Measuring Welfare in Setting the Nisab for Zakat and Wage Policy

Measuring Welfare in Setting the Nisab for Zakat and Wage Policy

Note: This article represents the author’s personal opinion and does not reflect CNBCIndonesia.com’s Editorial Team.

Measuring welfare in public policy often relies on macro indicators that are aggregate in nature, particularly inflation and nominal wage growth. Both indicators are important as markers of overall economic stability. However, when used as direct proxies for household welfare, such an approach has fundamental limitations. In welfare economics, this problem is known as aggregation bias, a condition where macro indicators that appear stable actually mask the economic pressures faced by certain groups at the micro level.

This phenomenon becomes increasingly relevant ahead of the formulation of the 2026 minimum wage policy. Public debate often focuses on the magnitude of the wage increase, while more substantive questions are rarely asked: does the increase genuinely reflect a rise in real earnings for workers?

Limitations of Inflation and Nominal Wages

Nationally low inflation does not automatically reflect cost-of-living stability. Various studies on the cost of living index show that low- and middle-income households experience higher effective inflation. This happens because their expenditure shares are concentrated on food, energy, and housing—categories that are the most volatile.

In Indonesia, when general inflation runs around two to three percent, inflation for the food group often runs between five and seven percent. This creates a real income squeeze, a decline in real purchasing power even if nominal wages rise. If wage policy only responds to aggregate inflation, wage increases may not be sufficient to offset actual living costs.

As a result, money illusion arises: welfare appears to rise on paper but not in daily life. This is one source of recurring tension between workers, employers, and government in wage policy formulation.

KHL as the Floor of Welfare

Within the framework of the minimum living standard theory and the social floor, the Kebutuhan Hidup Layak (KHL) plays a central normative role as the lower bound of welfare. KHL represents the minimum level of consumption socially and biologically necessary to live a life of dignity. It answers the fundamental question of the minimum standard of living that should be guaranteed by public policy.

However KHL has two important characteristics. First, it is normative because it is set by social consensus. Second, it is periodic because it is updated at fixed intervals. Without adequate adjustment mechanisms, KHL risks lagging behind price dynamics that move faster.

This is where it is important to distinguish between the normative standard of living and the dynamic cost of living. KHL answers the first but does not fully reflect the second.

Role of CPI in Correcting Living Costs

The Consumer Price Index (CPI) functions as a correction mechanism bridging the gap. In a technocratic framework, CPI is not merely an indicator of macro inflation but acts as a price adjustment mechanism that ensures the minimum living standard remains relevant to real living costs.

Ideally, KHL should not be treated as a static figure, but as a variable implicitly adjusted to price developments, especially for lower-middle income groups. Without integrating KHL and CPI, wage policy risks policy lag—the delay in policy response to economic pressures actually felt by society.

This risk becomes very real when the 2026 minimum wage policy remains grounded only in aggregate inflation and economic growth, without accounting for sectoral inflation that directly affects workers’ living costs.

Nisab of Zakat and the Challenge of Nominalism

The problem of measuring welfare becomes more complex when the social obligation dimension is considered. In Islamic economics, welfare is not only measured by the ability to meet living needs but also by the capacity to contribute to redistribution through zakat.

The gold standard for setting the nisab of zakat al-mal functions as a value anchor relatively stable across time. Traditionally, the nisab is set at eighty-five grams of twenty-four karat gold.

With average gold prices in 2025 around Rp1.515 million per gram, the nisab of zakat would be equivalent to nearly Rp98 million per year or around Rp8.1 million per month. The contextual approach used by BAZNAS with a 14-karat gold basis lowers that threshold to around Rp5 million per month.

Although different in nominal terms, both approaches face the same problem. The nisab is set as a standalone number, without direct linking to the minimum cost of living. As a result, the zakat obligation threshold may not align with real earning capacity, especially for formal workers near the living wage.

Reading the Misalignment Through Simulation

To understand this misalignment more concretely, a simulation approach offers a closer view of reality. Imagine an urban area with a Minimum Living Standard of about Rp3.6 million per month. If effective inflation in the food and housing groups reaches 6 percent, the KHL adjusted by CPI rises to around Rp3.82 million per month.

In such a condition, workers earning Rp5.5 million per month are indeed above the minimum living standard. However once real living costs are met, room for welfare