Indonesian labor unions KSPI and Partai Buruh have proposed a 7.5% to 9.5% increase in 2027 minimum wages, citing inflation, economic growth, and regional disparities. The plan, to be formalized in October demonstrations, uses data from October 2025 to August 2026, with calculations based on a 3.20% inflation rate, 5.43% economic growth, and an index of 0.9.
Indonesian labor unions, including the Confederation of Indonesian Workers’ Unions (KSPI) and Partai Buruh, have formally proposed a 7.5% to 9.5% increase in 2027 minimum wages, aiming to address regional disparities and economic conditions. The demand, which includes both Upah Minimum Provinsi (UMP) and Upah Minimum Kabupaten/Kota (UMK), is rooted in a formula that combines inflation, economic growth, and a government-mandated index. The proposal, set to be reiterated during planned demonstrations in October 2026, reflects a calculated effort to balance national averages with local economic realities.
The Calculation Behind the Proposed Increase
The 7.5–9.5% range is derived from a formula outlined by Said Iqbal, who emphasized that the proposal uses data from October 2025 to August 2026. According to the calculations, the average national inflation rate during this period was 3.20%, while economic growth averaged 5.43%. These figures were combined with an index of 0.9, as specified in Government Regulation No. 49 Tahun 2026, to determine a baseline 7.7% increase. However, the final range adjusts for regional variations, with 7.5% accommodating areas with lower economic growth and 9.5% reflecting higher growth in regions like Maluku Utara, which saw a 20.05% economic growth rate.
We use the average inflation of 3.20% and economic growth of 5.43%, multiplied by the index of 0.9, resulting in a 7.7% national average, Iqbal explained during an online press conference. However, because some regions have lower growth rates, we set the lower bound at 7.5%, while the upper limit of 9.5% accounts for areas with higher growth, like Maluku Utara, which could see a 12.5% increase under the same formula.
The proposal also references historical precedents. Iqbal noted that two-digit increases in minimum wages are rare in Indonesia, with the highest recorded being 10% in previous years. Maluku Utara’s potential 12.5% increase is an outlier, so we cap the upper limit at 9.5% to align with past trends, he said. This approach aims to balance ambitious demands with practical considerations, ensuring the proposal remains defensible in negotiations with the government and employers.
Planned Demonstrations and Additional Demands
The labor unions have scheduled a series of demonstrations in October 2026 to push their demands, starting at the provincial level before expanding to national offices. Said Iqbal confirmed that the exact dates for these actions are still under discussion but emphasized that the protests will begin with regional actions at provincial governor’s offices.
Beyond the minimum wage increase, the unions have outlined additional demands, including the immediate passage of the RUU Perlindungan Ketenagakerjaan (Labor Protection Bill) and revisions to Permenaker No. 7 Tahun 2026, which governs outsourced workers. They also called for the abolition of the 0.5-times severance pay scheme, advocating for a minimum of 1.0 times the current rate, as mandated by a 2026 Supreme Court ruling (MK No. 168).
Iqbal highlighted another key demand: a 0% tax on pension contributions, currently at 5%. We are reminding the new Minister of Finance, Pak Suahasil, that workers and taxpayers demand a 0% tax on pension contributions, he stated. This demand underscores the unions’ broader agenda to reduce financial burdens on workers and improve social security frameworks.
Regional Disparities and Historical Precedents
The proposed 7.5–9.5% range acknowledges the economic diversity across Indonesia’s regions.
The unions’ calculations also reflect a cautious stance toward inflation and economic volatility.
The next critical step for the unions is the formalization of their proposal in October 2026, coinciding with the scheduled determination of UMPs and UMKs. However, the exact timing of the demonstrations and the finalization of the 7.5–9.5% range remain uncertain. The government’s response to these demands, particularly regarding the RUU Perlindungan Ketenagakerjaan and tax reforms, will also shape the outcome.
For now, the unions insist their calculations are grounded in verified data and historical precedents. We are not seeking a radical shift but a fair adjustment based on economic realities, Iqbal said. As the deadline for UMP and UMK determinations approaches, the coming weeks will test the government’s willingness to negotiate with labor representatives on these critical issues.