Minimum wage is legal minimum amount that is due to workers in the labor section of a country. Indonesia’s minimum wage is referred to as UMR ( Upah Minimum Regional). The purpose of the presence of minimum wage is to protect workers from firms and businesses who may give workers a salary or wage that is unfit for them to afford their daily necessities. The main idea of this system is to overcome poverty and reduce income inequality in the country. The components of minimum wage consist of the basic wage and a number of other payments such as irregular working hours, overtime, extra shifts. Specifically, in Indonesia, firms are also obliged to pay their employees an annual bonus called THR (Tunjangan Hari Raya Keagamaan), worth an employee’s month wage. The THR is being paid to the workers before their religious holiday. This occurs during the Ramadan holiday because the majority of Indonesians are Muslim. As a result, by the end of the year, Indonesians normally would have received 13-month worth of pay. Employees are usually paid at or above the minimum wage and the amount must be stated clearly in the agreed contract including other performance related pays, irregular hours and overtime payments as well as the THR. Standard of living is the quality of life of a person living in a country and their ability to afford basic necessities, access to high quality goods and services and the best possible living conditions. There are many factors contributing to it, including: GDP (Gross Domestic Product), Income, Economic Growth, Political stability, environment, safety and security, gender equality, education, healthcare, freedom of religion and political party, mortality and birth.There are many ways to measure a country’s standard of living. First is by calculating the nation’s Real GDP per capita. Unlike calculating the GDP or GDP per Capita, the Real GDP per capita takes into account the population and also adjusts for a country’s inflation rate making the values more accurate to measure the quality of life in the country. The Real GDP is measured by the following formula = Consumer expenditure + Investment + Government spending + Net Exports (Exports – Imports).However, the issue with only calculating the nation’s GDP is that it does not consider other factors such as: literacy, life expectancy, income equality, environmental damage, voluntary work, and depletion of natural resources.Which is why, economists have developed another way of measuring the standard of living.Second is the HDI (Human Development Index) this measures a country’s quality of life by looking at 3 Dimensions. First is at the level of education and literacy which is indicated by the expected years of schooling and mean years of schooling. Second is the Long and healthy life of citizens which can be indicated by life expectancy at birth. Third is the decency of standard of living or income equality which is indicated by the Gross National Income per Capita. Third is the MEW (Measure of Economic Welfare) this measures the real GDP in the country and also the economic welfare of the nation or to put at a simpler note, how well the conditions are for the citizen in the country.The MEW is calculated by a formula: Value of real GDP + Value of leisure time = Value of unpaid or voluntary work – Value of environmental damageHowever, to put into monetary value to economic welfare can be inaccurate and complex. Take for example, it is nearly impossible to get a specific amount to value the amount of leisure time you have in numbers. Which is why this essay will not focus of the usage of the MEW method. Despite all methods of standards of living, the most common methods are HDI and Real GDP, however since the most accurate and recognizable method to measure the standard of living is by the HDI, we will then mainly focus on the HDI method.


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