Government Involves Workers and Employers in the Formulation of the 2026 Provincial Minimum Wage (UMP)
By: Theo Saktiawan)
The government has emphasized that the process of formulating the Provincial Minimum Wage (UMP) policy is carried out in a participatory manner by involving various stakeholders, particularly representatives of workers and the business sector. This approach is intended to ensure that the resulting wage policy not only fulfills the principle of fairness for workers, but also takes into account business sustainability and regional economic stability. In this context, the government seeks to position the UMP as both a social protection instrument and a driver of national productivity.
President Prabowo has signed the Government Regulation (PP) on Wages for 2026 after considering various factors. Under this regulation, President Prabowo decided on a wage increase formula of Inflation + (Economic Growth × Alpha), with an alpha coefficient range of 0.5–0.9. The alpha index in this formula, which ranges from 0.5 to 0.9, represents the contribution of workers to economic growth at the provincial and regency/municipal levels. With this formula, the amount of minimum wage increases will vary across regions, adjusting to the economic conditions of each area.
The inclusion of workers’ aspirations is one of the main focuses in the formulation of the UMP. The government has opened space for dialogue through formal mechanisms such as the Wage Council, which consists of representatives from the government, labor unions, and employers’ associations. In this forum, workers can convey their views on decent living needs, inflationary pressures, and the real conditions they face on the ground. These aspirations serve as important inputs to ensure that wage policies remain closely aligned with the socio-economic realities of workers.
Minister of Manpower Yassierli explained that the drafting process of the Wage Regulation went through extensive studies and lengthy discussions. The wage scheme, he said, is designed not to burden employers or disadvantage workers. With the introduction of the alpha index, the government grants authority to the Regional Wage Councils (Dependa) to actively submit recommendations to regional governments regarding the level of the 2026 UMP to be determined.
On the other hand, the business sector is also given equal opportunity to express its views and considerations. The government recognizes that businesses face significant challenges, ranging from global economic fluctuations and rising production costs to labor market dynamics. Therefore, input from employers regarding their capacity to pay wages, productivity levels, and the investment climate is an integral part of the UMP policy formulation process. This approach is expected to prevent policies that place excessive burdens on any single party.
The government also stresses that the formulation of the UMP is not conducted unilaterally or behind closed doors. The entire process adheres to existing regulations, including the use of formulas that consider economic variables such as economic growth and inflation. However, the government emphasizes that the formula is not the sole reference, but is combined with the results of social dialogue so that the resulting policy is adaptive and contextual, in accordance with the conditions of each region.
Minister of Home Affairs Tito Karnavian stated that governors play a central role in determining minimum wages for 2026, including the Provincial Minimum Wage (UMP), Provincial Sectoral Minimum Wage (UMSP), Regency/Municipal Minimum Wage (UMK), and Regency/Municipal Sectoral Minimum Wage (UMSK). In addition to being obligated to set the UMP and UMSP for 2026, governors may also establish the UMK and UMSK. He emphasized that the determination process must be conducted in a timely, coordinated, and conducive manner at the regional level. All minimum wage determinations for 2026 must be completed no later than December 24, 2025. With approximately seven days remaining, he urged regional governments to promptly follow up on the process in a serious and coordinated manner.
Transparency is a key principle that continues to be strengthened in the UMP determination process. Regional governments are encouraged to openly convey information to the public regarding the stages, bases for consideration, and outcomes of Wage Council deliberations. Through this openness, the public is expected to understand that the UMP policy is the result of a lengthy deliberative process involving various interests, rather than a decision made abruptly.
Furthermore, the government views the UMP policy as part of its efforts to maintain harmonious industrial relations. The involvement of workers and employers from the early stages is expected to minimize the potential for conflict and social tension. The government believes that continuous dialogue is far more effective than confrontational approaches, as it helps build mutual trust among workers, employers, and the state as the regulator.
In the medium and long term, a participatory approach to formulating the UMP is expected to improve workers’ welfare without undermining business competitiveness. The government also links wage policy with broader agendas, including productivity enhancement, workforce skill development, and the creation of sustainable employment opportunities. Thus, the UMP is not viewed merely as a numerical figure, but as part of a healthy labor ecosystem.
Through this inclusive approach, the government reaffirms its commitment to making the UMP policy a balanced outcome between social and economic interests. The involvement of workers’ and employers’ aspirations is expected to produce a policy that is fair, rational, and acceptable to all parties. With an open and dialogical process, the government hopes that the UMP policy will serve as a foundation for harmonious industrial relations and equitable economic development.
*) The author is a public policy observer.
