Jakarta Labor Unions Demand Minimum Wage Increase Amid VAT Hike Concerns

Labor Unions Demand Minimum Wage Increase Amid VAT Hike

Labor unions in Indonesia are calling for a rise in the minimum wage as the government plans to increase the Value Added Tax (VAT) from 11 percent to 12 percent. They warn that without a wage increase, workers’ purchasing power will diminish, leading to worse economic conditions and a potential crisis.

Mirah Sumirat, President of the Indonesian Workers’ Union Association (Aspek), emphasized that stable food prices are crucial for public welfare. She expressed concern that failure to raise wages alongside the VAT increase could trigger an economic downturn.

“If the wage increase is not significant, an economic crisis will occur. The economy will worsen, and workers’ purchasing power will decrease even further,” Mirah stated.

The Ministry of Manpower announced a delay in setting the 2025 Provincial Minimum Wage (UMP), originally planned for November 25. This delay allows for a review of the policy and wage calculation formula, with the new UMP expected to be released by December 2024.

The VAT hike will take effect on January 1, 2025. Mirah urged the government to take into account inflation, economic growth, and decent living standards when deciding on the minimum wage.

“All 60 components of the decent living standard should be included in the calculation for the 2025 minimum wage. The current regulation for the 2025 UMP calculation does not seem to align with the Ministry’s standards,” she concluded.