Indonesia urged to create unemployment insurance scheme

Pedro Gonçalves
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Indonesia urged to create unemployment insurance scheme

Indonesia needs to have an unemployment insurance scheme and clear regulations for per-hour employment to ensure workers' protection, a think tank has urged.

The Institute for Development of Economics and Finance (INDEF), through researcher Bhima Yudhistira, said that Jakarta should implement unemployment insurance, which will act as a safety net to ensure workers' salaries meet the minimum wage regulations.

"In this hire-and-fire context, workers might not get decent pay even at the amount of the minimum wage," the Jakarta Post quoted him as saying during a seminar discussing an omnibus bill on job creation in Jakarta.

The irony is that the labour protections that are meant to protect workers have actually left them worse off"

The government is preparing the bill as a part of its efforts to ease doing business and eventually attract more investment to jack up economic growth. Once passed into law, the bill will amend hundreds of articles in dozens of prevailing laws, including the Labour Law.

However, three quarters of the country's non-agricultural workforce is in the informal sector, which includes those who work as housekeepers or casual construction labour who rarely benefit from the country's labour laws that, among other things, provide for minimum wages as well as severance payments, according to the World Bank.

The Office of the Coordinating Economics Minister said that the bill will lay the ground for hourly-based employment in some industries - such as consultants, freelancers, and those working at start-ups. However, labour unions have expressed disapproval to the bill, as it could end up enabling violations of workers' rights to decent pay.

Some experts say that these labour laws discourage investment and won't actually help the workers.

"The irony is that the labour protections that are meant to protect workers have actually left them worse off," Tom Lembong, the former chairman of the Indonesia Investment Coordinating Board (BKPM), told Bloomberg.

Lawyers say, for instance, an employer cannot sack a worker caught stealing, without a conviction in court. And even then they are owed severance pay.

 

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