The commemoration of Labor Day on May 1, 2025, was marked by workers’ demands for better wage systems, highlighting the still-low and declining wages. This issue stems from the imbalance between income and expenses, which continues to weigh heavily on workers. The rising cost of necessities is not matched by increases in workers’ wages.
The situation has worsened since the government changed the wage calculation formula through Government Regulation No. 78 of 2015 on Wages.
UGM Professor Tadjuddin Noer Effendi, specializing in labor issues, stated that the low wages are a result of Indonesia’s industrial focus on labor-intensive sectors rather than technology-based ones.
As a result, the government tends to suppress wage increases to keep labor-intensive industries afloat.
“Labor-intensive industries are expected to absorb large numbers of workers, so there’s a tendency to maintain that perception,” he explained at UGM Campus on Wednesday, May 7, 2025.
However, according to Professor Effendi, if the country were to develop technology-driven industries, the wages offered would be significantly higher than those in labor-intensive sectors.
Therefore, he encouraged the government, business owners, and employers to come together and discuss suitable solutions to the wage issue.
“If the government increases wages as demanded by workers but companies cannot afford to pay, it could drive them to collapse, which would be harmful,” he noted.
Regarding the current high unemployment rate and the ongoing wave of mass layoffs, he pointed out that these are partly consequences of the continued push for labor-intensive industries.
Moreover, the rise in unemployment is often linked to age restrictions for job applicants.
“Age limits are possibly used as a screening method to ensure that the workforce matches the required capacity,” he explained.
To address the wave of layoffs, he argued, the government must take responsibility for ensuring businesses remain operational to support economic growth.
At the same time, the government should also work to increase job creation opportunities. If businesses collapse, the government itself will suffer the consequences.
“Wage issues must be resolved by considering both sides, the employers and the workers. We must avoid burdening one party without accounting for the long-term impact,” he concluded.
Author: Jelita Agustine
Editor: Gusti Grehenson
Post-editor: Lintang Andwyna
Illustration: Bisnis.com