Business Leader Reveals Indonesian Workers' Productivity Lags Behind Wage Increases

Jakarta, CNBC Indonesia - Business leaders have revealed that Indonesia’s productivity is becoming increasingly concerning, as the figures are deemed to be getting lower.

Apindo’s Head of Labour Affairs, Bob Azam, stated that the suboptimal functioning of Indonesia’s manufacturing sector is leading to low productivity.

“Our manufacturing sector’s contribution is among the lowest in ASEAN; we, who actually have high manufacturing potential, only at 19%.

As a result, manufacturing as the engine of job creation is not functioning optimally. So our productivity has not budged over time; now it’s only a 2% annual increase,” said Bob Azam in his presentation during a hearing with Commission IX of the Indonesian House of Representatives (DPR RI) regarding the Employment Bill (RUU Ketenagakerjaan), on Tuesday (14/4/2026).

On the other hand, the average minimum wage rises by around 7% to 8% per year. Consequently, there is a gap between productivity and wages.

“On the other hand, the minimum wage rises by around 7%-8% per year. So there is a gap between productivity and wages. We are not against minimum wage increases; go ahead.

We also support improving welfare. But after 10 years of average wages at 7%-8%, our workers are still not prosperous. That means something is wrong,” he continued.

This situation makes workers and employers seemingly squeezed together by the existing conditions. Meanwhile, investors are also starting to leave Indonesia’s manufacturing sector.

“As a result, workers are not prosperous, employers are squeezed from all sides, and investors in the manufacturing sector are leaving Indonesia, especially in labour-intensive industries,” he explained.

He hopes that the new labour law can resolve these problems in Indonesia, particularly the increasingly low productivity issue.

“We hope that the law formed later will not only cover labour issues but also solve the problems,” he said.