If the Jakarta city administration uses the old wage calculating formula, next year's minimum wage will be more than Rp 3 million (US$220.28 pr S$308) because the cost of living in Jakarta has increased to Rp 2.98 million next year or 14.2 per cent above the current figure of Rp 2.53 million (S$260).
The cost of living is an important element to include in determining whether or not to use the old wage formula. This year, with the cost of living near Rp 2.53 million, the city minimum wage is Rp 2.7 million. In 2014, the cost of living was Rp 2.2 million, while the minimum wage was Rp 2.4 million.
"We [the City Wage Council] have already made an agreement that the cost of living [KHL] in the city is Rp 2.98 million," said head of City Manpower and Transmigration Agency Priyono as reported by kompas.com in Jakarta.
However, the government's fourth economic package has ruled that the minimum wage will only be based on the fiscal year's inflation and gross domestic product (GDP) growth, ignoring the old formula in deciding the cost of living.
The new mechanism will be stipulated in a new government regulation.
Previously, the City Manpower and Transmigration Agency announced that the City Wage Council considered the use of the old formula a better option for deciding the 2016 minimum wage. Members of the City Wage Council are representatives of employers, workers and the Jakarta city administration.
The cost of living is based on prices of 84 commodities and other daily needs of the workers. The Agency said recently that the City Wage Council had carried out the survey on the cost of living in the city.
Priyono said that there were no additional items added to the cost of living in the city, while the increase of the cost of living was caused by the items being surveyed improving in quality.
Priyono said the council was scheduled to start discussing the city minimum wage on Oct. 27.