Tuesday, August 20, 2013

Iraq’s Unemployment Rate Much Worse Than Officials Say

Iraq’s unemployment rate has seen a slow and steady decline. Baghdad likes to claim that its policies are the cause for this drop since it provides thousands of public sector jobs each year. People have always criticized the official statistics however, and now a new study by Booz & Company has found that the reason for the decrease is not the creation of new employment opportunities, but rather large numbers of Iraqis giving up looking for work. That affects the young the most, which is the largest and fastest growing group within the population. That could cause severe problems down the road with more social unrest and ready recruits for militant groups unless the economy is restructured.

The jobless rate in Iraq has flat lined for the last couple years, but is far lower than what it was in 2003. After the fall of Saddam, unemployment was at 25%. It then sharply dropped to 17% by 2005, but then leveled off, only improving to 15% by 2008. In February 2012, the Planning Ministry said that unemployment went down 3% to 12%, and the next year announced that it was at 11%. In March 2012, the Kurdistan Regional Government (KRG) claimed that its jobless rate was 14%, (1) but there are no reliable numbers for the north. Iraq’s Labor Minister Nasser Rubaie told the press that he would like to cut unemployment to 7% in the coming years. By region, Kurdistan is doing worse than the rest of the country. From 2003 to 2008 the number of people out of work went from 33% in Baghdad to 12%, compared to 29% to 17% in the center, and 24% to 17% in the south. In Kurdistan however, unemployment went up from 8% to 12%. That increase was due to the labor force growing faster than jobs being created, and puts a damper on all the talk of the KRG being the more prosperous part of the nation. That problem is affecting the entire country though, especially for the young, who suffer from the highest jobless rate. In 2008, 29.9% of people 15-24 were out of work, followed by 14.5% for 25-34 years olds, 7.2% for 35-44, 5.0% for 45-54, 4.9% for 55-64, and 5.3% for those 65 and older. The lack of opportunities for those just entering the labor market is increasing as the population is growing and getting younger. Iraq’s median age is only 20, and 64% of the population is 24 years or less. That led to around 250,000 people entering the labor market per year from 2007-2011, and that’s expected to increase to 290,000 per year from 2012-2016. The result is that there are around 500,000 unemployed university graduates according to Deputy Premier Salah al-Mutlaq, and 550,000 young people out of work in 2013. If Iraq can’t create jobs for its growing population that could lead to increased instability. Already, in the last few years people have taken to the streets over corruption, the lack of services, and employment opportunities. Some young men could also be drawn to extremist groups out of frustration, and for money. To add to the problem there will not be many retirements soon given the country’s age distribution. This will only increase the pressure upon the authorities to improve the economic situation, something they are ill suited to do.

Iraq’s Unemployment Rate 2003-2013
2003 25%
2005 17%
2008 15%
2012 12%
2013 11%

Iraq’s Unemployment Rate By Region 2003 vs. 2008
Baghdad 33% vs. 12%
Central Iraq 29% vs, 17%
Southern Iraq 24% vs. 17%
Kurdistan 8% vs. 12%

Iraq’s Unemployment By Age 2008
15-24 yrs old 29.9%
25-34 yrs old 14.5%
35-44 yrs old 7.2%
45-54 yrs old 5.0%
55-64 yrs old 4.9%
65+ yrs old 5.3%

The government’s response has been to promise more public jobs each year, along with talking about developing the private sector, but that has not worked out. For instance, the 2012 budget was supposed to create 58,000 new governments jobs, (2) and parliament’s finance committee wanted to add 42,000 more. The next year, 100,000 more public sector jobs were to be included. Likewise, the Kurdish authorities claimed they hired 25,000 in 2011, and wanted to recruit 40,000 more in 2012. Iraq is also supposed to be promoting its private sector and attracting more foreign investment. The country has struggled to do this due to its difficult business environment, and oil sector that dominates the economy. Most companies also contract out with the government, which is corrupt and often slow to complete work. The problem, as Labor Minister Rubaie admitted is that there are structural problems with the Iraqi economy that prevents it from generating enough opportunities for the population. The number of government employees has more than doubled since 2003, and the private sector has also picked up recently, but that’s still not enough. In fact, the rate of job creation has dropped by two-thirds since 2005. From 2003-2005 an average of 793,000 new jobs were created, compared to just 222,000 from 2005-2010. That’s below the number of people entering the labor market currently. How then has Iraq’s unemployment rate continued to decline?

Booz & Company did a study of the Iraqi economy recently, and found that the reason why the jobless percentage has gone down is because more and more Iraqis have given up looking for work. From 2003 to 2005 the unemployment rate was almost cut by a third due to a 33% increase in jobs. Concurrently, the labor force participation rate went from 43.5% in 2003 to 49.0% by 2005. Since then, the rate has gone down to 47.8%. At the same time, the percentage of people who were discouraged or only marginally employed went from 2% in 2006 to 33% in 2008. A 2008 survey found that 24% of those questioned thought there were no jobs available, 20% were in school, in training, or stayed at home, 15% were tired of looking for work, 12% were ill or too old, 10% said they could not find a suitable job, 8% didn’t know how to look for employment, and 6% either were not qualified or were waiting on work. When Booz & Company added the discouraged workers it found that the unemployment rate in Iraq was 50% since 2008. Immediately after the U.S. invasion there were plenty of places to find work including with the rebuilding government and security forces, along with all the contractors that came to the country for reconstruction. Those opportunities seemed to dry up when the civil war took off, and have not returned since then. That is because the economy suffers from the oil curse where the non-energy sector is underdeveloped. The large petroleum revenues also leads the government to try to provide most of the work, which can never adequately meet demand. In fact, now the situation might be getting worse as security is again deteriorating.

Iraq’s Labor Force Participation Rate 2003-2010
2003 43.5%
2004 47.5%
2006 49.0%
2007 47.8%
2008 47.0%
2009 47.5%
2010 47.8%

Iraq’s Reasons For Iraqis Not Working 2008
24% thought there were no jobs
20% in school, training, or at home
15% tired of looking
12% illness, old age
10% could not find suitable work
8% didn’t know how to look for a job
6% not qualified
6% waiting to join a job

Iraq’s Official vs. Expanded Unemployment Rate 2006-2010
2006 17.6% vs. 21.5%
2007 16.4% vs. 37.2%
2008 15.2% vs. 50.2%
2009 15.3% vs. 50.1%
2010 15.0% vs. 50.0%

If violence went down, and more importantly, the entire economy was developed more people would likely be looking for work. That’s impossible right now as the oil industry continues to dominate other businesses, and both the central and regional governments want to expand their role as well. Instead, the authorities will brag about the official jobless rate going down, and add to the public sector each year. Out on the street however, the level of frustration and cynicism is growing, as the people know what the real employment situation is. Iraq could see continued and growing protests, and more young men joining the insurgency as a result. What needs to be done is restructuring the economy so that the country can overcome the oil curse. Iraq’s authorities are aware of this problem, but because the political class only thinks short-term and about their own interests, they will continue on the current path instead of dealing with the serious structural problems that beset the nation. They are sacrificing the future of the country for their own gain as a result.


1. Hussein, Nabard, “Conflicting Unemployment Rates in Kurdistan,” Rudaw, 3/7/12

2. Ibrahim, Haider, “Finance Ministry discusses adding 42,000 jobs to the 2012 budget,” AK News, 1/16/12


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