Iraq’s economy is producing fewer jobs today than it did in
the recent past. At the same time, the population is growing and becoming
younger. This creates a huge dilemma for the country to meet the expectations
of its populace. The government has tried to step in using its growing oil
revenues to produce more work, but it can’t meet demand. Luckily private sector
employment is picking up, but many Iraqis turn down that opportunity for the
civil service, because it offers better pay and pensions. There’s the added
issue of Iraq importing large numbers of foreign workers. These mirror
historical trends, and highlight the structural problems Iraq faces in trying
to develop.
After 2003, Iraq witnessed a large growth in employment,
which then contracted. From 2003-2007 an average of 793,000 new jobs were created per year. That fell to only 222,000 jobs per annum from 2005-2010.
That fails to meet the expanding population. For example, around 250,000 new people entered the labor market from 2007-2011, and that’s supposed to increase
to 290,000 from 2012-2016. Iraq needs to develop its private sector to meet
this growing demand. That’s happening to an extent after a large drop, but the
government still dominates jobs. In 2005, 241,000 new government workers were
added compared to 646,000 private ones. That reflected the large number of
reconstruction contracts, and work offered to service the Americans. The next
year that was reversed when 759,000 new public jobs were offered, while the
private sector lost 613,000. The cause was a surge in migration from rural to
urban areas, which cut agricultural work, along with electrical shortages that
hindered businesses, and led to layoffs. The civil war also took off that year
closing down large sections of cities due to violence. It wasn’t until after
2008 that private sector opportunities really began growing again going from
31,000 to 316,000 by 2010. No new government jobs were offered that last year, because
it took so long to form a new ruling coalition after parliamentary elections.
The result is that the percentage of workers in the private sector is finally
growing, going from 16% in 2004 to 31% in 2010. Some of these issues continue
to this day with large numbers of people moving to the cities. Many head
for Baghdad or Irbil only to find disappointment. As Labor Minister Nassar
Rubaie warned in 2012, the economy cannot generate enough employment, because
the private sector is too small, and the large government presence is
distorting the market. Ironically, he advocated for the public sector to
employ more people as the immediate solution. Even with soaring oil revenues,
Baghdad and Irbil have failed to provide enough work to meet demand.
Job Creation In Iraq
2005-2010 Public vs. Private Sector
2005 241,000 public, 646,000 private
2006 759,000 public, -613,000 private
2007 148,000 public, 31,000 private
2008 81,000 public, 98,000 private
2009 179,000 public, 130,000 private
2010 0 public, 316,000 private.
% Of Iraqis In Public
And Private Sector
2004 5.5 mil jobs total, 84% public, 16% private
2010 7.5 mil jobs total, 69% public, 31% private
The situation is made worse by the fact that many Iraqis are
not skilled, and employers are turning towards foreign laborers to pick up the
slack. Many workers don’t have the education or experience to work in the
private sector. That leads them to look for employment with the government,
which pays better, and offers pensions. Many positions don’t require real work
either, and can be acquired in return for votes. Workers from other countries
are being imported to fill this gap. (1) There are no exact figures for how
many foreign laborers are in Iraq, but they are believed to number in the tens of thousands. There are large amounts of illegal ones as well. Countries like the Philippines, India, Bangladesh, Sri Lanka, Nepal, Egypt, and
Sudan have all sent people to Iraq. In 2011, the Kurdistan Regional
Government (KRG) brought in 3,000 foreigners, (2) and had over 17,000 registered in total. Foreign workers not only bring down wages, but take
away opportunities for Iraqis. Since so many people look towards the government
for jobs, because of the incentives it offers, many businesses have turned
towards foreigners. At the same time, the lack of an educated workforce is
leading even the government to bring in non-Iraqi workers for things like
nursing. Once again, the negative effects of the large public sector are being
felt.
Iraq has suffered through similar problems for decades. When
oil profits began to take over, so did government jobs. The number of public
workers went from approximately 20,000 in 1958 to 580,000 in 1977 to 821,000 in
1993. That didn’t include the military, which also saw a major expansion
under Saddam Hussein. The migration to the cities has been a long-term trend as
well. In 1947 66% of the population was rural, but by 1977 it had switched to
64% urban as people moved to the cities where there were greater opportunities.
Starting around the same time, Iraq began bringing in foreign workers as the
economy began expanding, and there were labor shortages during the Iran-Iraq War. Egyptians became a major part of the workforce from the 1970s until
the Gulf War when they left.
Iraq is projected to be one of the fastest growing economies
in the next few years. This is based upon the development of the country’s oil
and gas industries. Those aggregate numbers hide the major structural problems
that it faces. While all the development plans call for diversification and
promoting a market economy, in practice Iraq has become more oil dependent, and
the state has expanded its influence. To add to the oil curse, Iraq has
suffered from decades of wars and sanctions, which have devastated its social
services such as education, which has left many Iraqis unprepared for the work
place. As a recent United States Agency for International Development study
pointed out, Iraq is at a crossroads. It has the potential to invest its vast
oil wealth into reforming the economy, and promoting the private sector or it could
continue on its current state-run path, which will perpetuate its structural
inequalities. Shot sighted decisions by the nation’s leaders who are more
concerned about holding onto power through their vast patronage networks than
the health of the economy will likely mean that Iraq remains an incredibly rich
country in resources, with a relatively poor and unemployed populace.
FOOTNOTES
1. Saadi, Salam, “Erbil’s
Development Not All Positive,” Rudaw, 1/12/12
2. Hussein, Nabard,
“Conflicting Unemployment Rates in Kurdistan,” Rudaw, 3/7/12
SOURCES
Agence France Presse, “Iraq pledges curbs on foreign
labour,” 2/25/12
Ali, Arkan, “In Kurdistan Region,
Plenty of Jobs That No One Wants,” Rudaw, 5/15/13
Booz & Company, “Iraq Integrated National Energy
Strategy, Appendix Part D – Socio-Economic and Environmental Baseline,” 9/25/12
Fattah, Zeiki, “Iraq’s Faltering Economy,” Sada, 2/2/12
Hussein, Nabard, “Conflicting Unemployment Rates in
Kurdistan,” Rudaw, 3/7/12
Kadhem, Adel, “Iraq to reduce unemployment by half by 2014,”
Azzaman, 2/18/12
- “Thousands of foreigners in Iraq without proper
documents,” Azzaman, 3/4/12
Al Khafaji, Isam, “Iraq: Mixed Opportunities, Messy Outlook?
(Part I: The Road To Entrapment),” Economy Watch, 2/8/12
Mahmoud, Nawzad, “Growing Demand for Foreign Domestic
Workers in Kurdistan,” Rudaw, 9/30/12
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sweet, bitter dream in Iraq,” Xinhua, 7/12/12
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Sassoon, Joseph, Saddam
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