CHAPTER 1

INTRODUCTION

1.1 Background

The increase in the number of graduates is a result of the swift development

in higher education. As the economy becomes digitized, there emerges a favorable
shift in the industrial market with an increased demand for skilled workers.
However, the rising graduate unemployment rate still remains a contentious topic.
It is important to attend to the matters of graduate viability and employability which
include issues such as job mismatch and unemployment especially given how much
effort has been put in by the government or privately to ensure that these graduates
are market ready. From the investment standpoint, this situation reflects a low or
negative return for investment and a loss for the country as human capital is
inefficiently allocated.
The mismatch between an individual's education and the prerequisites of a
job is known as the job-education mismatch, and is a problem that needs to be
addressed as it has dire consequences on the labor market (Veselinović et al., 2020).
A job-education mismatch arises when the competencies of the employee do not
meet the tasks in the job description (Li & Wang, 2020). It is common to confuse
the term with other concepts that depict relative inefficiency in the use of manpower
such as: overeducation, underemployment, overqualification, and underutilization
(Robert, 2014). Nonetheless, the context of the study determines the appropriate
use of the terminology.
Take the use of the term overqualification, it is frequently applied in
graduate studies, and in research that focuses on higher education and economic
growth. Psychological research, sociology, and organizational studies where
attitudes towards work and performance are researched tend to use the term
overqualification (Wang et al., 2019). In contrast, in employment and
organizational contexts, the term underemployment is used more frequently with
regard to a situation where (1) the employee is working for less hours than they are

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contracted, or (2) the employee is overqualified for the position and is not fully
utilizing their skills, training and experience (Beukes et al., 2017).
Mismatches can occur vertically or horizontally. Vertical mismatch is an
inadequacy that occurs because the workforce has lower or higher qualifications or
skills than required. Workforce with higher qualifications is called overeducation,
while a workforce with lower qualifications is called undereducation. On the other
hand, a horizontal mismatch refers to an insufficiency resulting from a significant
difference in education or skill between the workforce's requirements and those of
the job in the field of education (Safuan & Nazara, 2005). Technical abilities can
be acquired more rapidly and effectively through structured training programs. In
cases, involving a discrepancy between an individual's educational background and
their current occupational role, the existence of a skills gap may be indicated (Allen
& de Weert, 2007). The Mismatch of labor is an inefficient allocation of human
resources because it can affect labor productivity. Three factors are closely related
to the incidence of mismatch: the distribution of individual capabilities before
entering university, the distribution of firms in adopting technology, and the cost of
education (Ordine & Rose, 2017). As a result, there will be a lot of unemployment
and the well-being of the people will decline. The dissatisfaction and wage effects
experienced by the labor force may encourage them to seek others.
The level of education that workers have will be a signal for employers who
are trying to find workers with the appropriate abilities. Mismatches occur in the
world of work because the qualification demands of employers and the
qualifications of workers do not match (ILO, 2018). The difficulty of the process of
adjusting labor demand and supply causes a skill gap. In addition, an increase in the
quality of labor offered is not followed by an increase in demand for labor that
requires high skills, which can lead to a mismatch (Hasibuan & Handayani, 2021).
It is important to appreciate that skills and credentials are not equivalent. The
concept of skills represents a specific state of affairs at a given moment in time,
which is typically a considerable period of time in the past. In contrast, the
development and loss of skills is a continuous and ongoing process throughout an
individual's lifetime (Senkrua, 2021).

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 A significant transformation occurred in the early 1990s, characterized by a
shift in the composition of the workforce from the primary to the secondary sector.
The expansion of educational opportunities is transforming the labor market. The
elevated educational levels of the workforce are a consequence of increased access
to education. However, the enhanced quality of the labour force through education
has not been reflected in a corresponding distribution of labour according to the
educational requirements of different occupations (Saputra & Junaidi, 2011).
Based on BPS (2023), the working-age population in West Sumatra
Province, comprising individuals between the ages of 15 and 64, has reached a total
of 3.24 million. The working-age population is primarily composed of individuals
between the ages of 25 and 44, with a total exceeding 1.4 million. The Indonesian
Central Bureau of Statistics (BPS) categorizes generations as generation x,
comprising individuals born between 1965 and 1980, and millennials, comprising
individuals born between 1981 and 1996.
The individual characteristics of generation x and millennials in the
workplace are very different. The advancement of the millennial generation's
education is not accompanied by the availability of jobs that match their
qualifications being a problem for the moment. The millennial generation has a
different work ethos than the previous generation, one of which prefers challenges
in employment over job security, which is not achieved if the millennials work
under their qualification. The education of the millennial generation is better than
the previous generation. Compared to generation x, millennials and generation z
have a greater desire to be leaders in their careers. Compared to generation x,
generation millennials and generation z focus on matching their personalities to
their working environment. Compared to matching personal characteristics with the
workplace, generation x is more pragmatic in the world of work and focused on job
stability. Intergenerational differences are an important factor in social
categorization. The orientation, preferences, and work ethos of a generation are
influenced by the cultural, political, social, and economic developments.
Generation x and baby boomers still dominated labor market conditions between
2000 and 2016, although they had different characteristics and work ethos than the
millennials. The millennial generation has a higher tendency to experience

