Issues surrounding the formulation of the Minimum Wage following the Constitutional Court’s ruling on the Job Creation Law have sparked speculation about the size of the 2025 wage increase. Bhima Yudhistira, Executive Director of CELIOS, emphasized, “In the past 10 years, the government has never used the minimum wage as a counter-cyclical policy. Yet a better minimum wage would boost household consumption and benefit businesses as well as overall economic growth.” CELIOS simulations show that a 10% increase in the minimum wage could raise household consumption by IDR 67.23 trillion, positively impacting MSMEs.
The macroeconomic effects of a higher minimum wage are also significant. Nailul Huda, CELIOS’ Director of Digital Economics, stated, “The difference in impacts between wage-increase scenarios is considerable. Employment would increase by 1.19 million people in 2025 if the minimum wage rises by 10%, compared with just 188,000 new jobs under the Government Regulation 51/2023 formula.” This increase would also raise GDP by IDR 122.2 trillion and reduce the poverty rate to 8.94%, compared with the old formula, which would have almost no impact.
Media Wahyudi Askar, CELIOS’ Director of Public Policy, stressed the importance of an independent body in determining wages: “We recommend that the government immediately establish an independent body monitored by labor unions and employers, rather than relying on BPS data.” The 2025 minimum wage increase will shape the direction of Indonesia’s economic growth, both by boosting household consumption and investment and by reducing the risk of layoffs.
The formulation of the Minimum Wage following the Constitutional Court’s ruling on the Job Creation Law has sparked speculation about whether the new wage regulation for 2025 will be higher or lower than Government Regulation 51/2023. Bhima Yudhistira, Executive Director of CELIOS, emphasized, “In the past 10 years, the government has never used the minimum wage as a counter-cyclical policy. Yet a better minimum wage would boost household consumption and benefit businesses as well as overall economic growth.” CELIOS simulations show that a 10% increase in the minimum wage could raise household consumption by IDR 67.23 trillion, positively impacting MSMEs.
The macroeconomic effects of a higher minimum wage are also significant. Nailul Huda, CELIOS’ Director of Digital Economics, stated, “The difference in impacts between scenarios is considerable. Employment would increase by 1.19 million jobs in 2025 if the minimum wage rises by 10%, compared to only 188,000 under the Government Regulation 51/2023 formula.” This increase would also raise GDP by IDR 122.2 trillion and reduce the poverty rate to 8.94%, compared with minimal effects under the old formula.
Media Wahyudi Askar, CELIOS’ Director of Public Policy, stressed the need for an independent body to determine wages: “We recommend the government immediately establish an independent institution monitored by labor unions and employers, rather than relying solely on Central Bureau of Statistics (BPS) data.” The minimum wage increase in 2025 will be pivotal in shaping Indonesia’s economic trajectory—boosting household consumption and investment while reducing the risk of layoffs.
CELIOS_Scenario_of_Minimum_Wage_Increase_on_National_Economy_2025 Download