Unemployment Falls, Yet Youth Remain Trapped at the Job Market Entrance

The national open unemployment rate continues to shrink, yet youth unemployment is actually rising. Behind these seemingly improving figures lies a labor market paradox that cannot be understood through a single indicator alone.

JAKARTA — On paper, Indonesia's labor market appears to be improving. Statistics Indonesia (BPS) recorded a national Open Unemployment Rate (TPT) of 4.68 percent in February 2026, which then fell to 4.65 percent in May 2026.

However, behind these positive-looking figures lies a more complex issue, particularly for the younger generation striving to secure their first job.

The TPT counts individuals in the labor force who are not working and are actively seeking employment. This group includes fresh graduates submitting applications as well as workers who have been laid off and are looking for new roles.

In general, the national unemployment figure does show a downward trend. The problem is that the national average can mask significant disparities when broken down by age, education level, or region.

Source: BPS (Sakernas), processed based on data mentioned in the text.

National Figures Masking the Age Gap

When data is broken down by age group, the labor market picture changes.

The TPT for the 15–24 age group was recorded at 16.36 percent in February 2026 and increased to 17.37 percent in the subsequent release. That figure is nearly four times higher than the national TPT.

Approximately 19.44 percent of young people are also in the NEET group (Not in Employment, Education, or Training), meaning they are not working, not in school, and not participating in training.

Among various age groups, those aged 25–59 actually recorded a more significant TPT decline of about 0.37 percentage points. This condition indicates that the improvement in national unemployment figures is not necessarily felt evenly by the youth group.

Center of Economic and Law Studies (CELIOS) economist Bhima Yudhistira Adhinegara highlighted the high youth unemployment in Indonesia compared to several ASEAN countries.

Indef's Center for Macroeconomics and Finance head, M. Rizal Taufikurahman, also noted that Indonesia's youth unemployment is in the 14–17 percent range. He argues that the employment problem lies not only in the size of the TPT but also in the quality and the labor market's ability to absorb new workers.

Conversely, the age group of 60 and above recorded a relatively low unemployment rate. This condition does not necessarily mean that older individuals find it easier to get jobs.

Ministry of Manpower data shows that about 55.32 percent of seniors in 2024 were still working, some due to economic necessity. Many of them have also been in the labor market for a long time, including in the informal sector, and thus are not classified as new job seekers.

Diplomas No Longer a Guarantee

Another paradox is evident in education levels.

In February 2026, the highest unemployment rate was recorded among vocational high school (SMK) graduates at 7.74 percent. This was followed by high school (SMA) graduates at 6.23 percent and Diploma IV to Bachelor's degree holders at 3 percent, with a rate of 6.13 percent.

Meanwhile, the TPT for the population with primary school education or below was recorded at only 2.32 percent.

These figures show that a higher level of education does not automatically guarantee that someone will be absorbed into the workforce more quickly.

A common issue is the discrepancy between graduate competencies and industry needs, or skill mismatch. Data on vocational graduates also shows that many still work outside the fields they studied.

The East Java Chamber of Commerce (Kadin) has previously highlighted the need for industry involvement from the outset in designing vocational education curricula. This would ensure that the competencies provided in schools and universities are more closely aligned with the actual needs of the business world.

Minister of Manpower Yassierli also acknowledged the gap between the skills of job seekers and industry requirements.

This problem is increasingly felt by entry-level job seekers when many entry-level vacancies still require work experience. This creates a classic dilemma: one needs experience to get a job, but needs a job to gain experience.

Regional Disparities Exacerbate Competition

Labor issues also have a geographical dimension.

About 55.65 percent of Indonesia's labor force is concentrated on the island of Java. At the same time, the formal sector's capacity to absorb labor remains limited.

The concentration of economic activity and job opportunities in major cities leads many young people from various regions to migrate to Java in search of what they perceive as better opportunities.

However, this large influx of labor also increases competition.

Those not absorbed by the formal sector eventually face limited choices, ranging from informal work and short-term jobs to digital platform-based work that does not necessarily provide adequate income security or social protection.

On the other hand, regions of origin risk losing educated young workers when local economic opportunities do not develop as quickly as the growth in the number of job seekers.

