Does Iran's Job Market Have a Bright Outlook?

Masoud Nili, special assistant to the President and head of the Higher Institute for Education and Research in Management and Planning, announced on September 2nd that the country needs to create 800,000 jobs annually. He also added, "We need inclusive growth and alignment of growth and employment... The feminization of labor market characteristics, the increase in the number of university graduates, and the younger demographic of the labor market are three main issues that we will face in the coming years." Nili states, "One of the most important changes is the influx of women into Iran's labor market, such that in the past three years, the share of women entering the labor market has surpassed that of men. This phenomenon has occurred while the demand side has not been prepared to cope with it." This estimate from the President's special assistant is somewhat optimistic because according to a recent labor market study, Iran needs 899,000 job opportunities annually, and if we trust the estimates of government officials, the Minister of Labor states in the same labor market study workshop that the Iranian economy can create a maximum of 500,000 jobs per year. Therefore, there is a gap of over 40% between the need for and the ability to create employment in Iran's labor market, which is currently unmet. If we also consider the number of unemployed and underemployed, estimated to be between 6 to 7 million, we will have a more realistic picture of the unemployment problem and employment deficiencies. If the relationship between employment and economic growth is as the President's special assistant states, Iran's economy could create jobs for new job seekers with an annual sustainable growth rate of 8%. However, the growth capacity of Iran's economy during the lifespan of the "Islamic Republic" has been close to 3%. This level of economic growth is less than half of what is needed to create job opportunities for newcomers to the labor market. Furthermore, not every economic growth can create sustainable employment; rather, this growth must be of a specific quality and achieved in certain industries. Rent-seeking and traditional industries that continue to survive due to state rent and oil subsidies cannot create sustainable jobs. Although there are indicators of Iran's economy exiting recession in some sectors, the high number of bounced checks, the existence of bank arrears, construction restrictions in the housing market, and the slow circulation of money do not indicate comprehensive and sustainable economic growth. According to forecasts, the economic growth rate this year will reach half of last year's growth. Such a trend does not paint a positive outlook for reducing unemployment. What are the fundamental reasons for the unemployment problem in Iran? Unemployment in Iran is structural, and several reasons explain this structural bottleneck. The failure of Iranian industries to enter the digital world, ineffective management, inappropriate regulations, and the non-competitiveness of Iran's economy are among the main reasons for the low entrepreneurial capacity in Iran's economy. Simultaneously, many economic units in Iran survive by receiving rent and state support, otherwise, they have no economic justification and cannot compete with foreign enterprises. Currently, while some jobs are created, others are lost, and most jobs created in the current labor market in Iran are in the service sector—albeit of the non-advanced type—which are highly unstable. Countries that rank high in job creation have expanding export markets and massive investments that replace traditional and old industries with new ones. Iran's economy does not have the capacity for massive domestic investment in these sectors. For this reason, the Minister of Labor states: "We must attract foreign investments and bring in 10 times the capital we have attracted in the past 10 years." Such an understanding of increasing foreign investment tenfold is exaggerated and not very realistic. Attracting foreign investment to Iran faces serious obstacles, especially considering the intense global competition for foreign investment. Global rankings of foreign investment attraction indicate that Iran, given its internal and external problems, is not among the countries prioritized by foreign investors. Which industries can create jobs for new entrants to the labor market? What can be inferred from Nili's statements is that job seekers in Iran's labor market will be young, educated, and female. The traditional labor market and economy of Iran, namely the agricultural sector and traditional industries, do not have the capacity to absorb these job seekers. The education and skills of these new labor groups are compatible with the service sector, particularly of the new type. According to international and domestic assessments, traditional industries, especially large industrial enterprises, are losing their job-creating capacity. Therefore, it is these new sectors in the economy that can create employment for the workforce whose training is also aligned with new conditions. These institutions are the newly established "micro start-ups" or microscopic companies founded by young entrepreneurs, often not confined to the national arena and active globally. The advanced technical services sector of the information industry is the playground for such enterprises, which is why they have competitive power. The high profitability of these enterprises can lead to economic growth, reinvestment, and employment. Given the aforementioned points, the question arises: which economic approach can help create job opportunities for new job seekers in Iran? Naturally, an approach that helps to open up Iran's economy will be successful in this matter, as historical and international experiences of other countries show that domestic demand can have a minimal impact on employment. Therefore, it is the presence in regional and international markets that can realize the dream of increasing sustainable employment. The high added value of presence in international markets leads to reinvestment and ensures job sustainability.