Summary: This article critically analyses Indonesia’s 2026 Provincial Minimum Wage (UMP) policy through the dual lens of economic necessity and distributive justice, with particular reference to Islamic economic principles. The 2026 UMP adjustment, formulated using a technocratic combination of inflation, regional economic growth, and an alpha coefficient intended to reflect labour’s contribution to the economy, has resulted in nominal wage increases across all provinces. However, these increases have been widely contested by labour unions and workers’ organisations, who argue that the new wage levels remain insufficient in relation to the Decent Living Requirement (Kebutuhan Hidup Layak/KHL) and escalating living costs, especially in urban areas. The article situates this policy debate within a broader normative framework by engaging with key concepts in Islamic economics, which regard wages (ujrah) as enforceable rights embedded in a moral order that prioritises justice, human dignity, and social responsibility. It juxtaposes these principles with modern wage-setting mechanisms and draws on the insights of Ibn Khaldun, Adam Smith, and Karl Marx regarding labour, value, and fair remuneration. The analysis concludes that, while the 2026 UMP represents a step in the right direction, it remains normatively incomplete: the gap between statutory minimum wages and a genuinely decent standard of living persists, particularly for low-income and informal workers. Ultimately, the paper argues that wage policy must be assessed not only by macroeconomic criteria and legal compliance, but also by its capacity to realise substantive justice and uphold the dignity of those whose labour sustains the economy.
Introduction
At the beginning of 2026, the Government of Indonesia, in coordination with provincial administrations, implemented an increase in the Provincial Minimum Wage (Upah Minimum Provinsi/UMP) applicable from 1 January 2026. This adjustment resulted in higher statutory minimum wages in almost all provinces compared with the preceding year. Jakarta, for example, set its UMP at approximately IDR 5.5 million per month, while Aceh,…
