Tuesday, January 10, 2012

Baghdad Still Looking Towards Government Jobs To Solve Unemployment In Iraq


Iraq suffers from both high unemployment, and a large and inefficient government. This year Baghdad announced a program to address the former, by creating more public sector jobs, while also promoting business. Iraq has failed at most of its efforts at encouraging the private sector, so all that is likely to come of this plan is an even larger government that will add to the country’s problems.
Iraqis looking for work (Radio Free Iraq)
Iraq has one of the of the highest unemployment rates in the Middle East. The Ministry of Planning recently claimed that it had dropped from 15% in 2008 to 11% in 2011, while joblessness amongst the young went from 28% to 23%, based upon a survey conducted by the government and the United Nations. Unofficially, unemployment is estimated to be at 30%. The poor job market was reflected in a survey conducted by Abu Dhabi’s Gallup Center at the beginning of the year, which found that those who thought it was a bad time to look for a job increased from 41% in February 2010 to 65% in March 2011. Add to that the fact that within ten years, Iraqis aged 15-64 will become the largest part of the population, and that sector adds around 450,000 new workers to the job market each year, and it should be no surprise that young people are starting to contemplate leaving the country for better opportunities elsewhere. That’s a daunting problem for any country, and will only get worse if something isn’t done to address it.

The government wants to reduce the jobless rate to 5% through a combination of public jobs, and growth in the private sector. That involves creating 3 million government positions by 2014, and providing loans to businesses. Baghdad wants to hire 59,000 new workers in 2012 for instance, 18,000 at the Health Ministry and 15,000 at the Education Ministry. On the other hand, the credit program has yet to be passed by parliament. Although Iraq has consistently talked about creating more opportunities for entrepreneurs and foreign companies it has consistently failed at doing that. The World Bank for example, ranked Iraq 164 out of 183 in ease of doing business, because of the excessive regulations, fees, and time it takes to open and run a company there. Small and micro sized businesses have grown in the country, and more foreign investors are arriving due to the improved security, but that’s despite the government, not because of it.

A Planning Ministry official warned that relying upon the government to solve unemployment would do more bad than good, but that’s what Baghdad is doing. Because its plans for more capitalists has largely failed, coming up with more public jobs will be all that will immediately come of this plan. Many of these positions are useless ones, created simply to keep people off the streets. At state-run factories for instance, it’s common to have almost twice as many employees as needed. For instance, a reporter found that at the General Company for Leather Industry, only around 2,400 of the 4,170 workers there actually did anything. That high percentage of idleness is probably duplicated in the government bureaucracy as well. It’s for that reason that Iraq has one of the largest public sectors as percentage of population in the world. The government is already the largest employer in the country with around 4 million workers, a number that has doubled since 2005. Official offices provide 43% of all jobs in the country, and 60% of full time work, compared to 33% working in the private sector. That places a huge burden on the budget, nearly 60% of which in 2011 was for salaries and pensions. Kurdistan is no better with 60% of full time work being provided by the government. This distorts the labor market, because public jobs provide better pay, more security, and pensions, compared to ones in the business world, drawing away workers. That’s why job programs will not be the answer to Iraq’s problems as it just adds to underemployment rather than solving the issue. Not only that, but the government simply can't create enough positions to seriously address the large number of people out of work.

Iraq must do something about the unemployment rate, and the increasing number of young people who enter the working world each year. Without solutions, the country will have a bleak future as the population will become increasingly discontent, which could increase existing tensions. Baghdad’s plans for jobs and loans wouldn’t be so bad if it was more even, but because boosting the private sector is not a real priority right now, all that will become of this program is more idle workers at government agencies. That takes away much needed funding for investment in infrastructure and other development projects as more than half the budget is taken up paying all these past and present public workers. This is apparent to some officials, but until the leadership of the country gets behind diversifying the economy nothing will change.

SOURCES

Ali, Omer, “Public employees’ wages stagnate in 2012,” AK News, 12/12/11

Gutman, Roy, “Dysfunctional banking sector helps keep Iraq in economic shambles,” McClatchy Newspapers, 12/23/11

Hassan, Rebin, “Unemployment hits one million,” AK News, 12/11/11

Ibrahim, Haider, “Incentives for foreign companies to hire domestic workers,” AK News, 11/5/11

Ideas Synergy, “Private Sector in Iraq: Creating Jobs and Enhancing Sustainable Development?” Iraq Insights, July 2011

IRIN, “IRAQ: Youth unemployment driving emigration,” 7/20/11

Kami, Aseel, “FEATURE-Iraq’s car factory shows road ahead for industry,” Reuters, 7/28/11

Rashid, Hassan, “Iraqi Ministry of Planning: low rate of unemployment among young people,” Radio Free Iraq, 12/8/11

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 10/30/11

Unger, Christopher, “Planning Ministry promises to fight poverty – again,” AK News, 10/17/11

World Bank Group, “Economy Profile: Iraq; Doing Business: November 2011

2 comments:

Aymenn Jawad Al-Tamimi said...

Joel, I have always wondered why the Iraqi government does not turn towards a rearmament policy as a means to reduce unemployment in part. After all, the country is still incapable of defending itself from foreign threats, and could do with more manpower in intelligence, artillery and the air-force.

Besides that, I agree on the need to expand the private sector.

Joel Wing said...

There's already enough people in the security forces, around 900,000. That's not the answer, even in the short term.