Bandung - A total of 36 provinces in Indonesia have announced the 2024 Provincial Minimum Wage (UMP). Determination of the minimum wage refers to Government Regulation (PP) Number 51 of 2023 concerning Wages.

From these calculations, there are a number of regions with relatively low percentage increases in the UMP. West Java is even included in the 10 provinces with the lowest UMP increases in Indonesia.

West Java's UMP for 2024 was previously set to increase by 3.57% to IDR 2,057,495. This amount is an increase of around Rp. 70,825 from the 2023 UMP which is Rp. 1,986,670.

The low size of West Java's UMP is inversely proportional to the large investment value entering Tanah Pasundan. In the last five years, investment realization both domestic and overseas in West Java reached IDR 685.35 trillion. This makes West Java known as the province with the highest investment achievements in Indonesia.

In detail, in 2018 IDR 116.96 trillion, in 2019 IDR 116.96 trillion, in 2020 IDR 120.43 trillion. Then in 2021 IDR 136.14 trillion and in 2022 IDR 174.6 trillion.

Investment in West Java is even claimed to be increasingly successful in 2023. As of last August, investment realization in West Java had reached IDR 103.6 trillion or more than half of the planned investment target of IDR 188 trillion.

Responding to this, UIN Sunan Gunung Djati Bandung economic observer Setia Mulyawan said, looking at the UMP calculation formula with reference to PP 51, the problem with West Java's low UMP is that economic growth has not been strong.

"If inflation is high, economic growth is high, the multiplication factor is high, it means that the UMP is definitely high. If the situation is like that in West Java, it means that economic growth is not causing the UMP to increase according to expectations," said Setia when contacted, Friday (24/11/2023).

"So the important agenda to be driven in West Java is growth, economic growth," he added.

Setia also revealed that the low minimum wage is behind the large investment value in West Java, indicating that the presence of investors has not been able to significantly boost the rate of economic growth.

"So far, the claim is that investment is the highest in Indonesia, but this means that the high investment figures have not been boosted, have not become a boosting factor in economic growth. I think that's where the problem lies," said Setia.

Even so, he said, it is possible that the effects of investment coming into West Java have not been felt directly. Therefore, a process is needed so that investment can have a direct impact on economic growth in West Java.

"Investment doesn't happen immediately when there is investment in West Java, then the growth immediately increases, because it requires a process, what sector the investment is in. There is an initial period of investment, the real sector hasn't moved yet, so it hasn't moved significantly. "It can directly boost economic growth," he stressed.

In order for the minimum wage in West Java to increase significantly, Setia said the government must continue to boost the rate of economic growth coupled with maintaining the inflation rate so that people's purchasing power remains high.

"The big homework is how this economic growth can grow significantly so that people's purchasing power increases. If it is linked to the UMP, that will be a multiplying factor in determining the provincial minimum wage to be large too," he said.

High Investment Due to Low Wages

Furthermore, Setia said, the high value of investment entering West Java could be due to the still low minimum wage. Because according to him, the wage burden that must be paid by the company is an important component of an investment.

"If the UMP is too high, then people's interest in investing in West Java could also decrease because the workload means it is high, it becomes unattractive because for companies it becomes a cost component, so to speak, a cost component," he explained.

"So, with a figure like that, I believe that it is a moderate figure that is a win-win solution, which for entrepreneurs is not too burdensome, but also for workers there is a balancing of purchasing power, because their income is undermined by inflation," he continued.

Setia still said, the minimum wage is a main consideration for investors. Moreover, the industry presented is labor intensive and requires a large number of workers. Therefore, the possibility of high investment in West Java because wages are still low could be considered the right thing.

"Especially those that are labor intensive, if it is a labor intensive company that employs a lot of people, the UMP will be a main consideration. Because of the large UMP, if there are a large number of employees, the company will certainly not work efficiently," concluded Setia.

(SOURCE)