The increase in the Provincial Minimum Wage (UMP) for 2026 is essentially expected to help ease the financial pressure on most workers. With the UMP increase, workers are expected to be able to meet more of their living needs, many of which have often been postponed due to limited income.
This is also the hope expressed by Dwi, 26, a worker earning the UMP in Central Java Province. The man from Sukoharjo Regency, Central Java, places his expectations on the UMP increase next year. “Since my salary is based on the UMP, of course the increase brings hope to ease my monthly finances,” he said when interviewed on Tuesday (30/12/2025)
The approval of the UMP increase in several provinces only began shortly before the Christmas 2025 holiday. Out of 38 provinces, only 36 have officially announced their UMP increases for 2026.
Central Java Governor Ahmad Luthfi stated that the determination of the UMP in his province was calculated according to the wage-setting formula stipulated in Government Regulation Number 49 of 2025 concerning the Second Amendment to Government Regulation Number 36 of 2021 on Wages. The calculation took into account provincial inflation of 2.65 percent, economic growth of 5.15 percent, and an alpha value of 0.90.
The alpha index reflects the contribution of labor to economic growth in each province. According to central government regulations, the alpha range falls between 0.5 and 0.9. As a result, the UMP increase varies across provinces, depending on regional economic conditions.
Jakarta once again recorded the highest UMP nationally. The Jakarta Provincial Government set the 2026 UMP at Rp5,729,876, an increase of Rp333,116 (6.17 percent) compared to the 2025 UMP.
Meanwhile, West Java became the province with the lowest UMP nationally. The West Java Provincial Government set the 2026 UMP at Rp2,317,601, an increase of 5.77 percent compared to the previous year.
On average, the 2026 UMP increased by around five to seven percent. Several provinces even recorded increases of more than eight percent. Central Sulawesi experienced a UMP increase of 9.09 percent, reaching Rp3,179,565. Meanwhile, South Kalimantan became the province with the highest percentage increase in UMP, at 12.28 percent, rising to Rp3,686,138.
Nevertheless, a number of parties argue that the UMP increase has not met workers’ expectations. In Central Java, for instance, many workers believe the UMP has yet to fulfill the standard of decent living standard or DLS.
Citing Kompas.com, labor groups in Central Java stated that the 2026 UMP was expected to rise to Rp3.4 million. This figure is considered sufficient to meet DLS Central Java. It is known that the Central Java UMP in 2025 stood at Rp2.1 million.
A similar sentiment was expressed by Kris, a man working in one of the regencies in Central Java. According to him, the 2026 UMP did not experience a significant increase. Rising basic necessities, combined with social-related expenses, have made it difficult for him to feel financially relieved.
“If it’s just about surviving, yes, we can survive. But in terms of living decently, I don’t think so,” he said. Kris stated that the Central Java UMP should ideally be above Rp3 million to match today’s standard of decent living demands.
A professor at Universitas Muhammadiyah Surakarta, Prof. Dr. Anton Agus Setyawan, S.E., M.Si., said that the current economic conditions, which tend to be stagnant, make the 2026 UMP increase still feel burdensome for workers. “Yes, it is indeed tough,” Anton said on Tuesday.
An increase in the UMP that is not very significant has the potential to limit workers’ ability to meet basic needs, such as healthcare, decent housing, and education for their children. As a result, workers’ finances remain increasingly strained.
“Based on surveys of decent living standards in Central Java, the figure is Rp3.4 million per month. So a UMP of Rp2.327 million has not actually enabled workers in Central Java to live decently,” Anton emphasized.
On the other hand, a World Bank study states that increases in the UMP do not have a significant impact on workers’ finances. The Indonesia Economic Prospects report, December 2025 edition, explained that Indonesian workers experienced an average decline in real wages of 1.1 percent per year over the period 2018–2024. Highly skilled workers experienced an even deeper contraction, at 2.3 percent per year.
Anton echoed the World Bank’s findings. “The paradox of Indonesia’s economy is that growth remains stable, but that growth is unable to create quality jobs,” he explained.
Furthermore, the report underscores the growing importance of strengthening wages among the working class. This is because decent wage increases will help stimulate economic circulation within society.
Read more: What’s Behind Indonesia’s High Unemployment Rate?
The high prevalence of informal employment is considered a challenge for both workers and employers in facing the new UMP. Informal workers, Anton said, do not earn sufficient income to meet the DLS.
Tight finances force informal workers to tighten their belts even further. As a result, purchasing power declines. “Some people say that in a day they ( informal workers) can earn Rp250,000–300,000, but do they get health insurance?” Anton said.
Stimulus measures, Anton argued, need to be implemented by the government. For example, providing reductions in National Health Insurance (Jaminan Kesehatan Nasional) contribution fees for workers earning below Rp3.5 million. Another option would be to exempt certain groups of workers from value-added tax (VAT).
The government, Anton added, must also address structural issues in the long term. These include opening up quality job opportunities, creating more efficient industries, reducing investment costs, and eradicating corruption and collusion practices entirely.
“It is quite difficult for us to create an efficient economy. Business actors are burdened by unofficial costs. Governance must be fixed first,” stressed the Head of the Master of Management Program at UMS.
Although the UMP increase is still far from expectations, Anton believes Central Java still has the potential to experience a significant rise in the UMP in the future. One contributing factor is the migration of manufacturing industries from West Java Province.
Anton explained that the relatively low UMP makes Central Java increasingly attractive as a destination for relocating parts of factories from industrial areas such as Karawang and Cikarang in West Java. “Yes, it’s possible. Because the rule is that the greater the supply of jobs, the greater the interest,” he explained.
The large number of companies relocating to Central Java has the potential to absorb local labor on a large scale. The circulation of money in Central Java is expected to gradually increase. This, in turn, will have an impact on rising DLS and growing pressure to continuously increase the UMP.
Although this view may seem utopian, current conditions place Central Java among the provinces with the lowest UMP levels in Indonesia. This situation is considered ironic, as the low UMP has instead become an investment attraction for manufacturing entrepreneurs, rather than other factors such as natural or human resources.
Anton stated, “Because companies will always look for production locations where production costs are the lowest.”
Writer: Gede Arga Adrian
Translator: Farizal Luqman Majid
Editor: Al Habiib Josy Asheva
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