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The Manpower Law of 2003 and its implementing regulations: Genesis, key articles and potential impact

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  • Chris Manning
  • Kurnya Roesad

Abstract

This paper reviews Indonesia's Manpower Law 13/2003 and related regulations, against a backdrop of slow employment growth, business concerns about the legislation and government attempts to change it in 2006. The paper focuses on severance rates and dismissals, short-term contracts and out-sourcing, and minimum wages, also briefly discussing other articles, and comparing the law with those in neighbouring countries. It suggests that certain articles have contributed to significantly higher wage costs and reduced flexibility in the management of labour in Indonesia's formal sector, even though compliance is by no means universal within the private sector. Key provisions, especially large increases in severance rates, and needs criteria imposed for the purpose of setting minimum wages, are also out of step with labour market policies in other developing countries. Circumstantial evidence suggests that these measures have adversely affected the investment climate and damaged prospects for a recovery in employment.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Bulletin of Indonesian Economic Studies.

Volume (Year): 43 (2007)
Issue (Month): 1 ()
Pages: 59-86

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Handle: RePEc:taf:bindes:v:43:y:2007:i:1:p:59-86

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Cited by:
  1. Matsumoto, Makiko & Verick, Sher, 2011. "Employment trends in Indonesia over 1996-2009 : casualization of the labour market during an era of crises, reforms and recovery," ILO Working Papers 466252, International Labour Organization.
  2. Haryo Aswicahyono & Chris Manning, 2011. "Exports and Job Creation in Indonesia Before and After the Asian Financial Crisis," Departmental Working Papers 2011-11, The Australian National University, Arndt-Corden Department of Economics.
  3. Brusentsev, Vera & Newhouse, David & Vroman, Wayne, 2012. "Severance pay compliance in Indonesia," Policy Research Working Paper Series 5933, The World Bank.

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