Reducing Youth Unemployment in Indonesia: Identifying Financial Strategy for Technical and Vocational Education and Training

Abstract

With a large youth population, Indonesia faces both the challenge and the opportunity to increase its capacity and maximize its contribution to the country's economic growth. Empowering youth with skills and knowledge matching industry demand will benefit the private sector and society. Technical and Vocational Education and Training (TVET) is an avenue to connect school and workplace environments directly and accelerate its graduates becoming employed and productive in the very early stage of their careers. However, existing TVET institutions, especially in upper secondary education, still need to be improved due to their low employment rate compared to other graduates from different educational streams. Based on quantitative analysis using entropy balancing and instrumental variable method, the impact of vocational secondary school on employment and wage levels is more prominent in the younger graduates and diminished in the older age group. This situation raises concerns about how to strengthen existing TVET institutions so they can provide updated skills and knowledge and maintain TVET graduates' competitive advantage throughout their careers.