Jakarta. Labor unions are urging the government to increase the minimum wage in tandem with its plan to raise the Value Added Tax (VAT) rate to 12 percent. They argue that without a corresponding wage hike, workers’ purchasing power will decline, worsening economic conditions and potentially leading to a crisis.

Mirah Sumirat, President of the Indonesian Workers' Union Association (Aspek), stressed the importance of maintaining food price stability for public welfare and warned that the economic situation could worsen if wages are not raised alongside the VAT increase.

“If the wage increase is not significant, an economic crisis will occur. The economy will worsen, and workers’ purchasing power will decrease even further,” Mirah said on Monday.

Earlier, the Manpower Ministry confirmed that the determination of the 2025 Provincial Minimum Wage (UMP), originally scheduled for Nov. 25, would be delayed to allow for a review of the policy and wage calculation formula. The 2025 UMP is expected to be announced by December 2024.

The VAT increase from 11 percent to 12 percent is scheduled to take effect by January 1, 2025.

Mirah also emphasized that the government should consider various factors, including inflation, economic growth, and a decent standard of living when determining the minimum wage.

"All 60 components of the decent living standard should be included in the calculation for the 2025 minimum wage. From what I see, the current regulation for the 2025 UMP calculation set by the government does not seem to align with the Ministry’s standards," she concluded.

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