Promise of Education in Job Market

DIDIE SW

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For most residents, the objective of education is to improve the standard of living for themselves and their families. No doubt, such expectations are in accordance with the fact that the higher the education, the higher the income that can be obtained.

This phenomenon has been interesting to reveal since the middle of the last century (Mincer, 1958; Schultz, 1961; Becker, 1993) and until recently (Allen 2016). That is the basis of the calculation of the IRR (Internal Rate of Return) of future profits from investment in education.

Moreover, a recent review (17/4/2019) of 75 studies shows that now the greatest benefits are enjoyed by those who have obtained higher education. Wages of college graduates are 27 percent and 20 percent higher than secondary education graduates in low income and middle income countries.

Education, especially higher education, will become more important in the future with regard to the development of the digital economy, from Industry 4.0 to 5.0 and even 6.0. The rewards provided by the labor market continue to move from muscle strength to brain power.

Developing education

Whoever the president will be, all realize the importance of education for a nation to be recognized among the nations of the world. Given that education was a prerogative of the elite in colonial times, the emphasis since Indonesia gained independence has generally been on quantity. Therefore, when the opportunity arose, mass education was launched in the mid-1970s.

Until the turn of the century, there have been fundamental changes that reflect the results of encouragement from below. Educational policy was implemented from elementary schools (SD) up with a presidential instruction on elementary schools (SD Inpres) that mandated at least one primary school per village, followed by the release of education development donations (SPP), initially from grade one to three and then continued to the end of elementary school. This policy opened access for all by bringing schools close to people’s places of residence.

Access to education, since then, is open not only for the rich, but also for the poor; not only for city children, but also village children; and, most importantly, not only open for boys, but also for girls. It is this policy that allowed for practically universal elementary school education with an enrolment rate of elementary school-aged children of more than 99 percent in 2017, in line with the Sustainable Development Goals (SDGs) of the United Nations introduced on Jan. 1, 2016.

That is quite encouraging indeed. The first time for Indonesia to record the nationwide state of education was when we conducted the 1961 census. At that time, the Indonesian population amounted to 96 million, of which 33.6 percent were under 10 years of age and the population of working age of 10 years and above was 63.9 million (at that time, many children aged 10 years and above had to help their parents work).

Of that number, 65 percent or two thirds had never attended school; 20 percent had only gone to school for a few years, and 12 percent had completed elementary school. Of the remaining 3 percent, 2.4 percent had junior high school education, fewer than 1 percent had high school education and only 0.09 percent were highly educated.

The success is shown by the shrinking of the nonschooled group from 65 percent to only 3 percent and, conversely, a sharp increase in the highly educated group from 0.09 percent to 10 percent between 1961 and 2018.

For the 1961 census, the largest education group was those who had only attended a few years of classes at the elementary level, when it was known as ongko loro for second grade, by 20 percent. In 2000, the largest group was 36 percent of those who had graduated from elementary school, but by 2018, those with high school education dominated with a share of 29 percent. The number of higher education graduates grew from 56,000 people in 1961 to 5 million in 2000 and is now almost 20 million people.

Kompas

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Transition to the labor world

Even though the objective of education is to attain work with wages in line with expectations, not everyone works, even for any job. There are those who are forced to work regardless of the wage they can get. Generally, they are the ones with no or low education, not those with elementary school to junior high school education. However, there are also some who choose – at least temporarily – not to make a living, because of failing to reach a match between the offer and the request for the level of wages, and there are those who are classified as discouraged job seekers.

There is an imbalance in public policy that prioritizes secondary education. The government prioritizes vocational education, which is considered to produce the type of skills needed by the job market, while what is really needed is quality improvement (Kompas, 9/5/2019).

In an ever-changing labor market highlighted by technological changes, the policy that prioritizes secondary education needs to be reviewed. In 2008, there were more senior high schools (11,762) than vocational schools (7,592), in 2018 there were already more vocational schools (13,710) than high schools (13,495). As a result, the number of high students between 2008 and 2018 grew from 3.9 million to 4.8 million, while that of vocational school students grew much faster, namely from 3.1 million to 4.9 million.

Meanwhile, the open unemployment rate (APT) as the key labor market indicator was slightly higher in 2000 for high school graduates (namely 13.8 percent) than for vocational school graduates (13.4 percent); by 2018, this had flipped, with the APT among vocational school graduates at 11.2 percent much higher than among high school graduates at 8 percent.

Dream jobs remain just that

Growing access to education does not always translate into people getting their dream jobs. The labor market moves in the opposite direction of expectations. Secondary and high school graduates find it increasingly difficult to enter the labor market. Even though the absorption rate of high school graduates in the labor market has remained stable at 68 percent between 2000 and 2018, other graduates are faced with a less favorable trend. Vocational school graduates have experienced a decreased absorption in the labor market from 80 percent to 76 percent. The employment rate of Diploma I-III graduates fell from 85 percent to 76 percent and that of university graduates dropped from 89 percent to 84 percent.

The decrease in workforce absorption is offset by an increase in other groups. In the employment survey, the working-age population is classified according to the main activities carried out during the week before the survey, according to which the working-age population consists of (1) workers, (2) job seekers and nonworking labor force participants, (3) those in schools, (4) housekeeping and (5) others.

A worrying trend that warrants public attention is the swelling of household administrators among middle and high-school graduates, those who have invested human capital in themselves. Among high school graduates, the number has increased from 17 percent to 20 percent; vocational school graduates from 12 percent to 16 percent; Diploma I-III from 9 percent to 19 percent; and among university graduates it has risen from 7 percent to 10 percent.

The discussion above shows that the challenges of the labor market lie not only in labor supply but also in limited employment opportunities, especially for university graduates. Generally, they are accommodated in the government bureaucracy and affiliated institutions, including educational institutions. That the private sector is not yet or insufficiently involved in providing employment for highly educated people is caused by the fact that it is restrained by Law Number 13 of 2003 on labor.

Mayling Oey-Gardiner, Professor at the School of Economics and Business at the University of Indonesia and Chairwoman of the Social Science Commission at the Indonesian Academy of Sciences