Navigating Unemployment in South Sulawesi: Interaction of Investment, Economic Growth, and Demographic Dynamics

This study explores the multifaceted relationship between unemployment, investment, and economic growth in South Sulawesi, Indonesia, over the period 2017–2023. Using panel data from 24 districts, the research employs fixed-effects econometric modeling to analyze how population density, gross fixed capital investment (GFCI), and economic growth influence regional unemployment rates. The empirical results demonstrate that economic growth significantly and negatively affects unemployment, underscoring its crucial role in job creation and regional development. Conversely, both GFCI and population density show statistically insignificant effects, indicating that capital investment has not effectively translated into labor absorption, likely due to the prevalence of capital-intensive rather than labor-intensive investment patterns. The findings highlight a structural mismatch between the growing youth labor force and the skills demanded by emerging industries. Despite the region’s positive economic trajectory, unemployment persists, particularly among young workers, suggesting that economic expansion alone is insufficient for inclusive employment generation. The study identifies the dominance of informal sectors, urban–rural disparities, and educational inequalities as key factors constraining the full employment impact of growth and investment. Policy implications emphasize the importance of integrated strategies that combine targeted investment in labor-intensive sectors, support for micro, small, and medium enterprises (MSMEs), and alignment of vocational education with industry needs. Strengthening public–private collaboration and fostering digital and entrepreneurial competencies can further enhance employment quality and inclusivity. Overall, this study contributes to the regional labor economics literature by providing subnational evidence on the unemployment–growth–investment nexus in Indonesia. It concludes that sustainable job creation in South Sulawesi requires synchronized economic, educational, and demographic policies aimed at maximizing the region’s human capital potential and ensuring that growth translates into equitable employment opportunities.