The nexus between economic growth and educated unemployment

Joko Susanto and Miguel Angel Esquivias Padilla
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Joko Susanto: UPN Veteran Yogyakarta,Yogyakarta Special Region,Indonesia
Miguel Angel Esquivias Padilla: Airlangga University,East Java,Indonesia

Romanian Journal of Economics, 2024, vol. 59, issue 2(68), 36-47

Abstract: In Indonesia, excellent academic performance in Java Island is not accompanied by successful job performance. The unemployment rate for educated people on this island is higher than that for those with less education. This study aims to investigate whether economic growth reduces educated unemployment. This analysis estimates the impact of economic growth on educated unemployment, with population growth and wage rates as covariates. This study employed the Fully Modified Ordinary Least Square (FMOLS) method to investigate the relationship between economic growth and educated unemployment. This method allowed us to examine the effect of economic growth on the unemployment rates of vocational high school and college graduates. The research utilized secondary data from the Indonesian Statistic, including educated unemployment, economic growth, population growth, and minimum wages in Java, except in The Jakarta Capital Special Region. The research also collected primary data through questionnaires distributed among these graduates to validate our regression results. The results show that economic growth does not lower the unemployment of vocational high school graduates. However, economic growth reduces college graduates' unemployment. The wage rate positively impacts the unemployment rate for graduates of vocational high schools and colleges. Population growth, however, does not affect the unemployment of college graduates; instead, it positively affects the unemployment of vocational high school graduates. Primary data support the study's finding that unemployment in vocational high schools is related to students' reluctance to seek employment in other regions. Conversely, college graduates are willing to leave their area to seek a job. This research brings a unique perspective to the issue of educated unemployment by highlighting the differential impact of economic growth on vocational high school and college graduates. The results underscore the need for diverse policies to address the problem of educated unemployment effectively.

Keywords: educated; unemployment; growth; Okun’s law (search for similar items in EconPapers)
JEL-codes: J08 J21 O15 (search for similar items in EconPapers)
Date: 2024
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