Indonesia's job creation law a blow to labour - East Asia Forum

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Author: Teri Caraway, University of Minnesota Twin Cities

Indonesia’s Omnibus Law for Job Creation came into law in November 2020, amending more than 70 different pieces of legislation. The law, which the Widodo administration claims is necessary to improve Indonesia’s investment climate and promote employment, was rammed through amid the COVID-19 pandemic despite the opposition of civil society actors.

Its passage was a resounding defeat for labour unions and marked the culmination of a multi-year effort to clip labour’s wings. Before the election of President Joko ‘Jokowi’ Widodo in 2014, labour unions had won an impressive string of victories at the local and national level and emerged as one of the most powerful organised actors in Indonesia’s democracy. Labour’s victories — won largely through politics rather than through bargaining power in the workplace — demonstrated that lower-class actors could make gains through democratic politics.

But this strategy of pursuing its interests through street protests and electoral bargaining only worked as long as labour confronted political leaders who, if not friendly to labour, were not hostile to it. With Jokowi’s election, the precarious nature of labour’s victories quickly became apparent. Capital now had an ally at the top willing to play hardball.

The first sign that the tide had turned against workers was Government Regulation no. 78/2015 on Wages (PP78), issued in December 2015. In the years before Jokowi issued PP78, unions in industrial and metropolitan centres won significant minimum wage increases. They utilised street protests — often strategically timed around electoral cycles — to persuade local executives eager to win labour votes to side with labour during wage negotiations.

By playing politics, Indonesia’s unions secured larger wage increases than they would have obtained through workplace collective bargaining. Exasperated employers prevailed on Jokowi to rein in the local wage councils, culminating in the issuance of PP78, which tied the hands of the wage councils and local executives by requiring that minimum wages be set by a formula — inflation plus GDP growth — and not through negotiations.

The next target was the Manpower Act of 2003, a labour-friendly law passed under former president Megawati. Employers had long advocated for the rollback of its pro-labour provisions. But tackling the Manpower Act would be challenging because Jokowi needed the legislature’s endorsement. His predecessor, president Susilo Bambang Yudhoyono, tried three times to amend the law (in 2006, 2010 and 2011), but was thwarted each time by labour protests and rebellious coalition partners.

Perhaps for this reason, Jokowi waited until his second term and tucked the amendments to the Manpower Act into the massive Omnibus Law. The task force drafting the bill included no labour representation but was bursting with capitalists. In contrast to the drafting of the Manpower Act, during which legislative leaders gave both unions and employers a seat at the table, labour had no meaningful role in the drafting of the Omnibus Law.

This string of defeats portends a grim future for labour unions as long as Jokowi is in office. Despite repeated protests against PP78, the law weakening the anti-corruption commission and the Omnibus Law, Jokowi has stood his ground. When challenged, his government has deployed security forces to intimidate and intercept protestors and has dismissed criticism as hoaxes. Jokowi’s firm grip on his coalition partners allows him to govern largely unchallenged.

Further street protests will likely invite harsher crackdowns and efforts by labour to challenge the Omnibus Law in the Constitutional Court are probably destined to fail (just as they did with PP78). Just in case, Jokowi has taken steps to assure that the judges will side with him.

The silver lining is that labour is not alone in its disappointment with Jokowi. The crude tactics used against opponents, as well as the steamrolling of controversial laws through the legislature with minimal public consultation, have created opportunities for alliance building. The students who hit the streets to reject the amendments to the anti-corruption law also joined labour in opposing the Omnibus Law. Islamists, long antagonistic to Jokowi, also came out against the law and some labour activists are flirting with them.

In addition to bolstering its ability to confront capital head-on in the workplace, the labour movement must unify its ranks and forge broader political alliances in the run-up to the 2024 elections. Unions have learned the hard way that the existing political parties are at best temporary bedfellows. Prabowo Subianto signed a political contract with unions during the 2019 presidential race. But after losing he joined Jokowi’s cabinet, threw his party’s support behind the Omnibus Law and claimed that the unions protesting the law hadn’t read it.

The largest confederations have divided their loyalties in past presidential elections and previous efforts to form a strong pro-labour party foundered on the shoals of organisational divisions. If labour hopes to reverse its losses, it must stitch together the scattered elements of the disorganised opposition into a popular front that has the votes and the geographic reach to challenge oligarchic forces at the ballot box.

Teri Caraway is Professor of Political Science at the University of Minnesota, Twin Cities.

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