Minimum Wages - and participatory bargaining - strengthened in Indonesia

Indonesia’s 2026 minimum wage reforms reflect an evolving and increasingly complex wage-setting system shaped by regional diversity and growing worker representation. The reforms introduce updated wage levels across the country, while also highlighting significant variations between provinces, sectors, and districts, as well as the expanding role of collective bargaining.

At the provincial level, minimum wages rose by nearly 6% between 2025 and 2026. However, these increases were not uniform. Some provinces experienced notable adjustments, while others, such as Central Papua, saw no change at all. This variation is closely linked to Indonesia’s decentralised governance structure, introduced in 2001, which allows provinces to determine their own wage levels based on local conditions.

Growth in sectoral and district wage systems in Indonesia

Alongside provincial wages, sectoral and district wage systems have grown in importance. By 2026, sectoral wages had expanded significantly, with more than 870 different rates in place. District-level wages, first introduced in 2015, have also become increasingly prominent, often exceeding provincial minimums. In many cases, particularly in industrialised regions like Java, sectoral wages play a critical role in pushing overall wage levels higher.

A key feature of these developments is the integration of collective bargaining into the wage-setting process. This marks a shift toward greater inclusion of worker and employer negotiations, strengthening the responsiveness of wages to real economic and social conditions.

Historically, Indonesia’s wage policies have also undergone important changes

• Since 2001, wage data has been systematically collected through regional offices, enabling more evidence-based decision-making.
• Regulatory approaches have shifted from a sole focus on economic growth to a more balanced framework that includes decent living standards.
• A 2023 court decision reinforced this shift, affirming the need to combine economic indicators with cost-of-living considerations in wage calculations.

Indonesia 2026 wage: progress and complexity

Despite these advances, significant wage disparities remain. Differences between provinces - such as those seen between West Java and Jakarta - highlight ongoing inequalities. At the same time, sectoral wages, particularly in more developed regions, often exceed provincial levels and can substantially raise minimum earnings for workers.

Overall, Indonesia’s 2026 wage reforms illustrate both progress and complexity: a system that is becoming more nuanced and participatory, yet still marked by uneven outcomes across regions and sectors.

Read the full report here: New Minimum Wages in Indonesia in 2026.