Executive Summary

Key insights and market outlook

The Indonesian government, led by President Prabowo Subianto, has announced the 2026 minimum wage policy through a new government regulation ²

. The formula for calculating the minimum wage will be inflation + (economic growth x alpha), where alpha ranges between 0.5 and 0.9 ². This decision comes after labor unions expressed concerns and rejected the new formula, demanding a minimum 6.5% increase ⁵.

Full Analysis

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Deep Dive Analysis

Indonesian Government Finalizes 2026 Minimum Wage Policy

New Formula for Minimum Wage Calculation

The Indonesian government has officially announced the new minimum wage policy for 2026 through a government regulation signed by President Prabowo Subianto on December 16, 2025 ²

. The new formula for calculating the provincial minimum wage (UMP) will be based on inflation + (economic growth x alpha), where alpha will range between 0.5 and 0.9 ². This formula is designed to comply with the Constitutional Court's decision and better reflect regional economic conditions.

Labor Union Reactions

The new policy faced immediate resistance from labor unions. The Indonesian Workers Confederation (KSPI) rejected the new formula, arguing that it was decided without proper consultation with worker representatives ³

⁵. KSPI demanded a minimum 6.5% wage increase for 2026, criticizing the government's decision as favoring business interests over workers' welfare ⁵.

Implementation Mechanism

The new regulation mandates that provincial governors must determine the UMP for their respective regions by December 24, 2025 ²

. The policy also allows governors to set sectoral minimum wages at both provincial and district levels. This mechanism is expected to provide more flexibility in addressing regional economic disparities.

Background and Context

The development of the new minimum wage policy has been a complex process involving various stakeholders. The Ministry of Manpower had been working on the regulation since late November 2025, with the draft regulation being sent to President Prabowo for signature ¹

. Labor unions had been anticipating the announcement, with some expressing concerns about potential political motivations behind the timing of the decision ¹.

References