Credential Inflation in Indonesia: When Degrees No Longer Guarantee Mobility

Photo by Jodie Cook on Unsplash

A university degree was once a ticket to a better life. In today’s Indonesia, it may only be the minimum requirement to stay afloat.

Over the past decade, Indonesia has made significant progress in expanding access to higher education. The number of universities has increased, student participation has grown, and a bachelor’s degree has become more accessible to the middle class. In theory, this should strengthen social mobility.

In reality, it is not that simple.

Data from Badan Pusat Statistik show that the open unemployment rate among university graduates has remained at around 5–6 percent in recent years, higher than that of some groups with lower levels of education. This indicates that the labor market is not absorbing graduates as quickly as the education system produces them. From a Labour Economics perspective, this reflects an imbalance between the supply of educated workers and the demand for quality jobs.

This imbalance becomes even more apparent when looking at Indonesia’s economic structure. Around 60 percent of the workforce is still in the informal sector, a sector that in many cases does not require higher education. In this context, a university degree often loses its relevance, as the available jobs do not fully demand such qualifications.

For many young people, this reality is not just a matter of statistics. Fresh graduates with bachelor’s degrees are increasingly starting out in administrative roles, sales positions, or gig-based jobs that are not directly related to their field of study. In major cities, the idea of “just taking any job first” has become more common. This is often not a strategy, but a compromise as a way to survive in an increasingly crowded and competitive labor market.

At this point, credential inflation becomes tangible. A bachelor’s degree is no longer a competitive advantage, but a minimum threshold. Many graduates end up in positions that do not align with their qualifications. A report by the International Labour Organization shows that up to around 30 percent of workers in developing countries experience overqualification. This not only reflects inefficiencies in labor allocation, but also suppresses income potential and productivity over time.

Ironically, despite the growing number of graduates, companies still struggle to find suitable candidates. A study by McKinsey & Company notes that around half of companies in Asia face significant skill gaps. This suggests that the issue is not merely the quantity of graduates, but the quality and relevance of the skills produced by the education system. Degrees are there, but the competencies demanded by the market are not always developed alongside them.

The accumulation of these dynamics leads to an important implication: higher education is no longer a consistent pathway to social mobility. A report by the World Bank finds that only around 22 percent of individuals from poor families in Indonesia manage to move into the middle class. The pathway of “school → university → a better life” still exists, but it is becoming narrower and increasingly uneven.

This is where the structural issue becomes clear. Higher education has long been positioned as the primary solution to inequality, without being accompanied by a corresponding transformation in the labor market. Universities continue to produce graduates, while the creation of quality jobs does not keep pace. Policies have focused more on expanding access, but not enough on ensuring relevance. As a result, this systemic risk is shifted onto individuals, as if failing to “move up” is a personal failure, rather than the outcome of a misaligned structure.

For the younger generation, the implications are significant. The investment in higher education, time, cost, and expectations has become increasingly uncertain in its returns. A degree still matters, but it is no longer sufficient to guarantee a better life trajectory. Young people are forced to adapt more quickly, accumulating experience early, building additional skills, and navigating career paths that are far from linear.

In the end, a university degree has not entirely lost its value. But its function has changed. It is no longer a ticket to move up, but a requirement to stay afloat. And as long as the education system and the labor market continue to move in different directions, the question is no longer whether education matters, but whether the system remains fair to those who continue to believe in it.