JAKARTA • An Indonesian employers association yesterday labelled workers' demands for steep annual wage hikes as "unrealistic", and warned there could be more layoffs at companies struggling amid a slowdown in South-east Asia's largest economy.

Labour-intensive sectors like manufacturing and mining have shed thousands of jobs in recent months as economic growth in the second quarter slowed to its weakest pace in six years.

"The economy is slowing and companies all over the country are already either closing down or cutting jobs," said Mr Hariyadi Sukamdani, head of the Indonesian Employers Association. "And this could get worse if the annual wage increase is too high," he said, adding that firms in the association had cut 50,000 jobs since January.

Thousands of workers marched in several cities yesterday to protest against layoffs and call for higher wages as they contend with rising food prices that made Indonesia's annual inflation stay above 7 per cent in August, the highest in the region.

Union leaders have called for at least a 22 per cent rise in minimum wage in Jakarta, which is seen as a bellwether for the rest of the country. The capital last year saw a rise of 11 per cent in its minimum wage to 2.7 million rupiah (S$270) a month.

Annual negotiations are under way between workers, employers and local administrations to determine minimum wages later this year. Unemployment stood at 5.81 per cent in February, according to official statistics, but analysts say that does not cover the informal sector and the real figure could be much higher.

"We realise economic conditions in Indonesia are not very good at the moment, but the government needs to realise it's the workers and poor people who get hit the hardest," said Mr Bambang, a Jakarta factory worker who had participated in the rallies. "We are the ones who need to be protected."

-REUTERS