By Dr Rashesh Shrestha, Economist at ERIA, and Dr Romora Edward Sitorus, Chief Economist at the Coordinating Ministry for Economic Affairs of Indonesia: Youth unemployment remains stubbornly high across Southeast Asia. According to the International Labour Organization, more than 16% of youth in the region were not in education, employment, or training (NEET) in 2024. In Indonesia, the rate reached around 21% – amongst the highest in ASEAN – surpassed only by Lao PDR and almost double the levels in Cambodia, Viet Nam, and Thailand. This persistently high NEET rate highlights the hurdles first-time jobseekers face, even amid overall economic growth.

Two structural shifts are intensifying this challenge. First, slower economic growth, shaped by trade uncertainty and higher interest rates, reduces opportunities for entry-level positions as firms hold back from investing in inexperienced young workers. Second, automation and artificial intelligence are steadily replacing routine tasks that often serve as steppingstones for fresh graduates. Together, these trends lengthen the time it takes for youth to secure stable employment.

Traditional responses, such as extending years of schooling, are proving insufficient. As of 2025, Indonesia had more than 1 million unemployed university graduates, even as the economy faces a looming shortage of digital skills. By 2030, Indonesia will need an estimated 12 million digital talents, compared to a current base of only 3 million. This disconnect shows that degrees alone are no longer enough to prepare youth for the evolving labour market.

Microcredentials as a Game Changer

Firms are increasingly prioritising skills-based hiring over educational pedigree. LinkedIn’s 2025 analysis reveals that shifting to skills-based screening dramatically expands candidate pools – especially for non-degree holders. What youth need, therefore, are skills-development pathways that can keep pace with industry change rather than the slower cycle of traditional curricula.

Microcredentials provide such a pathway. These short, targeted programmes deliver job-relevant skills, assessed and certified in alignment with industry standards. They are faster, cheaper, and more adaptable than degree programmes, making them well-suited to address specific gaps in the labour market. They also support lifelong learning, allowing individuals to incrementally build their skills over time.

Importantly, microcredentials can expand opportunities beyond domestic markets. By participating in freelance and gig-economy platforms, young people can demonstrate their skills, work ethic, and professionalism to global clients – building portfolios that enhance employability both online and offline.

Importantly, microcredentials can expand opportunities beyond domestic markets. By participating in freelance and gig-economy platforms, young people can demonstrate their skills, work ethic, and professionalism to global clients – building portfolios that enhance employability both online and offline.

Embedding Microcredentials into Education Systems

Microcredentials should complement, not replace, traditional education. A hybrid approach – combining the depth of degree programmes with the flexibility of microcredentials – can better prepare youth for the dual demands of foundational knowledge and practical skills. Policymakers must also ensure that microcredentials are accessible to those who cannot pursue higher education, thereby expanding inclusivity.

Real-time labour market intelligence is essential for effective programme design. ASEAN countries are already experimenting with labour-market information systems (LMIS) that link vacancies, skills requirements, wages, and training options. Singapore’s SkillsFuture, for instance, publishes public dashboards that map direct pathways from learning to work. Seamless integration between LMIS platforms and microcredential systems would allow programmes to stay aligned with market demand.

A Policy Priority for ASEAN

Integrating microcredentials into workforce strategies offers ASEAN governments a powerful lever to accelerate reskilling and upskilling at scale. But success depends on regulatory reform, institutional support, and careful programme design. International organisations such as OECD, Cedefop and UNESCO are already developing standards to ensure quality, portability, and stackability – frameworks ASEAN can adapt to local contexts.

Regional initiatives provide a useful guide. Singapore’s SkillsFuture and Indonesia’s Kartu Prakerja demonstrate how digital learning platforms and microcredentials can empower workers to pivot, adapt, and thrive in fast-changing labour markets. Scaling such approaches across ASEAN could help unlock the region’s demographic dividend – turning today’s youth unemployment challenge into tomorrow’s engine of growth.

This opinion piece was written by Dr Rashesh Shrestha, Economist, ERIA, and Dr Romora Edward Sitorus, Chief Economist, the Coordinating Ministry for Economic Affairs of Indonesia, and has been published in The Manila Times. Click here to subscribe to the monthly newsletter.

Disclaimer: The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the Economic Research Institute for ASEAN and East Asia.