More Degrees, Fewer Good Jobs? Indonesia’s Graduate Expansion in an Economy Still Dominated by Informal Work

Abstract

Indonesia’s higher education system now produces approximately 1.26 million bachelor’s graduates annually, yet the country’s labour market remains dominated by informal employment. This article examines whether the expansion of higher education has outpaced the creation of formal and high-quality employment. Using a narrative evidence synthesis and secondary descriptive analysis of the 2021–2026 literature, National Labour Force Survey statistics, higher-education statistics, and recent World Bank and ILO reports, the article distinguishes three claims that are often conflated: growth in graduate supply, growth in formal employment, and the availability of good jobs. Formal employment did not contract in absolute terms between February 2025 and February 2026; it increased from 59.19 to 59.93 million workers. However, informal employment increased more rapidly, from 86.58 to 87.74 million, leaving almost three-fifths of workers outside formal employment. More importantly for higher-education policy, the World Bank reports that the share of tertiary-educated workers in formal wage employment declined from 74.1% in 2018 to 67.8% in 2025. Indonesian studies also document substantial vertical and horizontal education–occupation mismatch and associated earnings penalties. The evidence therefore supports a more precise diagnosis: Indonesia is not running out of work, but the supply of tertiary credentials is expanding in an economy that is not generating enough productive, secure, skill-matched jobs at a comparable pace. The article argues that universities should shift from a degree-centred model toward a capability-centred model encompassing work-integrated learning, digital and analytical competence, professional networks, entrepreneurship, and career adaptability, while economic policy must simultaneously accelerate structural transformation and productivity-enhancing job creation.