APINDO South Sulawesi Highlights Impact of Sharp Minimum Wage Increase on Businesses
Saturday, 01 November 2025
Makassar – The Indonesian Employers Association (APINDO) of South Sulawesi has raised concerns over the potential impact of a significant increase in the provincial minimum wage (UMP), warning that a sharp rise could disrupt company operations and employment stability.
Chairman of APINDO South Sulawesi, Suhardi, stated that a substantial wage hike would compel companies to adopt efficiency measures, which could lead to workforce reductions or a slowdown in new recruitment.
“When the increase is too steep, it must be carefully calculated. Companies will inevitably implement efficiency measures, and that will ultimately reduce job opportunities because businesses will have to streamline their operations,” Suhardi said on Saturday (November 1, 2025).
1. Rising Costs and Labor Efficiency Pressure
Suhardi emphasized that discussions on wage increases often focus on workers’ needs, while employers and business operators must also assess how such changes affect operational costs.
“Sometimes, what used to require three workers may later be handled by just one person. Eventually, that could even lead to layoffs due to the efficiency measures triggered by high minimum wage hikes,” he explained.
While certain sectors may be able to absorb the impact more easily, others could face heavier financial strain. “For example, after government efficiency measures early last year, the hospitality sector suffered, and the MICE (Meetings, Incentives, Conventions, and Exhibitions) sector struggled as well. If companies are already under pressure and another sharp increase comes in 2026, the burden will be even heavier,” he added.
2. Striking a Balance Between Workers and Employers
Suhardi stressed the need for balance between workers’ welfare and companies’ financial performance in determining the UMP. “We must find a middle ground — workers deserve a decent living wage, but at the same time, companies need to maintain performance and profitability,” he said.
He acknowledged that while some companies have seen stable profits, others continue to struggle due to lingering effects of the COVID-19 pandemic, efficiency pressures, and economic uncertainty. “Some businesses simply cannot afford to implement the new UMP rates, and this reality must be recognized,” Suhardi noted.
3. UMP Adjustment Should Reflect Inflation and Regional Economic Growth
According to APINDO, the ideal UMP adjustment should be based on inflation rates, regional economic growth, and the local cost of living, while also factoring in productivity and other relevant indices.
“These calculations are actually well-defined in Government Regulation No. 51 of 2023, but they were not applied last year,” said Suhardi.
If the UMP were calculated using those indicators, each province would have different adjustment figures, reflecting their respective economic conditions. “Last year, the government imposed a uniform 6.5 percent increase nationwide, without considering regional disparities,” he said.
“That approach, in APINDO’s view, is less fair because some regions experienced slower economic growth. In South Sulawesi, for example, our third-quarter growth is still around 4–5 percent,” Suhardi concluded.
Source: IDN Times