When Giving Up No Longer Counts as Unemployment

This is one of the key paradoxes in interpreting unemployment data.

A person is generally categorized as unemployed if they are not working and are still actively looking for work. However, when someone stops looking for work, they can exit the labor force category.

In labor economics literature, the group that stops looking for work because they feel the opportunities are too slim is known as discouraged workers .

As a result, a decline in TPT does not always mean that the number of new jobs has increased by the same amount. In certain conditions, the unemployment rate can also fall because some job seekers have simply stopped looking.

Research by LPEM FEB UI based on Sakernas data noted that about 1.87 million people stopped looking for work as of February 2025, an increase of about 11 percent in one year.

Meanwhile, the Labor Force Participation Rate (TPAK) in February 2026 was recorded at 70.56 percent, a decrease of 0.04 percentage points compared to the previous period, even though the working-age population continues to grow.

Therefore, labor conditions cannot be read solely through the TPT.

Other indicators such as the employment-to-population ratio can provide additional insight into how many working-age people actually have jobs.

BPS recorded this ratio at 67.17 percent in August 2025, a slight decrease compared to 67.24 percent in February 2025.

However, this indicator also has limitations. In labor statistics, a person can be categorized as employed if they perform economic activity for at least a certain minimum amount of time, including unpaid family workers.

This means that "employed" status is not necessarily synonymous with having a stable, decent job that can meet one's living needs.

Bright Institute economist Awalil Rizky also believes that the TPT should not be used alone to describe labor conditions.

In a society without strong unemployment protection, many people lack the financial ability to remain unemployed for long. They eventually accept any job just to earn an income, even if the job does not match their competencies or offers low pay.

President of the Confederation of Nusantara Workers Unions (KSPN), Ristadi, also highlighted the importance of reading layoff data alongside other labor indicators to get a more complete picture of the job market.

The Demographic Bonus at Stake

For years, Indonesia has relied on its demographic bonus as a pillar of development.

The proportion of the working-age population is projected to remain high leading up to 2030. However, a large working-age population only becomes an advantage if there are jobs available that can absorb them productively.

If millions of young people are unemployed, out of school, not receiving training, or working far below their skill levels, the demographic bonus risks turning into an economic and social burden.

CELIOS economist Nailul Huda warned that the growing NEET group needs serious attention because they are outside three critical paths: employment, education, and training.

The World Economic Forum (WEF) also identifies limited economic opportunities, including for young people, as one of the risks that Indonesia needs to address in the coming years.

Several labor studies have also highlighted the mismatch between education, skills, and business needs as a cause of unemployment among the educated.

The Job Market Needs More Than Just TPT Figures

Several steps can be taken to narrow this gap.

Industry-based internship programs need to be expanded so that fresh graduates gain real work experience before entering the full-time job market. The government plans to expand the internship program from about 20 thousand to 80 thousand participants.

Vocational training centers need to be revitalized so that the training provided follows changing industry needs, including digital skills, artificial intelligence, modern manufacturing, the green economy, and various new professions.

The relationship between education and the business world also needs to be strengthened through the link and matchconcept, not just through curriculum alignment on paper, but by involving companies in competency design, internship programs, and the certification process.

Youth entrepreneurship can also be an alternative, but it should not be positioned as the sole solution to the limited formal job market.

Statistically, the government needs to expand the indicators presented to the public. In addition to TPT, the public needs to see the labor force participation rate, the employment-to-population ratio, the proportion of formal and informal workers, the underemployment rate, the number of discouraged workers, and layoff trends.

With more complete indicators, labor market improvements can be assessed based on their quality, not just on the decline of a single figure.

Ultimately, Indonesia's unemployment paradox is not merely a statistical issue. The decline in the national TPT is an important development, but that figure cannot stand alone.

The more relevant questions are who is actually getting jobs, what kind of jobs they are getting, whether the income is decent, and how many people have finally stopped looking for work because they feel the entrance to the job market is narrowing.

Behind every falling unemployment figure, there is still one question that must continue to be asked: who is actually getting a job, and who has quietly stopped hoping?