Indonesia’s Minimum Wage: Ideal or Reality for Graduates?

Minimum wage in Indonesia is a hot topic, especially for fresh graduates. While the government has set a legal wage floor, many young job seekers face underemployment or unemployment. As a result, the minimum wage often feels like a distant goal instead of a baseline for earning.

High Graduate Unemployment and Unrealistic Job Requirements

Indonesia’s job market presents major challenges for fresh graduates. The unemployment rate for youth aged 15–24 is 17.32%, a significant concern. Many university graduates are unable to find work in their field, with 5.34% of degree-holders still unemployed.

Furthermore, employers often list 2–3 years of experience for entry-level positions. This creates a catch-22: graduates need experience to get a job, but they can’t gain experience without being hired. Consequently, many graduates struggle to find jobs despite their qualifications.

Informal Sector Jobs: A Barrier to the Minimum Wage Standard

The informal sector in Indonesia comprises 59% of the workforce. Jobs in this sector, such as street vendors and small businesses, often don’t comply with minimum wage laws. Workers in these jobs can earn as little as Rp 1.99 million per month, far below the Rp 5.39 million set for Jakarta in 2025.

For many workers in the informal sector, the minimum wage is an ideal that seems out of reach. Even though the government raises the minimum wage each year, weak enforcement means that many workers still earn below the legal floor.

Why the Minimum Wage Feels Like a Grand Ideal

To many, the minimum wage in Indonesia seems like a “grand” ideal rather than a minimal standard. Although the government sets this wage to ensure a decent quality of life, the reality is different for many young people. The combination of high unemployment and the informal job market makes the minimum wage seem unattainable.

Graduates are often left with two choices: stay unemployed or take jobs that pay well below the minimum wage. This situation makes the wage floor feel more like a distant goal than an achievable standard.

How Can Indonesia Bridge the Gap?

To make the minimum wage a true baseline, Indonesia needs to take several key steps:

Align educational curricula with industry needs to improve employability.
Mandate internships or job-shadowing to provide practical experience for graduates.
Incentivize hiring fresh graduates by offering tax breaks or subsidies to employers.
Strengthen enforcement of minimum wage laws in both the formal and informal sectors.
Offer skill development programs to help workers move from low-paying jobs to better-paying ones.

Conclusion

Indonesia’s minimum wage system was designed to protect workers, but for many fresh graduates, it feels like an unattainable ideal. While the wage floor is meant to ensure a minimum standard, the reality is far from ideal for millions of workers, especially in the informal sector.

To close the gap, the government must reform education, enforce wage laws more effectively, and support fresh graduates in finding meaningful employment.

Key Takeaways:

Graduate unemployment is a critical issue, with 5.34% of university graduates unable to find work.
Unrealistic job requirements prevent many fresh graduates from finding entry-level positions.
The informal sector accounts for 59% of the workforce, and workers often earn below the legal minimum wage.
Policy reforms such as updating education, strengthening enforcement, and incentivizing hiring are crucial to making the minimum wage a reality for more workers.

By addressing these issues, Indonesia can move toward a future where the minimum wage is a true minimum, not just a distant dream for new workers.