The Assemblage of Power: The Role of The State in Minimum Wage Policy in Indonesia

Abstract

The minimum wage is an essential issue for workers in Indonesia. Employers still apply the minimum wage to all workers, regardless of their experience. Further, the calculation of the minimum wage is still based on an estimate for single workers. This calculation can mean that a worker is unable to meet the daily needs of their dependent family. Workers in Indonesia are trapped in debt and poverty. The minimum wage in Indonesia is intended as a safety net to prevent workers from falling into poverty, with workers’ welfare the responsibility of the state.

This study aims to examine the role of the state in determining the minimum wage policy. The outcomes of this process cannot be separated from the strength of workers and employers to communicate their interests. As a semi-peripheral country within the international division of labour, the minimum wage policy in Indonesia is influenced by the interests of international capital. This qualitative study uses the capitalist state theories of Miliband, Poulantzas, and Jessop to examine the role of the state and worker-employer relations, and the influence of the international market on determining minimum wage policy in Indonesia -with world-systems analysis also drawn on to investigate the international market context.

Overall, this study proves that wage rates are the result of the struggle of the agency, i.e. workers, employers, and government personnel through various institutions, regulatory products and laws. The various regulations and institutions of the state ensure that the struggle between these interest groups takes place in a way that does not endanger capitalism as the prevailing economic and political system. For workers, the struggle for increased wages occurs at two levels. Firstly through tripartite institutions -Institutions where workers, employers and government representatives negotiate wages and other industrial relations issues- and laws that are created by the state to limit struggles around the wage rate. Secondly, through a larger, democratic space in strikes or demonstrations are staged. Employers mostly pursue their interests through parliamentary, tripartite institutions and through occupying prominent positions in government structures. International markets affect the determining of wage policy through the actions of international and regional institutions that provide access to overseas debt, and who stipulate the conditions to be followed by the Indonesian government in receipt of this debt.