Executive Summary

Key insights and market outlook

Thirty-six Indonesian provinces have announced their 2026 Provincial Minimum Wages (UMP), with increases ranging between 6-7% ²

. The adjustments follow the government's new regulation (PP No. 49/2025) allowing for an alpha range of 0.5-0.9 in wage calculations ¹. While some provinces like Jakarta set their UMP at Rp 5.72 million, others like Banten recorded a 6.74% increase to Rp 3.1 million ³.

Full Analysis

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Deep Dive Analysis

Indonesia Implements New Provincial Minimum Wages for 2026 Amid Economic Challenges

Significant Wage Adjustments Across Provinces

Indonesia has seen a comprehensive adjustment in Provincial Minimum Wages (UMP) for 2026, with 36 provinces announcing their new rates ²

. The increases generally range between 6-7%, following the guidelines set by the government's new regulation (PP No. 49/2025) on wages ¹.

Regional Variations in Minimum Wage Adjustments

The capital city Jakarta led with the highest UMP at Rp 5.72 million, representing a 6.17% increase from the previous year ²

. Other provinces showed varying adjustments: Banten's UMP rose by 6.74% to Rp 3.1 million ³, while Central Java recorded a 7.28% increase ⁴.

Business Community Response

Industry associations representing labor-intensive sectors such as textiles, furniture, and footwear have expressed concerns that the wage increases should be accompanied by productivity enhancements ¹

. The business community has also been involved in discussions regarding the alpha value used in wage calculations, with Jakarta's employers suggesting a maximum alpha of 0.55 while workers advocated for above 0.9 ⁶.

Economic Implications and Future Outlook

The wage adjustments come as Indonesia faces challenges including pressure on the middle class and continued layoffs, which could potentially weaken household consumption in 2026 ⁵

. Economists suggest that the government needs to provide more targeted incentives and structural policies to support the middle class, who play a crucial role in driving economic growth ⁵.

References