Introduction
The Asian financial crisis in the middle of 1997, which is started in Thailand, spread to others countries in Southeast Asia Region. According to Investopedia, financial crisis is certain circumstances which the value of financial institutions and assets drop rapidly. So, the investors will sell off assets or withdraw money from saving account. The financial crisis can cause the economy in to recession or downturn.1 This financial crisis immediately has impacts to the financial market that includes exchange rate instability, capital outflows, and declining productivity. That condition led to loss of profitability and large number of unemployment. International Labor Organization (ILO) has defined and identified the probabilities of the main factors regarding to Asian financial crisis in 1997, especially in Indonesia. The incompatibility between exchange rates and capital account because of macroeconomic mismanagement could be the first reason of causing crisis.2 On the other hands, the collusion between the government, banks, and the corporate sector is leading to trigger the crisis. Because of the misconception of industrial relation theories, where there is a good companion between the government and workers, the imperfection in financial markets will distract the productivity of capital and labor. A. Industrial Relations System in Indonesia
Indonesia has experienced rapid economic growth and rising per capita income from the mid-1980s to the mid-1990 that improved its welfare in health, education, and job opportunities. Since the Asian financial crisis in the middle of 1990s, its dramatically increase the unemployment rate and a decline in wages for those who did not lose their jobs, with women being particularly vulnerable because the criminality as getting higher. This condition also accompanied by the increasing price of drugs and health service, and rising food prices that cause malnutrition. In education sector, declining income also reduced access to higher quality education, which more than 25% should have been dropped out from school.3 From that event, the industrial relations concept in Indonesia was starting to reform into transition.
Since the fall of Soeharto regime and the implementation of autonomy policy, the industrial relations transition in Indonesia had been influenced. Previously, industrial relations in Indonesia were under control of the central government and there was only one labor union officially recognized by the government. The industrial relations system in Indonesia has transformed the objective and workers attitudes, because the workers are more explicit when expressing their ideas. As we know the voice of the workers are prohibited and under pressured. That condition led to the establishment of labor unions and worker movements to deliver their demands.
At this time, industrial relations in Indonesia are starting to be decentralized while some elements are still influenced by the central government. The aspect of decentralization will influence decision making processes and several changes have been made to labor regulations. For example, the creation of Law No. 21, 2000: permitting workers to establish unions at the enterprise level. This decision was made following the ratification of several International Labor Organization (ILO) conventions, including Convention No. 87, 1948 on “Freedom of Association and Protection of the Right to Organize”. Furthermore, government policy and legislation, which has influenced the livelihoods of the workers, has also contributed to the increasing number of strikes and demonstrations in Indonesia.4
B. The Role of Good Industrial Relations during Economic Crisis
There is still differential perception on understanding the effectiveness of good industrial relations systems. If we may take a look back to the first part, we could assess and measure to the extent of good industrial relations and its importance during the economic crisis. A good industrial relations practice will influence the economic performance through (1) the effectiveness of the management conflict among government, employers, and employees, (2) the motivation, commitment, and behavior of individual workers and work groups, and (3) the rules and practices governing the allocation and use of human resources. Before we go further, let us explain the role of good industrial relations during the economic crisis.
a. Conflict Resolution Systems. One of the most critical functions of an industrial relations system is to establish procedures and processes for resolving conflicts or problems that arise between employees and management. During the economic crisis, where the instability of financial markets and loss of productivity of workers, industrial relations practice should be applied in order to avoid the economic downturn.
b. Worker Motivation/Commitment/Involvement/Performance. After designing the conflict resolution systems, it clearly reflects that the motivation, attitudes, and behavior of worker can be effected on organizational performance as well.
“A wide range of theoretical arguments suggest that individual worker ability, motivation, and participation in job related decision-making will affect both organizational effectiveness and individual worker satisfaction.” (Hackman and Oldham, 1976)
During the economic crisis, if the management can maintain the ability and willingness of the workers, together they can be participated in the way to improve job performances and lead to increase organizational effectiveness and individual satisfaction. As we know that economic crisis will rise the unemployment, it is better to harmonize the willingness between the employers and employees.
c. Human Resource Management Rules and Practices. Industrial relations at the national level build trust and confidence between representatives of workers and employers, which is the point at which the system must ultimately be effective. Effectiveness at one level would naturally have some impact on the other. According to MckKersi and Hunter (1973), it implemented by the allocation of workers, the compensation system, and the adaptability to change serve the organizational effectiveness and employee goals.
By any chance, in Indonesia was established National Social Security Council that consists of person from government, experts, employers, and workers organizations. One their functional duty is implementing regulation of Act
No.24 of 2011 for social security.5 In economic crisis, the critical role is holding dialogue in tripartism particularly in discussing and implementing law and regulation on industrial relations to strengthen the effectiveness of consultation and coordination among the central government and regional government. On the other hands, National Social Security Council should lead to better understanding among stakeholders by improving participation among stakeholders in the national and international events. Conclusion
The presence of good industrial relations system, where the relationship among government, employers, and employees is in line to the common goals, has very important role during the economic crisis, especially for example in Indonesia. After experiencing by the Asian financial crisis in the middle of 1997 and the fall of Soeharto regime, have given influences and impacts to the industrial relations in Indonesia. The concept and practice of good industrial relations system has adopted during the economic crisis in Indonesia through conflict resolution system, worker motivation and performance, human resource management, and the last but not less important is holding dialogue between the actors of industrial relations systems itself.
Reference List
1. Dunlop, J.T. 1999, ‘Industrial Relations Theory’, in Lewin, D. and Kaufman, B. E. Advances in Industrial and Labor Relations, vol. 8, JAI Press Inc., London, pp. 15–24.
2. ILO, Evolution of the Asian financial crisis and determination of policy needs and responses, GB.274/4/2, 274th Session, Geneva, March 1999, Para 24.
3. SMERU Report (2001) on The Impact of Minimum Wages in the Formal Urban Sector which found a statistically significant negative impact on employment. Manning (1996) and Rama (1996) indicate that minimum wages are beginning to impact on several types of workers, especially youth, and unskilled female workers in certain regions.
4. UNESCAP, 1999, ‘Social impact of the Economic Crisis’, Economic and Social
Survey of Asia and the Pacific 1999’, United Nations Economic and Social Commission for Asia and the Pacific. (http://www.unescap.org/drpad/publication/survey1999/svy99ch3.pdf)
