Inflation and economic growth served as the basis for the Indonesian government's decision to increase the provincial minimum wage by 6.5 percent in 2025, Coordinating Minister for Economic Affairs Airlangga Hartarto said on Monday.
He said the government considered the cost of labor in each sector. For labor-intensive sectors, the impact on labor costs is 30 percent, while in non-labor-intensive sectors, the impact is less than 15 percent.
"The government has considered the cost structure in each sector," he stated.
Regarding the risk of layoffs, Hartarto said that the issue was discussed at the 2024 National Leadership Meeting of the Indonesian Chamber of Commerce and Industry (Kadin) on Sunday.
"Layoffs are the last step for entrepreneurs. Yesterday, there was a Kadin meeting, where it was made clear," he added.
Kadin general chairperson Anindya Bakrie earlier asked entrepreneurs to avoid layoffs following the 6.5 percent increase in the minimum wage for 2025.
At a press conference after the 2024 National Leadership Meeting of Kadin, he said he had asked companies to take steps to ensure the minimum wage increase does not raise the unemployment rate.
Hartarto affirmed that the government would soon form a task force on employment termination following the minimum wage hike. The step is meant to anticipate potential layoffs by companies due to the minimum wage increase.
President Prabowo Subianto earlier announced that the average national minimum wage would be increased by 6.5 percent in 2025. He said the increase was slightly higher than the 6 percent increase proposed by the Minister of Manpower.
The decision was made after a limited meeting held to discuss the minimum wage as a social safety net for workers, especially those who had worked for less than 12 months.
Prabowo explained that the final decision was taken after in-depth discussions, including with leaders of labor unions.
He also emphasized that the increase was aimed at improving workers' purchasing power while maintaining business competitiveness.
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Translator: Imamatul Silfia, Raka Adji
Editor: Anton Santoso
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