The high unemployment rate among young graduates amid rapid technological disruption serves as a warning sign for Indonesia’s education system. While millions of new graduates enter the labor market every year, businesses’ capacity to absorb workers has yet to keep pace with labor force growth.
Professor of the Faculty of Economics and Business at Universitas Gadjah Mada (FEB UGM), Prof. Dr. R. Agus Sartono, M.B.A., said that the momentum following the Constitutional Court’s decision on the allocation of the education budget should be used to evaluate the direction of national education policy. He emphasized the need for the government to improve the quality of higher education, particularly by strengthening research and innovation capabilities, without neglecting the development of vocational education.
“Regardless of the level or type of education, the bottom line is graduate employability. In other words, the waiting time [to secure employment] should be shortened so that graduates do not instead contribute to unemployment,” Agus emphasized in a written statement on Monday (August 10).
Agus said the challenge of high unemployment is becoming increasingly evident amid growing uncertainty in the national economy. Ahead of the President’s presentation of the 2027 Financial Note and State Budget Bill, the government faces various challenges, including a weakening rupiah, corruption, illegal mining, and illegal business activities.
“Vigilance is necessary amid the threat of a wave of layoffs driven by automation and technological disruption,” he said.
According to Statistics Indonesia (BPS), Sakernas data from May 2026, the number of unemployed people in Indonesia reached 7.22 million. The Open Unemployment Rate (TPT) declined slightly by 0.03 percentage points to 4.65 percent. However, unemployment among people aged 15–24 increased by 1.01 percentage points to 17.37 percent. Meanwhile, vocational high school (SMK) graduates recorded the highest unemployment rate at 7.68 percent, followed by senior high school (SMA) graduates at 6.17 percent.
The State of Educational Outcomes
Agus said that many of these problems stem from an imbalance between the number of graduates and the labor market’s capacity to absorb them. Every year, approximately 3.7 million graduates from senior high schools, vocational high schools, Islamic senior high schools, and equivalent institutions complete their education. Of this number, only around 1.9 million continue to higher education, while approximately 1.6 million enter the workforce directly.
Meanwhile, around 1.8 million higher-education graduates enter the job market, bringing the total number of new job seekers to approximately 3.4 million. When combined with the existing unemployed population, at least 10.62 million people are competing for employment opportunities.
“These figures have not changed significantly over the past ten years because the flow of graduates from senior secondary and higher education cannot simply be halted. This is the real challenge for the government: creating a conducive business climate so that more employment opportunities can be generated,” he explained.
Agus explained that approximately 10.62 million job seekers are competing for increasingly limited employment opportunities with varying levels of competency. Intensifying competition has forced many higher education graduates to accept jobs below their qualifications. At the same time, technological developments have encouraged businesses to rely increasingly on automation to improve efficiency, making their demand for human labor more selective.
Implications and Opportunities for Improvement
Agus warned that high unemployment not only affects the labor market but could also undermine national economic resilience. Low incomes make it difficult for people to save, while dependence on consumer financing continues to grow. Data from the Financial Services Authority (OJK) show that the outstanding balance of legal online loans reached IDR 105.14 trillion in June 2026, an increase of 25.88 percent from the previous year. This condition is seen as a warning that the public’s capacity to accumulate capital is weakening.
According to Agus, high unemployment also carries broader economic consequences. Low incomes make it difficult for people to save, while dependence on consumer loans continues to increase. OJK data recorded that the outstanding balance of legal online loans had reached IDR 105.14 trillion as of June 2026, representing a 25.88 percent year-on-year increase.
“This is a serious warning of how dangerous it can be when consumption is financed through debt. The declining capacity to build capital through savings and the surge in consumer credit through online lending pose a long-term threat to the national economy, particularly as the productive-age population gradually transitions into an aging population,” he explained.
To address these challenges, Agus believes the government needs to continue the vocational education revitalization agenda initiated through Presidential Regulation No. 68 of 2022 on the Revitalization of Vocational Education and Training. The policy is aimed at improving access, quality, and relevance of vocational education so that it aligns more closely with industry needs. In addition, strengthening internship programs and collaboration among the government, industry, and educational institutions are considered important strategies for narrowing the competency gap between graduates and the demands of the labor market.
The development of polytechnics in industrial areas and special economic zones, Agus continued, is also an effort to strengthen the quality and relevance of vocational education to industry needs. In addition to ensuring access to internships, this approach facilitates access to industry-provided technical assistance. It also represents a model of collaboration among industry, government, and educational institutions. This polytechnic development strategy should be continued to reduce the number of secondary school graduates entering the labor market with limited competencies. Beyond producing job-ready workers, vocational education is also expected to foster new entrepreneurs who can create additional employment opportunities.
Nevertheless, Agus emphasized that revitalizing vocational education alone is not enough. The government must also promote industrialization to create more employment opportunities. At the same time, the quality of higher education, particularly in research and innovation, must continue to be strengthened.
