An interesting perspective on quora:
This goes back to when Indonesian was occupied by VOC or the Netherlands.
At the time, the dutch need cheap laborers to work on the plantations and trading route.
So they need to pay these people (slavery is sub-optimal since you degrade the dignity of both the supervisor and the victims) but you want to pay them so low that it will only feed them for that day and thus forcing them back to work the next day.
Another reason is political. To better control the majority of native Indonesian, the dutch encourage a 3 tier society, where the Europeans are at the top, Chinese Arabs and Indians are in the middle, and native Indonesian at the bottom. One way to make this happen is by limiting access to public service, another is income.
Now, during the independence, the cost structure of the government basically follows that of the Dutch, with very low paid native civil servants.
The nation leaders saw that it's good to keep this system because they didn't have a lot of money to pay civil servants when the country was just passing its independence and remember as a nation, Indonesia has been in a captive mindset for hundreds of years (either captive to the dutch or their local rulers), so they are used to a hand-to-mouth existence.
The traders, merchants, landowner and industrial class was also in the same mood, I've paid my workers pitiful salary yesterday why should i change now.
So that's the historical background on why Indonesian salary is so low.
And by the way, in addition to the captive mindset, the education, initiative, and productivity level of the workers would discourage anyone from paying them European labor worker's salary.
And from independence, for decades Indonesian has been without a middle class. A middle class meaning people are educated and can reliably represent the owners interest in a company.
I think that up to the 1980's, there still a lack of middle class in Indonesia. There are basically 4 class of society: low level government official who has no access to corruption and stay poor, laborers and farmers who stay poor, government official who learn to compensate their meager salary with massive corruption, and private company owners. Managers are rare since most company are managed directly by the owners.
When more people become managers in the 1990's, this pattern of paying meager salary for Indonesian continues.
But it gives rise to rampant corruption in all sector of society, if in the 1960 and 1970's it was government officials who learn to corrupt, then it was private managers who then learn, but by more subtle means that government officials.
Some old money families I met manage by this creed "whether I give people low salary or high salary, people will steal. So I let them have low salary".
In more modern times, this pattern continues.
For example, Jakarta has a city budget of US$ 5 billion, more than many top companies in Indonesia. Do you know that the official salary of Jakarta governor is less than $1,000 per month? Then what did his predecessor do?
a. They create a lot of non-salary official payments, fees for attending meetings, fees for sitting on a chair (they created a lot of chair), incentives from tax collection
b. They create a lot of "opportunity". As a resident of Jakarta, I would estimate that at least half of the city non-employee budget is wasted on corruption. How do i know? The speed and quality of construction being done now. Just around my house the city is revamping canal walls with concrete, creating large drain trenches, and this is done in many parts of the city. I cannot help but wonder, the city had the money to do this in the previous governor's terms, where did that money go?
Now, there are efforts to move Indonesian government salary to the Singaporean standard (i.e. Pay international market rate for government official and civil servant but zero tolerance for corruption and silly fees), but nooo, many Indonesians, especially old and powerful ones are just to use to having a corruptible system. For government official it presents massive upside, for businessman it provides a way to skirt regulation or change regulation per their business interest.
https://www.quora.com/Why-is-salary-level-in-Jakarta-and-Indonesia-so-low
