ARI Publishes Living Wage and Living Income Benchmarks for Indonesia’s Key Provinces
Referring to the 2023 Indonesia studies
ARI Publishes Living Wage and Living Income Benchmarks for Indonesia’s Key Provinces
The Anker Research Institute (ARI) is excited to announce the release of two important benchmark reports on living wages and living income for Indonesian provinces. These reports, which represent the latest efforts of ARI’s Indonesia work programme, focus on two distinct areas:
- Living wage estimates for the provinces of Banten and West Java, key hubs for garment and footwear manufacturing.
- Living income estimates for households in rural Lampung, a major coffee-producing region in the country.
These studies aim to address growing concerns about the adequacy of wages for workers in Indonesia, particularly in industries that drive the national economy but often leave workers struggling to achieve a decent standard of living. The goal is to provide data-driven insights into what constitutes a "fair" wage, and to highlight the disparities between current wage levels and the living standards that are necessary for basic decency.
The Economic Context of Indonesia
Indonesia is a resource-rich country, known for its vast array of primary products such as crude palm oil, coffee, cocoa, rubber, and minerals like copper and zinc. It is also home to a dynamic manufacturing sector, including large-scale garment and footwear production that serves global brands.
However, despite the country’s vast economic resources and its growing role as a global exporter, many workers in these key sectors still face challenges in achieving a living standard that goes beyond mere survival. As multinational companies increasingly source from Indonesia, there is mounting pressure to improve the living and working conditions of the people behind the products.
In response to these concerns, ARI undertook research to determine living wage and living income benchmarks that better reflect the cost of living and the dignity of work. These reports are part of a broader effort to quantify how much income is necessary for workers in these regions to achieve a basic, decent standard of living.
“The living wage in these areas is three times higher than the national poverty line.
These findings underline that the official minimum wage in these regions is insufficient to ensure a decent standard of living, highlighting a significant gap between what workers are paid and what they need to live with dignity.”
Living Wage Estimates for Banten and West Java
The first report focuses on Banten and West Java, two provinces that are critical to Indonesia's garment and footwear industries. These regions are home to many factories that serve international brands, including sportswear giants like Nike and Adidas.
In collaboration with the Institute of Social and Economic Research (Inrise) in Jakarta, ARI conducted an in-depth study in three key districts: Serpong (Banten), and Garut and Subang (West Java). The findings reveal that the living wage for these regions is significantly higher than the national poverty line wage, as well as the World Bank’s poverty benchmarks. Specifically:
The living wage in these areas is three times higher than the national poverty line.
It is 60-90% higher than the World Bank's poverty line for upper-middle-income countries.
In terms of minimum wage comparison, the living wage in Garut is 92% higher, Subang is 37% higher, and Serpong is 10% higher.
These findings underline that the official minimum wage in these regions is insufficient to ensure a decent standard of living, highlighting a significant gap between what workers are paid and what they need to live with dignity.
Living Income for Rural Lampung
The second report focuses on Lampung, a province in southern Sumatra that is a key player in Indonesia’s coffee production. Lampung is the country’s second-largest producer of Robusta coffee, accounting for a significant portion of the national yield. ARI’s study, carried out in West Lampung district, estimates the living income required for rural households to meet their basic needs.
“It is more than double the family income at Lampung’s poverty line. These results suggest that the existing poverty and minimum wage measures in Lampung fail to reflect the true cost of living in rural areas, particularly for farming households engaged in coffee production”
Working in partnership with Yayasan Aceh Hijau (Green Aceh Foundation), ARI’s research found that the living income for families in this region is notably higher than existing poverty thresholds:
It is more than double the family income at Lampung’s poverty line.
It is 19% higher than the income a typical family would earn at the minimum wage.
It is 27% higher than the World Bank’s poverty line for upper-middle-income countries (based on a 6.85 PPP per day benchmark).
These results suggest that the existing poverty and minimum wage measures in Lampung fail to reflect the true cost of living in rural areas, particularly for farming households engaged in coffee production.
ARI’s Ongoing Research in Indonesia
Building on the success of these benchmark studies, ARI is continuing to expand its research on living income in Indonesia. Two additional studies are underway:
A study in Rembang, Central Java, focused on farming communities that grow tobacco.
A study in the Acehnese highlands, looking at Arabica coffee farming households.
Both studies, expected to be finalized by the third quarter of this year, will further contribute to ARI’s mission to provide more accurate and region-specific living income data across Indonesia’s rural and agricultural sectors.
Conclusion
The release of these reports underscores the importance of addressing the living wage and income gaps in Indonesia’s key sectors. With multinational brands sourcing from the country, it is crucial that their supply chains support fair and sustainable wages for the workers who are integral to their production processes. The benchmark data provided by ARI serves as a crucial tool for policymakers, businesses, and NGOs working towards improving the living and working conditions of Indonesia's workforce.
For further details on these reports and ongoing research, visit the ARI website.
For more information about our research on migration, contact ARI’s Senior researcher: Azfar Khan akhan@ankerinstitute.org
For general inquiries about the Anker Research Institute’s work, contact: inquiries@ankerinstitute.org
Views expressed are the authors. The opinions expressed here belong solely to the author and may or may not reflect the views of Anker Research Institute.
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