employment, rising crime rates and many other.
Apindo (Indonesian Employers Association) told the industry minister that they will file a lawsuit with the State Administrative Court. Apindo Chairman, Sofjan Wanandi also told the industry minister they were afraid their companies would have to layoff workers
There are also 60 companies from Kawasan Berikat Nusantara (KBN) that eventually pitted about their rejection regarding this policy to Sarman Simanjorang, member of Dewan Pengupahan Daerah. The 60 companies from KBN feel objected to fulfill this requirement because of the chain reaction it will cause to other region and to foreign investor interest in the future.
Objections rised by Apindo and KBN implies that governor of DKI Jakarta have not accomodated the aspiration from every levels of society in deciding this policy while Jokowi’s main obligation in the position he occupy now is to represent the society of every level. We can say it is a bit out of line with Pancasila’s 4th sila, “Kerakyatan yang dipimpin oleh hikmat kebijaksanaan dalam permusyawaratan/perwakilan”.
The 5th sila, “Keadilan sosial bagi seluruh rakyat Indonesia”, too might have been infringed. This policy doesn’t seems to be fair for the companies. They have not yet agree with the signing of it.
The positive and negative impacts of Jokowi’s decision on rising the regional minimum wage must be put in our consideration. We cannot see this event from only the labor’s point of view. We should see this from many different angles because this not only related to labor’s economical aspect but also in wider society economical aspect. Put in mind that this has impact on nation wide economical aspect too.
All the matters i’ve mentioned above is what I have in mind in the process of creating this academic paper. Later on in this academic paper i will discuss more about the details of each point of view and it’s connection with Pancasila’s principles and values. 1.2 Problem Identification
There are several problems might arise when the policy is being implemented in reality but i will be focussing on these three main problems throughout the rest of this academic paper. a. Has the policy represent every layer of society and the value of Pancasila? b. Will the policy creating bigger problem than the one that already arise in the present time, which is the labor’s necessity fulfillment. If yes, can the government overcome them? c. Is there another way in accordance with Pancasila’s value to guarantee the labor’s welfare rather than rising the minimum wage?
1.3 Scope of the Study
Throughout this academic paper, the range of knowledge we’re going to discuss is mainly about public policy , economics of labor, and how Pancasila’s value affecting the economical aspect especially in this particular case study.
2.1 Public Policy
During the nineteenth century, representative govermment began to evolve in some parts of the world. Since then government became more involved in larger public sectors and their decisions took on new importance. Government began to turn their attention more to their citizens and their problems because the social and economic development during those period had immense implication for politics and government Put it in a simple definition, Public policy is a course of action adopted and pursued by a government. The full definition of public policy is a purposive and consistent course of action produced as a response to a perceived problem of a constituency, formulated by a specific political process, and adopted, implemented, and enforced by a public agency. Public policy manifests the common sense and common conscience of the citizens as a whole that extends throughout the state and is applied to matters of public health, safety, and welfare. It is general, well-settled public opinion relating to the duties of citizens to their fellow citizens. It imports something that fluctuates with the changing economic needs, social customs, and moral aspirations of the people. Public policy enters into, and influences, the enactment, execution, and interpretation of legislation What puts the public in public policy? The Latin phrase res publicum meant the public thing. The term public meant of the people, which is held dear to Indonesians as stated in Pancasila’s fifth sila “Social justice for whole Indonesia people”. A republic is a form of government based on the principle that those holding political power are directly responsible to the citizens who have elected them. The essence of a republic is representation. The government so established was designed to rest on common consent through free elections.
The definition of public policy by the experts is differ widely on how to approach the field. Consider the following three definitions as examples of the dissent among leading political scientist: Thomas Dye characterizes public policy as the observable actions of public leaders and institutions; James Anderson and his colleagues extend Dye’s definition of public poicy to indlude intent and direction; and Fred Frohock analyzes public policy as the need of government to convert competing private objectives into public commitments.
