The UMP Increase is Proof of the State’s Presence, Rejecting Provocations of Mass Mobilization
By: Gina Winarsih )*
The policy of increasing the Provincial Minimum Wage (UMP) in 2026 is a strong sign of the state’s commitment to protecting workers’ rights and welfare. The government positions wages as a strategic instrument to maintain public purchasing power, reduce income inequality, and ensure inclusive and sustainable economic growth.
In a global economic climate full of uncertainty, this step demonstrates the government’s courage in adopting policies that favor workers without neglecting the sustainability of the business world. Therefore, the government emphasizes the importance of vigilance against provocative calls for demonstrations that could potentially disrupt employment stability and the business climate. Provocative actions are deemed inconsistent with the spirit of wage policies that prioritize balance and social dialogue.
Through the Government Regulation on Wages, the government introduced a wage increase formula based on inflation and economic growth, with an alpha coefficient adjustment ranging from 0.5 to 0.9. This data-driven approach emphasizes that improving worker welfare is achieved through measured policy mechanisms, rather than through pressure or mobilization that risks harming workers and businesses in the long term.
Minister of Manpower Yassierli believes the formula provides fairer and more flexible space for regional governments to adapt wage policies to the living needs of workers in each region. He believes this approach represents a significant improvement over the previous formula, which was deemed too narrow in accommodating regional economic conditions.
Yassierli explained that the drafting of the Wage Regulation had gone through a long and comprehensive process involving various stakeholders. Trade unions, business leaders, and academics were involved in the discussions, ensuring that the resulting regulation was not only normative but also grounded in reality. All the results of these studies were then submitted to President Prabowo Subianto and became a crucial part of the formulation of the draft government regulation before its official enactment.
During the process, President Prabowo reportedly listened directly to the aspirations of labor unions and various related parties. This demonstrates that wage policies are not decided unilaterally, but rather through social dialogue that takes into account the interests of workers and the business sector equally. The formula established in the Wage Regulation then serves as a national reference for determining the Provincial Minimum Wage (UMP) and sectoral minimum wages at the provincial, district, and city levels.
The Wage Regulation also grants governors greater authority to set the Regional Minimum Wage (UMK) and Regional Minimum Wage (UMSK) based on recommendations from the Regional Wage Council. The minimum wage is required to be set no later than December 24, 2025, using a formula based on annual inflation plus economic growth multiplied by an alpha coefficient. The government emphasizes that alpha is interpreted as a reflection of the workforce’s contribution to economic growth and as an adjustment instrument when there is a gap between prevailing wages and the cost of a decent living.
The expansion of the alpha coefficient range from 0.1–0.3 to 0.5–0.9 is considered a progressive and responsive measure. Yassierli believes this policy follows up on the Constitutional Court’s ruling and addresses the needs of regions with varying economic characteristics. This approach allows regions with uneven economic growth to still have room to establish fairer wage increases for workers.
Under this new formula, the government also ensures there is no mechanism for wage reductions. If regional economic growth is recorded as negative, the Regional Wage Council can still recommend wage increases based on inflation. The central government is committed to providing guidance and support so that all regions can implement the UMP determination according to the established provisions and deadlines.
The Executive Director of the Great Institute, Dr. Sudarto, welcomed the policy of expanding the alpha range. He viewed the President’s decision as a strong signal of the state’s support for workers. However, he urged that the implementation of the formula actually result in real wage increases and not lower than the previous year.
According to a study by the Great Institute, several provinces have the potential to record relatively low UMP increases even if using the highest alpha. Therefore, the government needs to ensure that the final policy outcome still protects workers’ purchasing power.
Meanwhile, Great Institute Economic Researcher Adrian Nalendra Perwira assessed that the policy of expanding the alpha is a logical step to address the inequality in income distribution. He argued that the old formula did not fully reflect the labor force’s contribution to gross domestic product. With a higher alpha, the transmission of economic growth to household income is expected to be faster and encourage domestic consumption, the primary driver of national economic growth.
Adrian also emphasized the importance of caution in implementing policies at the regional level. He stated that the use of alpha ranges needs to be adjusted to local economic conditions to ensure wage increases do not place excessive pressure on production costs. He believes a balance between worker protection and business sustainability must be a key principle, ensuring wage policies do not lead to layoffs or inflationary pressure on costs.
Overall, the 2026 UMP increase policy reflects the government’s active role in protecting workers through fairer, more adaptive, and dialogue-based regulations. With a new, more flexible formula, supporting accompanying policies, and committed oversight from the central and regional governments, the UMP increase is expected to truly become a social protection instrument that strengthens workers’ welfare while safeguarding the foundation of national economic growth.
*) economic observer
