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The issue of provincial minimum wage (UMP) continues to spark debate each year. Labor unions are now proposing that the 2026 minimum wage be increased by 8.5% to 10.05%.
This proposed increase refers to Constitutional Court Decision No. 168, which mandates that UMP calculations consider inflation, economic growth, and an index reflecting a decent standard of living.
According to calculations by the Research and Development Division of the Labor Party and the Confederation of Indonesian Trade Unions (KSPI), several factors must be considered when determining the UMP. One key factor is accumulated inflation from October 2024 to September 2025, which is estimated to reach 3.23%.
Meanwhile, economic growth during the same period is projected to range between 5.1% and 5.2%, and the specific index proposed by KSPI and the Labor Party is between 1.0 and 1.4.
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KSPI is urging the government to finalize the 2026 minimum wage and sectoral minimum wage by October 30, 2025, following Wage Council meetings held at both national and regional levels between August 25 and October 30, 2025.
So, what steps will labor unions take to push for the expected wage increase? And how will the government respond to these demands?
KSPI announced plans to hold mass demonstrations across 38 provinces and more than 300 regencies and cities to advocate for the 2026 UMP increase. One of these large-scale actions took place on August 28, 2025, with tens of thousands of participants joining from various regions.
In addition to demanding a wage increase, workers also voiced six employment-related demands, including:
Abolishing the outsourcing system and rejecting low wages
Stopping layoffs and establishing a Layoff Task Force to protect workers
Labor tax reform, which includes raising the non-taxable income threshold (PTKP) to Rp7.5 million per month, eliminating taxes on severance pay tax, holiday allowance (THR), and old-age protection (JHT), and ending tax discrimination against married women
Passing the Labor Bill without the Omnibus Law, which unions deem unfavorable to workers. Passing the Asset Forfeiture Bill to strengthen anti-corruption efforts
Revising the Election Bill by redesigning the 2029 election system
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In response to union demands, particularly regarding the proposed 2026 minimum wage increase, the Ministry of Manpower (Kemenaker) plans to take a more comprehensive approach to setting next year’s wage policy.
Kemenaker views this issue not only as a matter of wages, but as part of a broader strategy to boost labor productivity in Indonesia.
Before setting new wage levels, the Ministry emphasizes the need for a shared understanding of what constitutes a minimum wage and a decent standard of living.
This requires clarity on how to define and measure key factors such as inflation, economic growth, GDP, and other relevant indicators.
Drawing on data from Statistics Indonesia (BPS), Kemenaker aims to present a clear and transparent comparison between current minimum wage levels and the cost of living.
”We have data comparing BPS’s version of decent living needs with other estimates, and the variation is quite large. Some are still at 60%, others at 80% or even 105%. This is a challenge because we’re starting from different baselines to reach the minimum wage. Hopefully, we can reach a common agreement,” said Minister Yassierli, as quoted by cnbcindonesia.com.
These are some of the latest updates on the 2026 minimum wage discussions and the government’s ongoing efforts to address them. Whatever the final decision, it will undoubtedly have a major impact on Indonesia’s economic and business landscape.
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