Jakarta. The government has approved a 6.5 percent increase in the 2025 provincial minimum wage (UMP), aiming to protect middle-class purchasing power and fuel economic growth. However, the Indonesian Employers Association (Apindo) has cautioned that the policy could lead to widespread layoffs, particularly in labor-intensive industries already grappling with economic pressures.

Manpower Minister Yassierli confirmed on Tuesday that the ministry is finalizing the regulation, which is expected to be completed by Wednesday. "We are preparing the ministerial regulation, and hopefully, it will be ready tomorrow," Yassierli said, highlighting ongoing discussions with other ministries to synchronize policies and balance stakeholder interests.

President Prabowo Subianto approved the 6.5 percent wage increase last week, a compromise between employers’ proposal of a 3 percent hike and workers’ demands of up to 10 percent. 

"The synchronization process with the Law Ministry is ongoing. We are also holding discussions to anticipate strategic economic challenges," Yassierli added.

The Central Statistics Agency (BPS) classifies Indonesia’s middle class as those earning between Rp 2.04 million and Rp 9.9 million ($65.6 to $625) per month. The wage hike is expected to help sustain consumption levels within this demographic, a critical engine of the nation’s economy.

However, Apindo Chairwoman Shinta Widjaja Kamdani voiced concerns that the increase could strain businesses and result in job losses. "Labor-intensive industries will be the hardest hit, potentially leading to fewer job opportunities, diminished productivity, and reduced global competitiveness," Shinta said, urging the government to reconsider its decision.

The wage increase follows recommendations from the National Wage Council (Depenas) and consultations through the National Tripartite Cooperation Institution (LKS Tripartit), which includes representatives of workers, employers, and the government.

Despite Apindo's warnings, Yassierli defended the government’s move as necessary for economic resilience and worker welfare. "I reported the situation to President Prabowo, and based on discussions and studies, we proposed a 6 percent increase," he said.

The decision comes amid rising layoffs nationwide, with the Manpower Ministry reporting nearly 60,000 job losses as of October 2024, a 25,000 increase in the past three months.