Mismatch in Two Dimensions: Wage Effects of Education-Job Mismatch among Vocational Senior High School Graduates in Indonesia Noa Yokogawa
Graduate School of International Cooperation Studies, Kobe University
Abstract
Vocational education is vital for economic development, especially in emerging economies, as it equips individuals with job-ready skills. However, misalignment with labor market demands often leads to education-job mismatches. This study focuses on two types of mismatch: horizontal mismatch, where workers are employed outside their field of study, and vertical mismatch, where individuals have more or less education than required. In Indonesia, about 60% of vocational senior high school graduates experience horizontal mismatch. Regarding vertical mismatch, 82% are matched, 2.81% are undereducated, and 15.11% are overeducated.
Using data from the August 2023 Indonesia Labor Force Survey (SAKERNAS), we examine the wage effects of these mismatches and their gender differences. Ordinary Least Squares (OLS) and Heckman selection models are applied to address potential sample selection bias due to the exclusion of non-wage earners. Mismatch categories (Match, Weak Match, and Mismatch) are defined based on the Job Analysis method, which compares educational backgrounds with job requirements.
The results show that horizontal mismatch leads to wage penalties: fully mismatched workers earn 6% less, and weakly matched workers 3% less than matched peers. Vertical mismatch reveals contrasting effects: undereducation yields a wage premium of 20.6%, while overeducation incurs a 13.6% penalty. Gender analysis indicates that males face penalties in both weak and full mismatch, whereas females are penalized only in full mismatch scenarios.
These findings support job assignment theory, suggesting that mismatches, particularly horizontal ones, reduce productivity. However, the wage premium for undereducated workers and the mixed effects of overeducation highlight the role of broader labor market dynamics. Evaluating vocational education outcomes requires attention to both individual mismatch and external labor market conditions.
