The Constitutional Court’s decision stipulating Law no. 11/2020 concerning conditional unconstitutional job creation and the determination of the 2023 UMP (Provincial Minimum Wage), which has an average increase of around 7.25 percent based on Permenaker No. 18/2022, no longer based on PP No. 36/2021.
Which is a derivative of Law no. 11/2020, had given rise to optimism that the government would no longer adopt a policy of low labor wages as the primary strategy for attracting investment and creating jobs. However, the issuance of Perppu No. 2/2022 concerning Job Creation counteracts this expectation.
In addition to considering the factors of economic growth and inflation, the determination of the minimum wage in the Job Creation Perppu also takes into account a “certain index,” which tends to be a discretionary space for the government to keep the minimum wage low. Even the Job Creation Perppu also stipulates that the government has the right to change the formula for determining the minimum wage under “certain conditions,” which are very open to broad interpretation. The low wage regime continues to be the leading spirit of the Job Creation Perppu.
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