These individual approaches all have merit, but for our purposes we need a definition that takes into account both people and what they do. Thus, public policy is the combination of basic decisions, commitments, and actions made by those who hold or affect government positions of authority.
In Indonesia the public policy seems to be in three major area: social issues, economic issues, and technological issues. In this particular case it is the economic issues that we will be viewing since the main topic in the case study is the policy about rising the provincial minimum wage in Jakarta.
Governments respond to economic issues because of the fluctuations in the economy and the sense that society should share certain collective benefits. However, society must also pay the price for correcting its problems and financing important benefits. Debates over the necessity of a given economic policy, weighing both costs and benefits, may be quite divisive. Criticism of an economic policy commitment increases in proportion to the cost and scope of that policy.
Economic policies tend to be controversial because they have uneven impacts on society’s members. For example, the minimum wage rise in 2013 may be beneficial to the labors but the employers won’t feel satisfy about it. Somehow they have to do something for efficiency such as layoff workers, or lower their product quality, and the last thing to do is to increase their selling price.
Economic public policy issues include much more than budget phiosophies and spending patterns. Economic discussions are predicated to a larger degree on a series of political and social values regarding individuals, society, and government. Our attention will focus on the political relationship between public policies and economic issues. The management of economic questions can have broad implication for all sectors of Indonesian society.
2.2 Labor Economics
In economics, labor is a measure of the work done by human beings. It is conventionally contrasted with such other factors of production as land and capital. There are theories which have developed a concept called human capital (referring to the skills that workers possess, not necessarily their actual work), although there are also counter posing macro-economic system theories that think human capital is a contradiction in terms.
What we mean by ‘labor’? Should we count as workers only those who work with their hands? Or should we include also the many millions of white-collar workers whose jobss carry no supervisory authority?
There is no exact answer to this question, and good arguments can be brought forward on either side. On the one hand it can be argued that the similarities between white-collar and manual workers are more important than the differences between them. The two groups occupy a similar status in the productive system. They do not own the tools or control the processes of production. They are dependent on paid employment for livelihood. The great majority will remain in paid employment throughout their working lives.
The Meaning of Wages and Wage Determination
About the compensation and measurement of the labors, there is this something we call wage. The term “wage” has different conotations to the union leader, the management official, an the worker in the plant. The union leader is apt to think of wages as “that which can be bargained about with the employer,” which means principally the schedule of hourly rates of pay for different jobs in the plant. The worker, however, may be more concerned with his “weekly take-home pay”, or with how much his weekly pay check will buy at the store. Management is interested basically in labor cost per unit of output, which depends on the amount produced by workers in the plant as well as on how much they are paid. This differing meanings of wages must be explained before we can conclude what steps and policy must the government take that suit best with the current labor economic the spciety economic situation.
Now about the wage determination. Wage differences exist, particularly in mixed and fully/partly flexible labour markets. For example, the wages of a doctor and a port cleaner, both employed by the same company, differ greatly. But why? There are many factors concerning this issue. This includes the Marginal Revenue Product (MRP) of the worker. A doctor 's MRP is far greater than that of the port cleaner. In addition, the barriers to becoming a doctor are far greater than that of becoming a port cleaner. For example to become a doctor takes a lot of education and training which is costly, and only those who excel in academia can succeed in becoming doctors. The port cleaner however requires minimal training. The supply of doctors therefore would be much more inelastic than the supply of port cleaners. The demand would also be inelastic as there is a high demand for doctors and medical care is a necessity, so the company will pay higher wage rates to attract the profession.
Purchasing Power of Wages
The worker’s welfare depends, not on how much money income he receives, but on the purchasing power of this income or the amount of goods and services which he can buy with it. In this connection economist have coined the term “real wages”, which means how much the money wage will buy goods and services. The object of statistical calculations of real wage is usually to discover whether the real wage level has been rising or falling over some period of time. An increase in workers average monthly earnings from Rp 1.5 million to Rp 2.2 million with no change in retail price level is clearly quite different from a 44 percent wage increase accompanied by a 44 percent increase in retail prices.
