2026 Provincial Minimum Wage Predicted to Be More Equitable Thanks to New Government-Strengthened Formula
Jakarta – The government has officially strengthened the mechanism for setting the 2026 Provincial Minimum Wage (UMP) through a Government Regulation (PP) on Wages signed by President Prabowo Subianto. This regulation serves as a new legal basis requiring all governors to announce the 2026 UMP no later than December 24, 2025.
The latest Wage Regulation introduces a new formula for UMP increases based on Inflation + (Economic Growth × Alpha), with the alpha value ranging from 0.5 to 0.9. This formula is considered to provide a fairer approach because it allows adjustments based on economic conditions and the specific characteristics of each region, rather than applying a uniform national increase.
Minister of Manpower Yassierli explained that the magnitude of the 2026 UMP increase will largely be determined by regional governments through their choice of the alpha value.
“So, the alpha range provides flexibility—flexibility from 0.5 to 0.9. So if people ask, how much will the increase be, Minister? Well, it depends on each region. Some may choose 0.6, 0.7, or 0.8,” Yassierli explained.
According to Yassierli, alpha is an index that reflects the contribution of labor to economic growth.
The alpha value stipulated in the new Wage Regulation has increased significantly compared to previous provisions, which ranged only from 0.1 to 0.3. With this increase, the role of workers in driving regional economic growth is expected to be better accommodated in wage policy.
The application of this formula ensures that the 2026 UMP increase will vary across provinces. This differs from the 2025 UMP, which was uniformly set to rise by 6.5 percent nationwide.
Yassierli emphasized that the determination of the 2026 UMP will involve dialogue between the Regional Wage Councils and governors, taking into account regional economic conditions, including growth distribution and levels of public welfare.
He also stressed that the previous year’s UMP should not be used as a reference.
“So, don’t use last year as the basis. Last year’s 6.5% was a special condition, because the Constitutional Court decision came near the end of the year and we didn’t have enough time to formulate a regulation,” Yassierli said.
Under the Wage Regulation, Regional Wage Councils play a central role in conducting calculations and assessments, including examining wage gaps relative to Decent Living Needs (KHL). The results of these assessments are then submitted as recommendations to governors to be set as the UMP, and also serve as the basis for determining sectoral minimum wages.
The government hopes that through the new formula and the strengthened role of regional authorities, the determination of the 2026 UMP will be more equitable, balanced, and sustainable, while safeguarding the interests of both workers and businesses across Indonesia.
