UMP 2025 Determination: Workers Demand a 10% Increase, Prabowo Approves 6.5%

In recent years, the debate over UMP adjustments has been a hot topic in Indonesia. In 2025, workers are demanding a 10% increase, citing inflation, rising living costs, and the need to improve purchasing power. Meanwhile, Prabowo Subianto, the Minister of Defense and a key political figure, has approved a more modest increase of 6.5%, a decision that has sparked considerable debate among both labor groups and employers. This article explores the background of this contentious issue, the arguments on both sides, and the potential consequences of this wage adjustment for both workers and businesses.

Background: Understanding the UMP 2025 and the Economic Context

The Upah Minimum Provinsi (UMP) is the minimum wage that workers are entitled to receive in each province across Indonesia. The wage is determined annually based on factors such as the inflation rate, economic growth, and the cost of living. In 2025, the proposed wage increase has become a central issue because it directly affects millions of workers who depend on it for their livelihood.

1. Current Economic Climate: The demand for a 10% increase by labor unions comes at a time when Indonesia is facing various economic challenges. Inflation, especially in the cost of food and daily essentials, has been rising steadily in recent years. According to data from the Indonesian Statistics Bureau, the consumer price index (CPI) in 2024 saw a steady rise, with the inflation rate reaching approximately 5.6%. This reflects the increased cost of goods and services, which directly impacts the purchasing power of workers.
2. Living Costs and Worker Struggles: As the cost of living rises, many workers find themselves struggling to meet basic needs such as housing, food, and transportation. In many major urban areas like Jakarta, Surabaya, and Bandung, the price of rent and utilities has skyrocketed, leaving workers with little room to save. In this context, the demand for a 10% wage increase is seen as a necessary step to help bridge the gap between the wages workers earn and the costs they must bear to survive.
3. Historical Precedent: In previous years, the government has raised the minimum wage by varying amounts. For instance, in 2023, the increase in UMP was around 5.1%. While this was seen as a positive move by many workers, it was still below the inflation rate, meaning that purchasing power essentially remained stagnant. With inflation rising more sharply in 2024, labor unions argue that a more substantial increase in 2025 is essential to maintain the workers’ standard of living.

The Workers’ Perspective: Why a 10% Increase is Necessary

For workers and labor unions, a 10% increase in UMP is not just a demand—it’s a necessity. Here’s why:

1. Rising Inflation and Economic Inequality: The primary reason workers are calling for a 10% increase is the relentless rise in the cost of living. According to the Indonesian Labor Union Federation (KSPI), the inflation rate in 2024 has significantly reduced the real value of the minimum wage. As essential goods become more expensive, workers find it harder to make ends meet. Without a commensurate increase in wages, many people in lower-income brackets will continue to face financial hardship.
2. Improving Living Standards: Labor unions argue that the minimum wage should reflect the actual cost of living. Many workers, especially in urban areas, spend a large portion of their income on housing, utilities, and transportation. Without a 10% wage increase, workers will continue to face stagnant living conditions. Higher wages would help workers afford basic necessities, improve their access to healthcare, education, and ensure they can live with dignity.
3. Encouraging Economic Growth: According to economists, higher wages can also stimulate the economy. When workers earn more, they have more money to spend, which helps to boost local businesses and create a cycle of economic activity. Labor unions argue that a 10% increase in UMP will contribute positively to economic growth by increasing consumer spending.

The Employers’ Concerns: Balancing Wage Increases with Business Sustainability

On the other hand, employers have raised concerns about the impact of such a significant increase in wages. While they understand the need for wage hikes, they argue that a 10% increase could have negative consequences on business operations.

1. Pressure on Small and Medium Enterprises (SMEs): Indonesia’s economy is driven by a large number of small and medium-sized enterprises (SMEs). For many of these businesses, a 10% increase in the minimum wage could be financially burdensome, especially when profit margins are thin. Many SMEs already face challenges like rising input costs, fluctuating demand, and competition from larger corporations. A sharp wage increase could lead to increased operational costs, and some employers might be forced to cut jobs or reduce hours to maintain financial stability.
2. Impact on Employment: Employers argue that excessively high wage increases can lead to higher unemployment rates. If businesses are unable to afford the increase, they may lay off workers or hire fewer employees. This is a concern for industries that are already struggling with labor shortages, such as retail, manufacturing, and hospitality. High wages can also incentivize automation, reducing the demand for human labor in certain sectors.
3. Prabowo Subianto’s 6.5% Proposal: To address these concerns, Prabowo Subianto, the Indonesian Minister of Defense and head of the Labor Ministry, has approved a more moderate 6.5% wage increase. This decision reflects an effort to strike a balance between meeting workers’ needs and ensuring businesses can remain competitive and sustainable. Prabowo has emphasized that the 6.5% increase considers both the cost of living and the need to protect the country’s economic stability.

Summary and Actions to Take

The debate over the 2025 UMP increase reflects a complex balancing act between ensuring that workers can meet their basic needs and protecting the financial health of businesses. While the 10% increase proposed by labor unions addresses immediate economic pressures, the 6.5% increase approved by the government aims to strike a middle ground.

Here are some steps that can be taken:

1. Consider a Gradual Increase: A compromise could be found by implementing a phased increase, allowing businesses to adjust to the higher wage demands while still improving workers’ income.
2. Support for SMEs: The government can offer support to small businesses, such as tax breaks or subsidies, to help them manage the increased wage costs.
3. Monitoring the Impact: Both the government and labor unions should carefully monitor the effects of the wage increase, ensuring that it helps workers without unduly burdening businesses.

Moving Towards a Balanced Solution

As we approach 2025, the debate over the UMP increase is far from settled. While workers demand higher wages to cope with the rising cost of living, employers are concerned about the potential financial strain. Ultimately, the key will be to find a solution that benefits both workers and businesses, ensuring economic growth and social stability.

What do you think about the proposed UMP increase? Should the government approve a higher wage hike, or is the 6.5% increase a reasonable compromise? Share your thoughts in the comments below!