2.3 Pancasila’s Value
Belief in the one and only God It is affirmed in the Republic of Indonesia, even it is not a religion state and also is not a secular state, but it is a “negara beragama”. Indonesia is not a “negara agama” because it is not implement certain religion law and neither it is a secular state because it doesn’t separate the state matters with religion matters. [Setijo, 2010]
Just and civilized humanity Humanity comes from the word human, which is a righteous being that has thoughts, sense, intention, and creative power because human have potential to own high dignity. With their intelligence, human cultured and with their moral conscience human aware of the values and principles. Just implies that a decision and action is based on values that are objective, not subjective notably arbitrary. Civilized means cultured for many centuries have high moral standard. It is an act of awareness and human action in their relation with values and cultures in general.[Setijo, 2010]
The unity of Indonesia Unity comes from the word “unite”, means as whole and not split, different pattern of local culture evolve as one national unity. [Setijo, 2010]
Democracy guided by the inner wisdom in the unanimity arising out of deliberations amongst representatives Pancasila democracy calls for decision-making through deliberations, or musyawarah, to reach a consensus, or mufakat. It implies that voting is not encouraged as long as deliberation is possible. It is democracy that lives up to the principles of Pancasila. The head of the bull at top left stands for this sila. The buffalo, or more precisely the water buffalo is an important domesticated animal in Indonesian traditional agricultural society, therefore it symbolizes democracy, the strength of the people.
Social justice for the whole of the people of Indonesia This principle calls for the equitable spread of welfare to the entire population, not in a static but in a dynamic and progressive way. This means that all of the country’s natural resources and the national potentials should be utilized for the greatest possible good and happiness of the people. Social justice implies protection of the weak. But protection should not deny them work. On the contrary, they should work according to their abilities and fields of activity. Protection should prevent willful treatment by the strong and ensure the rule of justice. This is symbolized by the paddy and cotton ears on the shield. In Indonesian culture, rice and cotton represent the fulfillment of food and clothing needs, therefore symbolize prosperity.
Analysis of the Study
3.1 The Governor’s Decision
In the recent time, Jokowi has just signed the policy regarding rise of jakarta’s Provincial Minimum Wage. His decision to have done this in my personal opinion might be too risky. This rise could trigger a chain reaction in the economical field, and might also create some problems in the social field. This is such a gambling decision because the worst that can happen is retail prices begin to increase, then the inflation start to take place not to mention other region’s labor across the nation will demand for a rise in their wage too. A policy should be a manifestation of the common sense and common conscience of the citizens as a whole. But this policy has been protested by many company union. Even Apindo, as i mentioned in the first chapter, is ready to file a lawsuit towards this policy. This is an economic policy, certainly there is an uneven impact in the society’s members. But the government should come out with a win-win solution for both labors and businesses’s people. After all that is what a policy should do, give a resolution for a conflict. It is clear that in the process of making this policy, the government failed to implement the value of 4th and 5th sila of Pancasila. Fairness have not equally feel by each member of the citizen, and the representative role of the governtment haven’t been done properly seeing by the way the companies, especially the mid to lower class company, protesting against the policy. Without the implementation of Pancasila’s value in each and every single regulation, this nation will slowly begin to lost it’s identity and the citizen’s trust towards the government could erode.
