Big increase of UMP can trigger the increase of import
News24xx.com - The Indonesian Trade Union requested a 2019 provincial minimum wage (UMP) increase of 20-25 percent. However, the government provides an increase of only 8.03 percent.
Deputy Chairperson of the National Wage Council Elements of the Indonesian Employers Association (Apindo) Bob Azzam explained, if the demand for a 25 percent increase in wages was granted, it could trigger an increase in imports.
He explained if the assumption that wage increases would increase public consumption. In fact, without an increase in consumption alone, currently domestic production cannot meet its own consumption needs. If the high consumption is not offset by the increase in production, there will be a hyperinflation.
"Demand will be higher than we produce goods. This will lead to inflation will also reduce the purchasing power of the workers. So we will experience hyperinflation, which in turn will hit workers" he explained, quoted from detikfinance, October 21st 2018.
Azzam further said that the potential for inflation would certainly be anticipated by the government. However, domestic production which is still minimal cannot be relied on to reduce inflation. So the most likely way to go in short term is import.
"If we consume it a little now, for example, our chili must be imported, our onions must be imported, salt must be imported. What does this mean, our productivity cannot meet our needs" he explained.
So according to him, the pretext used to propose wage increases to increase consumption and improve the national economy will not be achieved. In fact, it would be detrimental to the workers themselves in the end, because the price of goods rose above the wage increase they received.
"Not only laborers but all non-laborers will also be affected. So don't think the increase in labor costs to increase consumption will increase the national economy later" he said.
News24xx.com/fik/red
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