Indonesia’s economy continues to grow. However, behind this achievement, more than half of Indonesian workers still earn wages below the minimum standard. Data from Statistics Indonesia (BPS) show that around 53% of workers in Indonesia received wages below the Provincial Minimum Wage (UMP) in early 2025.
A lecturer at the Faculty of Economics and Business, Universitas Gadjah Mada (FEB UGM), and a labor market researcher, Qisha Quarina, S.E., M.Sc., Ph.D., considers this condition relatively common, given that the informal sector still dominates Indonesia’s labor structure.
Ideally, all workers should receive decent wages. In practice, however, UMP regulations cannot apply to informal workers. The rules are not legally binding for informal workers, so they are not protected,” Qisha said when contacted on Friday (30/1/2026).
She explained that most informal workers do not have permanent employment relationships. Many of them work as freelancers with frequently changing employers, making it difficult to include them in minimum-wage protection schemes. Conversely, Indonesia’s business landscape consists primarily of micro, small, and medium-sized enterprises (MSMEs), which benefit from regulatory exemptions when implementing the UMP.
“Around 58–59 percent of Indonesian workers are informal. Meanwhile, on the employer side, more than 90 percent of businesses are MSMEs. It makes the enforcement of the UMP impossible for informal workers,” she explained.
Qisha noted that wage practices below the minimum standard could lead to serious problems in the medium- and long-term. At the micro level, informal workers with low wages generally lack access to employment protection, including old-age security and pension schemes.
Furthermore, Qisha stated that, in the short term, MSMEs and informal workers will continue to dominate Indonesia’s labor market. In the long term, however, demographic changes toward a higher proportion of elderly workers may create new challenges. Although some may still work for relatively decent wages, the main challenge arises when they are no longer productive.
“The big question is, when they stop working, who will bear the cost of living for this group?” she said.
At the macro level, this condition could increase the state’s fiscal burden if a large proportion of workers depend on social assistance.
In response to this situation, Qisha argued that Indonesia’s labor policies should shift from merely debating minimum wages to a broader agenda of decent work. Decent wages are indeed important, but safe working conditions and adequate labor protection must accompany them.
“Policy focus must cover wages, working conditions, and social security protection. With demographic changes toward an aging workforce, long-term protection schemes are becoming increasingly urgent,” Qisha emphasized.
Reported by: Kurnia Ekaptiningrum
Sustainable Development Goals
