Indonesian economy has grown significantly for the past quarter of
century. However; welfare of the labors are still in a poor condition This was
indicated by their wages which only around the minimum wages, even after the
government of Indonesia raised them several times. In the era of globalization
or in a borderless economic framework, factors of productions become more
mobile. Mobility of both capital and labor could be driven by comparative
advantages of local and regional markets. When the wage IE' too low
domestically, and when there is a high demand for low-skill workers abroad,
tlte labor will migrate to higher-wage countries. On the other hands, when the
wage is too high in indonesia, foreign investors who invest in footloosee
industries may relocate their industries to lower-wage countries. In addition,
employer can cut down employment to reduce production cast if the wages are
too high. Titus, the scissor effects have to be dealt wisely. Increasing minimum
wages is not the only way to increase worker's welfare. Improving the
_productivity of the labor through formal and informal education is an indirect
way of raising the welfare of workers. Considering that the quality of
Indonesia's labor is still very low and the fact that factors of production are
more mobile in this globalization era, improving the quality of workers to be
more competitive globally is seen as a key situation to the problem.