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mismatched jobs than the generation x. The millennial generation has to compete
with jobs with low education because of the fierce competition in positions that
require the qualifications that fit them (Jamalludin, 2021).
According to SAKERNAS (2023), in 2 generations that exist in West
Sumatra Province, namely generation x and millennials who are categorized as
coming from the population age of 28-59. Workforce participation by age group is
high among those aged 28 to 43, with consistently above 51.28% than 44 to 59 of
the age group around 48,72%. This gives a signal that millennials have higher
workforce participation than generation x. The data indicates that West Sumatera
Province working populations are generally increasing, with the backbone of
productive generations from millennials to generation x.
In West Sumatra Province in 2023, many workers with higher formal
education cannot get jobs that match their qualifications, so many of them work in
positions that do not require the skills or education they have. This causes a
mismatch between the level of education and job qualifications in the workforce,
especially in the 28-59 age group, namely generation x and millennials.
Data from the Central Statistics Agency and the Ministry of Manpower
show that this mismatch is caused by a mismatch between the education curriculum
and the needs of the local labor market. In addition, most job opportunities in West
Sumatra Province are in sectors that do not require high academic qualifications,
such as agriculture, wholesale and retail trade, the car and motorcycle repair and
processing industry, so graduates with higher education tend to have difficulty
working in match their education. On the contrary, there is an increasing tendency
to work and an increasing number of active job seekers. On the other hand, several
sectors are experiencing slow growth, while the informal sector is still the main
choice for most workers, especially due to the lack of job opportunities in the formal
sector.
Audy Jolnaldy, deputy governor of West Sumatra Province, said that many
diploma and undergraduate graduates from many universities in West Sumatra
Province have difficulty getting a job amid the limited needs of workers in the West
Sumatra industrial world. Working outside the region to abroad is considered very
appropriate as a solution to reduce unemployment.

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 65,27%

19,03%
15,70%

Undereducation Match Overeducation

Figure 1.1 Educational Mismatch Across Generation x and Millennial in

West Sumatra (August, 2023)

Source: BPS (2023), processed by author

Based on figure 1.1 shows the percentage of educational mismatch that
occurs in West Sumatra Province. It is clear that educational mismatch exists in
West Sumatra Province where the number of workers who are undereducated is
19.03% and the number of workers who are overeducated is 15.70% and workers
who match are 65.27%. This shows the government's policy of encouraging access
to higher education can have two implications. Firstly, it can reduce the incidence
of undereducation. Secondly, it can result in overeducation. Despite this,
government policy through education expansion is still preferable, even though it
may lead to overeducation in West Sumatra Province

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 29,5%

16,6%

Generation x Millennial

Figure 1.2 Percentage of Population by generation in West Sumatra

Province 2023

Source: BPS (2023), processed by author

Figure 1.2 shows the percentage of the population of generation x and the
millennial generation in West Sumatra Province. Among the two generations, the
millennial generation occupies the highest position of around 29.5% or a total of
1,699.2 thousand people. After that, Generation x is around 16.6% or a total of
959.6 thousand people of productive working age in West Sumatra Province. This
shows that in 2023, the millennial generation has dominated the labor market
compared to generation x even though in terms of position on the job seen from the
experience of generation x is more occupied than the millennial generation. The
transition from traditional to knowledge-based economies has created new
challenges for labor markets worldwide. In Indonesia, especially in West Sumatra,
the demand for highly skilled workers has surged, driven by technological
advancements and globalization. However, the extent to which the educational
attainment of generation x and millennials aligns with the requirements of the
contemporary labor market remains a subject of debate.

