Jakarta (VNA) – Indonesia plans to raise minimum wages by about 5-7% in 2026 under a new formula signed into law by President Prabowo Subianto, a move that could test the country’s cost competitiveness in Southeast Asia.
The revised regulation retains the existing framework for calculating provincial minimum wages, which ties annual increases to inflation and economic growth, but significantly raises a coefficient known as alpha. The coefficient, which determines how much economic expansion is passed on to workers, has been lifted to a range of 0.5 to 0.9 from 0.1 to 0.3 previously, giving regional wage councils greater room to recommend higher pay.
Data from the Central Statistics Agency (BPS) showed that in the third quarter of 2025, several labour-intensive subsectors underperformed the national average or contracted, including textiles and apparel, footwear, furniture, tobacco processing, and rubber and plastics.
Labour unions, however, said the planned increases still fall short. According to Said Iqbal, President of the Confederation of Indonesian Trade Unions, the formula fails to reflect the real cost of living./.
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