Executive Summary

Key insights and market outlook

Indonesian businesses are bracing for potential mass layoffs in 2026 as labor-intensive sectors face significant challenges. The Indonesian Employers' Association (Apindo) highlights that weak domestic consumption and rising operational costs are squeezing corporate profitability. Experts warn that minimum wage increases alone won't prevent layoffs or boost consumption effectively without accompanying productivity improvements and new investments ¹

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Full Analysis

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Deep Dive Analysis

Indonesia's Labor Market Challenges and Layoff Concerns

Economic Pressures Mounting on Labor-Intensive Sectors

Indonesian businesses are on high alert as the threat of mass layoffs continues into 2026 ¹

⁴. The Indonesian Employers' Association (Apindo) warns that labor-intensive industries such as textiles, footwear, and furniture manufacturing are under severe pressure due to thin profit margins ⁵. As of November 2025, layoffs have already affected over 79,000 workers, setting a concerning precedent for the coming year ⁵.

Structural Challenges in the Labor Market

The current labor market conditions are characterized by weak domestic consumption and rising operational costs, creating a challenging environment for businesses to maintain profitability ¹

. Apindo's Labor Affairs Committee Chair, Bob Azam, emphasizes that the minimum wage increase, while beneficial for workers' nominal income, serves more as a buffer rather than a demand booster in the current economic climate ².

Expert Analysis and Recommendations

Economic experts from Universitas Paramadina warn that the government's current measures are insufficient to address the structural issues plaguing Indonesia's economy, including deindustrialization and the shift towards informal sectors ⁴

. To effectively prevent widespread layoffs, Apindo suggests that the government needs to focus on attracting new investments and enhancing worker skills through comprehensive training programs ³.

Sector-Specific Challenges

The labor-intensive sectors, particularly those dependent on exports, are facing significant challenges. For instance, the footwear industry operates on average profit margins as low as 5%, leaving little room for absorbing additional costs such as increased wages ⁵

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References