3.2 Money Wages and the Price Level
Wage increase without inflation
One cannot say that any increse in the wage level will compel a rise in prices. This will happen only if wages rise “too rapidly.” We should define more precisely what “too rapidly” mean. What rate of wage increase is compatible with a stable price level? The basic reason why the money incomes of workers and other groups in the economy can rise faster than prices is that per capita output is rising year by year. This create what Erik Lundberg has termed “wage space” – room for wage increases which will not require an upward adjustment in the price level. Thus if per capita output is rising 3 percent per year and we want to raise workers’s income at the same rate, the maximum raised of basic wage can only be 2 percent per year. These are more illustrative than precise, but may not be too far from the actual situation. This concept of increase in the money wage level is obviously useful. But it is also a dangerous concept, beacuse it is apt to be interpreted as meaning that every wage rate in the economy should rise by a certain percentage every year. This never happens and it would be very unfortunate if it did happen. Wages should rise faster than average in expanding companies, industries, and regions, and less than average in stationary or declining areas and industries, in order to assist the reallocation of the labor force to the growth points of the economy. Apart from this, the wage structure always contains inequities and anomalies which can be corrected only if there is flexibility for different wages to advance at different speeds. It may also be undesirable for the average wage level to advance at the same rate from year to year. Subnormal wage increase are natural in recession years, while in boom years the rate of increase may be unusually high. The feasible rate of wage increase over the long run should not be construed as a yardstick which can be applied inflexibly to particular wage decisions. From the research that conducted by Federal Reserve Bank of Cleveland in United States, it concluded that there is little systematic evidence that wages (either conventionally measured by compensation or adjusted through productivity and converted to unit labor costs) are helpful for predicting inflation. In fact, there is more evidence that inflation helps predict wages. The current emphasis on using changes in wage rates to forecast short-term inflation pressure would therefore appear to be unwarranted. The policy conclusion to be drawn is that inflation can appear regardless of recent wage trends.
Wages and Cost Inflation
There are several reason why people fear “cost inflation” will come afterwards the wage increases 1. There is something in the dynamics of the labor movement which will cause unions year in and year out yo demand wage increases greater than the tolerable level. This could happen if unions in the more prosper sectors of economy took the lead in demanding and securing outsize wage increases. 2. Employers will not oppose these wage demands very strongly because of a feeling that higher labor costs can be passed on to customers through higher product prices. 3. Buyers must, of course, be able to pay these higher prices. Any inflation is a demand inflation in the sense that adequate money demand is essential. The higher price level will be matched by adequate purchasing power, and the economy is then set for the next round of wage and price increases. This is what Hicks and others mean by saying that our monetary system now operates on a “labor standard” rather than a gold standard, and that the money wage level determines the monetary circulation rather than vice versa.
There is little doubt that something like this could happen in actuality. At the same time, there are a number of factors operating in the other direction to retard the rate of inflation:
1. Employer resistance to wage increases cannot be written off as absolete. 2. Despite the advances in monetary economics over the past generation, we are not yet clever enough to prevent occasional recessions even if we were thoroughly committed to doing so. Recession will not prevent wage increase but will reduce their averag size.
3.3 Pancasila’s Value as Remedy
Clearly the 4th sila, “kerakyatan yang dipimpin oleh hikmat kenijaksanaan dalam permusyawaratan/ perwakilan,” and the 5th sila “keadilan sosial bagi seluruh rakyat indonesia” must be included in the making of a public policy, which haven’t been done by the recent UMR rise policy. Pancasila as we know it is the Grundnorm of our nation. Grundnorm means that Pancasila is the highest values that must be contained in each aspect of our life.
Despite the controversial step took by the governor, we must look ahead with our chin up and not letting this one controversy ruin our trust towards the government. We as on of the citizen’s member must be pro-active in supervising the public policy and be critical about whether a policy is contained with Pancasila’s value.
Conclusion and Sugestion
After conducting several basic theories and relating it with on another, i’ve come into conclusion which will answer the problem identificated in chapter I (1.2). a. The policy haven’t met every layer of society neither the Pancasila’s value. This can be proofed by unsatisfied companies that are intend to bring this policy to the court . b. The predictable impact of the implementation of the new provincial minimum wage policy is that it will create inflation but it won’t be that harmful towards the national economy as whole. Jakarta itself is a city with good output percentage per capita, so i think the government can make it happen. And about the fear that this policy will affecting other province to increase their minimum wage, it should not be happening since each province has their own standards of appropriate life so they cannot be put as equal as Jakarta’s wage. c. Another way to guarantee the labor’s welfare rather than rising the minimum wage in accordance with Pancasila’s value is to maintain the retail prices with a policy that has been socialized with the citizens. In other words, the government should be able to increase the purchasing power of wages or the value of the same amount of wage rather than increasing the wage itself while the retail prices are also increasing.
