Academic journal article Development and Society

Labour Protection Policy in a Third World Economy: The Case of Indonesia

Academic journal article Development and Society

Labour Protection Policy in a Third World Economy: The Case of Indonesia

Article excerpt

All governments need to establish a regulatory system that will protect the interests of workers and ensure a minimum standard of living for the population at large. Such intervention is particularly important in developing countries, where a power imbalance between workers and employers can often lead to exploitative employment relations (Djankov and Ramalho, 2009, p. 4). More broadly, governments introduce employment protection policies not only to protect workers, but also to ensure their welfare as citizens. Without such regulations workers in developing countries are especially vulnerable to discrimination, low wages, poor workplace health and safety, as well as inadequate compensation if they suffer hardship. Critically, such protection should not only cover workers in the formal sector, but also workers in the informal sector.

In order to provide better protection for labour in Indonesia, it is clear that fundamental policy changes policies have been introduced over the last two decades. The first step taken by the government was to formulate 'Law 13 of 2003 concerning Manpower', a law which emphasized protection of rights and welfare as the most important element of development. The law stipulates that the government will provide social security and protection, and echoes the principles of cooperation and mutual assistance that many have come to consider to define the Indonesian nation. This law also decreed that there would be a minimum wage and equal employment opportunities for all, regardless of gender.

In order to further promote this evolving system of social security, the following year the government issued Law 40 of 2004 establishing the NSSS, 'National Social Security System' (SJSN, Sistem Jaringan Sosial Nasional). This law was formulated within the context of a national debate over how to expand the rights of workers. In its annual session of 1-11 August 2002 the People's Consultative Assembly amended Article 34 paragraph (2) of the Indonesian Constitution, which now reads "The State will develop a system of social networking which will engage all citizens and which will empower those who are weak or disabled, according [to principles of] human dignity." This provision thus implies that all Indonesians are entitled to social security, not only civil servants, state officials and the police/military.

This law aimed to provide protection for all workers from risk in the workplace, thus encouraging their motivation and enhancing labour productivity. As detailed below, the state-owned 'Jamsostek' corporation (Persero Jaminan Sosial Tenaga Kerja, 'Workers Social Security Corporation') was tasked to provide four social insurance programs to all workers and their families, namely Work Accident Insurance, Death Insurance, Pension Insurance and Health Care Insurance.

In the following years, however, the government realised that this state corporation lacked the capacity and resources to provide such universal coverage. Nor was there are single ministry that had the the capacity to oversee its operations. As a result, Law 24 of 2011 established an organisation to coordinate these activities, the BPJS (Badan Penyelenggara Jaminan Sosial, Agency for Administering Social Security'). The BPJS was tasked to provide social insurance programs and, in order to finance the promised benefits, to collect contributions from workers and employers. This 2011 law obliges both workers and their employers to contribute a fixed percentage of wages to the fund, while the government would make contributions to protect the poor. For implementing these laws, the government developed a roadmap for the operation of both NSSS and BPJS programs, which it finalised in 2013, when its implementation began (Muliati, 2013, p. 5). Amongst other changes, implementation involved the transformation of the Jamsostek Corporation into the Labour Division within BPJS (BPJS Ketenagakerjaan). Its social security program for labour was maintained, but with improved Pension Insurance and the addition of Retirement Warranty after 1st July 2015, as will be detailed below. …

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