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President Prabowo Subianto has officially set the average increase in provincial minimum wages for 2025 at 6.5 percent. According to Prabowo, this figure considers the conditions of the business sector and the needs of the public, including decent living standard of workers with less than 12 months of employment.
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Before this decision, there was a prolonged tug-of-war among workers, employers, and the government. Workers demanded a new wage formula following the Constitutional Court’s annulment of the labor cluster in Law No. 6/2023 on Job Creation. Based on workers’ calculations, the wage increase could reach 8 percent.
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On the other hand, employers wanted the wage increase to use the formula from the Job Creation Law. Under this method, wage increases would be capped at 3 percent. Employers argued that the economic conditions and competitiveness of labor-intensive industries are under significant strain, making higher wage hikes burdensome.
Meanwhile, the government sought a middle ground by readjusting the index within the minimum wage calculation formula. What were the lobbying efforts and the dynamics of this tug-of-war among workers, the government, and employers?
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