Who Gains from Higher Education? District-Level Development and Labor Market Inactivity Among Indonesian Young Adults

Despite rapid expansion in higher education access, Indonesia continues to face persistently high rates of labor market inactivity among young adults. This study investigates the relationship between tertiary education, household economic status, and NEET (Not in Employment, Education, or Training) outcomes among individuals aged 25–34, while examining how these effects are shaped by regional development contexts. Using nationally representative SUSENAS data from 2019 to 2024, the analysis applies a multilevel mixed-effects logistic regression model to assess both individual- and district-level influences, including interactions between education and contextual indicators such as the Human Development Index (HDI) and poverty rates. The results confirm that both tertiary education and household income (log per capita expenditure) significantly reduce the likelihood of being NEET. However, their protective effects are not uniform across regions. In high-HDI and high-poverty districts, the employment benefits of tertiary education are notably weaker—suggesting that credential expansion alone cannot overcome structural labor market constraints. Margins analysis further reveals that while NEET probabilities decline with rising income and education, these gains taper off in more developed and more deprived areas. These findings challenge assumptions of uniform returns to education and underscore the importance of aligning human capital investments with local labor market conditions. Targeted employment policies and spatially responsive education-to-work strategies are essential to ensure that higher education translates into real opportunities for Indonesia’s youth.