The solutions i would like to offer is for government to put Pancasila’s value first in mind when it comes to policy making. This should be familiarized with more of education alocated to this very subject amongs the member of the government.
We as the citizens of Jakarta too must be critical about the performance of the government. Watch every step they take and support their good act.
* Defining Public Policy http://profwork.org/pp/study/define.html * Larry N. Gerston, Making Public Policy From Conflict to Resolution (Illinois: Scott, Foresman and Co. 1983), p.5-6 * Lloyd G. Reynolds, Labor Economics and Labor Relations (New Jersey: Prentice-Hall Inc. 1959) p.418-319 * Labor Economics http://en.wikipedia.org/wiki/Labour_economics * Simon Kuznets, “Quantitative Aspects of the Economic Growth of Nations,” Economic Development and Cultural Changes, V, No. 1 (October 1956), p.10 * Lloyd G. Reynolds, Labor Economics and Labor Relations (New Jersey: Prentice-Hall Inc. 1959) p.431-433 * Gregory D. Hess and Mark E. Schweitzer, “Policy Discussion Paper”, Does Wage Inflation Cause Price Inflation?, No.10 (April 2000) http://www.clevelandfed.org/research/policydis/pd1.pdf * Pandji, Setijo. Pendidikan Pancasila Perspektif Sejarah Perjuangan Bangsa. Jakarta: Grasindo, 2010.
[ 1 ]. Defining Public Policy http://profwork.org/pp/study/define.html
[ 2 ]. Larry N. Gerston, Making Public Policy From Conflict to Resolution (Illinois: Scott, Foresman and Co. 1983), p.5-6
[ 3 ]. Lloyd G. Reynolds, Labor Economics and Labor Relations (New Jersey: Prentice-Hall Inc. 1959) p.418-319
[ 4 ]. Labor Economics http://en.wikipedia.org/wiki/Labour_economics
[ 5 ]. Simon Kuznets, “Quantitative Aspects of the Economic Growth of Nations,” Economic Development and Cultural Changes, V, No. 1 (October 1956), p.10
[ 6 ]. Lloyd G. Reynolds, Labor Economics and Labor Relations (New Jersey: Prentice-Hall Inc. 1959) p.431-433
[ 7 ]. Gregory D. Hess and Mark E. Schweitzer, “Policy Discussion Paper”, Does Wage Inflation Cause Price Inflation?, No.10 (April 2000) http://www.clevelandfed.org/research/policydis/pd1.pdf
Bibliography: * Lloyd G. Reynolds, Labor Economics and Labor Relations (New Jersey: Prentice-Hall Inc. 1959) p.418-319 * Labor Economics http://en.wikipedia.org/wiki/Labour_economics * Simon Kuznets, “Quantitative Aspects of the Economic Growth of Nations,” Economic Development and Cultural Changes, V, No. 1 (October 1956), p.10 * Lloyd G * Gregory D. Hess and Mark E. Schweitzer, “Policy Discussion Paper”, Does Wage Inflation Cause Price Inflation?, No.10 (April 2000) http://www.clevelandfed.org/research/policydis/pd1.pdf * Pandji, Setijo Jakarta: Grasindo, 2010. -------------------------------------------- [ 3 ]. Lloyd G. Reynolds, Labor Economics and Labor Relations (New Jersey: Prentice-Hall Inc. 1959) p.418-319 [ 4 ] [ 5 ]. Simon Kuznets, “Quantitative Aspects of the Economic Growth of Nations,” Economic Development and Cultural Changes, V, No. 1 (October 1956), p.10 [ 6 ] [ 7 ]. Gregory D. Hess and Mark E. Schweitzer, “Policy Discussion Paper”, Does Wage Inflation Cause Price Inflation?, No.10 (April 2000) http://www.clevelandfed.org/research/policydis/pd1.pdf