Youth and graduate unemployment in Indonesia: demography as institutional stress test under segmented labour markets

Indonesia’s demographic transition is widely framed as a demographic dividend. Yet persistently high youth and vocational graduate unemployment signals institutional strain rather than demographic advantage. This Research Insight reframes educated youth unemployment not primarily as a skills deficit, but as a structural coordination problem within a segmented labour market operating under conditions of premature deindustrialisation and technological restructuring. Drawing on labour market segmentation theory, comparative political economy, and national labour statistics, the article argues that Indonesia faces a triple constraint: (1) weakened labour absorption in tradable sectors, (2) entrenched segmentation and informality limiting structured entry pathways, and (3) fragmented collective skill formation and a coordination trap between firms, the state, and training institutions. The article conceptualises demographic expansion as an institutional stress test that exposes the capacity of labour market governance systems to coordinate school-to-work transitions under structural transformation.