Indonesia Shifts to Range-Based System for 2026 Minimum Wage Determination

New Approach to Address Regional Wage Disparities

The Indonesian government is set to implement a significant change in how it determines the 2026 Provincial Minimum Wage (UMP). Rather than using a single percentage for wage hikes, as was done for the 2025 UMP, the Ministry of Manpower will propose a specific range to guide regional wage setting. This new approach has been approved by President Prabowo Subianto, according to Minister of Manpower Yassierli.

Rationale Behind the Change

The decision to move away from a fixed percentage increase was made to address the issue of wage disparities across different regions. Yassierli explained that a single percentage does not adequately address the varying economic conditions across provinces. By introducing a range, the government aims to give regions more flexibility while maintaining a national framework.

Implementation Details

While the range for the 2026 UMP has not been officially announced, the Ministry of Manpower is working on the proposal. Yassierli indicated that further details would be released in subsequent announcements. This new system is expected to be more adaptive to the diverse economic conditions across Indonesia's provinces.

Economic Implications

The shift in wage policy could have significant implications for both workers and businesses across Indonesia. For workers, it could mean more tailored wage adjustments that better reflect local economic conditions. For businesses, it may require more nuanced budgeting and planning for labor costs. The government's decision reflects a balancing act between supporting economic growth and ensuring fair wages for workers.