New remuneration system will not necessarily boost investment: expert

New remuneration system will not necessarily boost investment: expert

Factory workers walk out of a factory during break time in Boyolali, Central Java, on April 7, 2020. (ANTARA PHOTO/Aloysius Jarot Nugroho/FR)

Jakarta (ANTARA) - The new remuneration system stipulated in Government Regulation No. 36 of 2021 on Remuneration will not necessarily increase investment realization, Pingkan Audrine Kosijungan, a researcher from the Center for Indonesian Policy Studies (CIPS), has said.

In a written statement issued here on Wednesday, she noted that investment realization is not only affected by the remuneration system since there are other manpower issues that have yet to be resolved.

These issues comprise the outsourcing system, severance pay and pension plan, as well as the lack of reskilling and upskilling programs, she pointed out.

The government should also ensure regulation certainty and coherency between the central and regional regulation, the enforcement of law, and economic openness in order to support economic recovery after the almost two-year-long pandemic, Kosijungan said.

The new regulation contains changes in how workers' minimum wage is calculated.

In the previous system, minimum wage was calculated by adding the current year's minimum wage with the product of the current year's minimum wage and the sum of inflation and economic growth, she said. With this, workers' minimum wage increased progressively each year, she added.

However, Article 36 of the new regulation has added a stipulation on the upper as well bottom limit for minimum wage, Kosijungan pointed out.

The upper limit will now be calculated by multiplying the average consumption per capita with the average household members, which will then be divided by the average number of household members working in each household, she said. Meanwhile, the bottom limit will be half of the upper limit, she added.

The calculation has been done using each region's official statistical data, which has led to a different result for each region, she explained.

"The new formula for minimum wage calculation no longer sums up the regional inflation rate with economic growth, which was the main variable in the past regulation. These two factors still play a role within the calculation of minimum wage, but with different formulations," Kosijungan added.

"On the one hand, this alleviates workers' burden in conducting remuneration adjustment, but on the other hand, the increase in workers' minimum wage each year would not be as high if the previous calculation formula was used," she added.

Despite this, she deemed that it is too soon to surmise the impact of the new regulation on investment. This is because the regulation will be applied next year and manpower as well as remuneration issues are only half of the factors that determine whether or not investors are keen on investment, she added.

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