Former U.S. Economic Adviser Warns Of Impending Jobs Crisis In Iraq

In the November 16, 2009 New York Times, Frank Gunter, the former senior civilian economic advisor to the U.S. military in Iraq warned of an imminent job crisis unless Baghdad liberalized its economy. He wrote that Iraq is facing the dual challenge of a lack of jobs and increasing numbers of people entering the labor market. The July 2009 Special Inspector General for Iraq Reconstruction’s report put unemployment at 17.3% and underemployment at 29.4%, for a combined figure of 46.7%. A January 2009 United Nations study found that young people were hit the hardest with men between 15-29 years of age facing 28% unemployment. They were 57% of the unemployed overall in the country. The cause is that the government is the largest employer in the country, constituting 43% of all jobs and 60% of full time work, and it prefers older workers. This was a major concern for Gunter because 250,000 young people enter the labor market each year, and are discriminated against by the largest employer. Not only that, but the drop in oil prices led to a hiring freeze in 2009.

The other part of the problem is the small size and limitations on the private sector. Outside of farming, there are few jobs available from businesses. It is hard to start an enterprise, get the licenses from the government because of complicated laws, slow bureaucracy, and costs, get credit, and trade internationally. That’s the reason why the World Bank has ranked Iraq 153 out of 183 countries for ease of doing business, placing it at the bottom of the region. This forces many businesses to pay bribes to government officials or participate in the underground economy. Either way, the private sector is not big enough to address the employment demands of the nation.

Faced with these two problems, Gunter warns that by next year Iraq’s unemployment rate will begin climbing rapidly, and this might lead to social unrest. He warns that militants have always taken advantage of poor men offering them cash to carry out attacks. Criminal gangs are also very active in Iraq, and young unemployment people might be easy recruits for them as well. The lack of opportunities will also add to the already high levels of discontent towards the government. Gunter recommends simplifying Iraq’s commercial code so that it is easier to establish businesses. There have been few moves in this direction, other than attempts to attract foreign investment with limited success. Instead Iraq maintains a state-run economy with a slow, inept, and corrupt bureaucracy that is largely unable to meet the needs of its people.

SOURCES

Gunter, Frank, “Liberate Iraq’s Economy,” New York Times, 11/16/09

Inter-Agency Information and Analysis Unit, “Iraq Labour Force Analysis 2003-2008,” United Nations Office for the Coordination of Humanitarian Affairs, January 2009

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/09
- “Quarterly Report and Semiannual Report to the United States Congress,” 10/30/09