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 Percent (%)
25,51
22,95
18,15

1,05 9,14 3,07 4,67 9,25 6,2

Figure 1.3 Work position in West Sumatera (August, 2023)

Source: Sakernas (2023), processed by author.

Nevertheless, a discrepancy exists between the highest level of education
attained by the labor force and the educational qualifications required for certain
work positions in the labor market. Based on figure 1.3 above, work positions are
dominated by service business staff and sales staff at 25,51%, followed by
agricultural and livestock business staff at 22,95% and manual workers at 18,15%.
Beside that, based on figure 1.4 below, shows the number of workers in 17
different industrial sectors in West Sumatra during the period 2015 to 2023.
Agriculture is still the sector that contributes the largest number of workers from
2015-2023, in 2015 around 856.437 people and in 2023 around 964,493 people.
This shows that the agricultural sector is still the backbone of the economy for some
people in West Sumatra Province. The second largest sector is followed by
wholesale and retail trade, car and motorcycle repair amounted in 2015 around
417.583 and in 2023 around 529,285 people. The third largest sector that absorbs
labor is the processing industry which amounted in 2015 around 155.953 and
2455,68 people in 2023.

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 Work Industry 17 Sector (People)
2015-2023
1200000
1000000
800000
600000
400000
200000
0

2015 2016 2017 2018 2019 2020 2021 2022 2023

Figure 1.4 Work industry 17 sector (people) 2015-2023

Source: BPS (2023), processed by author

According to Hasibuan & Handayani (2021), people with higher levels of
education have lower wages, whereas workers with lower levels of education have
higher outcomes. This is consistent with other research conducted in other nations,
which show that people who hold occupations that do not correspond to their
educational background pay less than those who possess the same training and are
employed in suitable positions.
According to Jamalludin (2021), generation is associated with the tendency
of mismatch in the labor market. The old generation and the generation of fighters
have a high tendency to experience mismatches in employment compared to the
new order generation. The reform generation has a low tendency to experience
mismatch in employment compared to the generation of the new order. The older
the age, the less the difference in the proportion of mismatched workers between
generations.
According to Patil and Patil (2019) in India, vertical job mismatches are
more prevalent in industries, while horizontal mismatches are more common in
academic institutions. This can be attributed to factors such as population growth
and increased labor supply. Research suggests that the employability of Indian
graduates has reached a new low, leading many to accept lower-level or unrelated
jobs. Additionally, cultural diversity poses significant challenges for graduates
seeking career opportunities in different regions, often hindering their willingness

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to accept promotions or new positions. Consequently, many workers remain in their
current jobs, regardless of whether they align with their educational qualifications.
Based on the above background, researchers are interested in examining
what the influence the educational mismatch in generation x and millennials in West
Sumatra with the existing labor market using independent variables that are
generations, training, marriage status and work industry of research coverage as
well as the dependent variable overeducation = 1, match = 0 or undereducation = 1
under the title "Educational Mismatch in Generation X and Millennial of West
Sumatra Province".

1.2 Research Problem

The title of this research is “Educational Mismatch in Generation X and Millennial

of West Sumatra Province“. This study aims to look at the causes of mismatch of
education workers using variables, such as generation, training, marriage status and
work industry on vertical mismatch in generation x and millennial in West
Sumatera. Based on the background of the research that has been done above, this
paper addresses some main research questions:
1. How does training influence educational mismatch in West Sumatra
Province?
2. How does marriage status influence educational mismatch in West Sumatra
Province?
3. How does generation x and generation millennial influence on educational
mismatch in West Sumatra Province?
4. How does agriculture, wholesale and retail trade; car and motorcycle repair,
processing industry and others sectors influence educational mismatch in
West Sumatra Province?

1.3 Research Objective

This study “Educational Mismatch in Generation x and Millennial of West Sumatra

Province”, which is rarely discussed. The analysis is carried out in order to:
1. To analyze the influence of training on educational mismatch in West
Sumatra Province.

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 2. To analyze the influence of marriage status on educational mismatch in
West Sumatra Province.
3. To analyze the influence of generation x and generation millennial on
educational mismatch in West Sumatra Province.
4. To analyze the influence of agriculture, wholesale and retail trade; car and
motorcycle repair, processing industry and others sectors on educational
mismatch in West Sumatra Province.

1.4 Research Advantages

The results of this study will also be used by workers as a reference to prepare
themselves in developing skills in entering the real world of work in dealing with
educational mismatches and by the government in seeing the development of
education and the job market in the following year in West Sumatra Province.

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