The Influence of Regional Minimum Wage Discretion on Wage Disparity and Company Relocation

Amiq, Bachrul and Liosten R.R. Ully, Tampubolon and Widayat, Edy The Influence of Regional Minimum Wage Discretion on Wage Disparity and Company Relocation. In: the 6th International Conference on Community Development (ICCD 2019), 23-24 Juli 2019, BRUNEI DARUSSALAM.

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Abstract

Wage disparity has been more apparent since 2015, causing anxiety among employees and employers. Therefore, a strategic policy in wage governance is required as the solution to address the issue. The current wage discretion policy was made by the governor through the Decree of the Governor of East Java number 188/665/KPTS/013 2018 regarding the minimum wage for the districts and cities in East Java province. Twenty-two regions of the regencies and cities received 11-24,57% of wage increment while the other sixteen regions, which have a relatively higher standard of minimum wages, received 8,03% wage increment in accordance with the Government Regulation year 2015 number 78. The purpose of this research is to analyze the influence of wage discretion in solving the wage disparity problem and company relocation. The subjects of this research were labor union, Indonesian business association (APINDO), and government based on purposive random sampling method. The data analysis method used is a descriptive-qualitative method, including interviews with the research subjects, triangulation, international journals, documents, and articles. The finding of the research shows that the minimum wage discretion policy influences 1) Decrease in wage disparity; 2) Increase in companies relocating to areas with lower minimum wage, and 3) Decrease in labor demand. Therefore, the minimum wage discretion policy should consider the following aspects, such as regional condition,decent living needs, company types, national economic growth, and inflation rates.

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