How Will Youth Unemployment Be Affected During Sanctions?

Omid Ali Parsaee, head of the Statistical Center of Iran, states: "According to statistics, the youth unemployment rate has reached 27 percent, and the unemployment rate among university graduates has increased." This official noted that university graduates make up more than 40 percent of the total unemployed in the country. The head of the Statistical Center of Iran also mentioned: "Nearly 550,000 jobs have been created in the first nine months of this year, but we are behind the program and the country's needs, which is about 900,000 jobs." The first point to note here is that the accuracy and validity of the employment and unemployment statistics published by the Statistical Center are questionable for various reasons. For instance, the economic growth rate in the last six months of this year has significantly decreased compared to the average growth rate of last year, and this decline should have been reflected in the overall unemployment rate, but such a reflection is absent in the published statistics. Furthermore, the labor market statistics of Iran are incomplete and based on limited statistical sampling, which is generalized to the entire heterogeneous statistical community. Such methodological inefficiency will certainly affect the results obtained in the statistics. Therefore, even if the employment and unemployment survey results have not been manipulated, they are methodologically and statistically contentious, and thus the overall and youth unemployment statistics, considering the decline in economic growth this year, could be higher than reported. What explains the high youth unemployment rate? Various macroeconomic, microeconomic, and labor market factors explain this high level of unemployment—especially the widespread unemployment among youth and graduates. From a macroeconomic perspective, Iran's economy is exogenous, inward-looking, and government-oriented, with a young population and minimal growth. This means that such an economy has little capacity to create jobs and offer new employment opportunities, while at the same time, the demand for jobs—especially from the young workforce—has an increasing trend in the labor market. However, the problem is not limited to this. It should be remembered that discrimination in the labor market is one of the features of the current regime, and those who appear to align with the regime's criteria have better chances of being hired in various government institutions. Supporting this point, international assessments indicate that Iran's labor market is inefficient and characterized by widespread discrimination, with the government being the largest employer in Iran. Moreover, in conditions of declining economic growth and recession, which means reduced new investment, young labor enters the labor market more slowly and with greater difficulty, especially if their education and skills are not of high quality. Youth unemployment, according to official statistics, is more than twice the average unemployment rate in Iran. Such a rate is usually considered a warning sign and an indicator of a labor market crisis. Conversely, the employment creation rate for youth symbolizes economic dynamism and indicates how much an economic system can create jobs for newcomers to the labor market through increased investment and the establishment of new industries or economic units. The youth unemployment rate exceeding 27 percent is higher than the average youth unemployment rate in previous years and symbolizes that the economy's capacity for entrepreneurship for new labor is slowing down. Employment and unemployment rates are chain-linked to many macroeconomic variables such as economic growth, short-term and long-term investment, and finally, the operational capacity and production of manufacturing workshops. The positive process of these economic variables is a factor in increasing employment and thus reducing unemployment. The first variable that should be emphasized is the investment and economic growth rate. According to the latest report from the Statistical Center of Iran, the growth rate in the industrial and agricultural sectors has decreased, and thus the economic growth rate in the first half of this year shows a significant decline compared to last year. Additionally, manufacturing workshops, especially in the automotive sector, are witnessing a significant decrease in production, indicating a reduction in production capacity in these units. Based on previous five-year program proposals and the 20-year outlook document, the condition for reducing unemployment in the Iranian economy is a sustainable economic growth of about 8 percent per year. However, in recent years, not only has such growth not been observed, but the economic growth rate in Iran has fluctuated significantly over the past six years, failing to reach below 8 percent. Simultaneously, the number of job seekers and unemployed has increased. The current high accumulated unemployment rate confirms this process. What is the outlook for youth unemployment next year? The World Bank, in its latest assessment of the Iranian economy, predicts a negative growth of 3.7 percent and an inflation rate of 31.2 percent for the year 1398. Although there is a margin of error in any prediction, the latest statistical evidence published by the Statistical Center of Iran also confirms the decline in economic growth, particularly in the industrial and agricultural sectors in the first six months of this year. There are various indications that this trend will continue next year. For instance, it is natural that with the decline in oil revenues in the second half of this year and next year, the engine of Iran's government-oriented economy, which derives its vitality from oil revenues, will slow down. In this context, due to the effects of oil sanctions, both long-term and short-term investments, and consequently the economic growth rate, will decrease. If sanctions and issues related to banking cooperation between Iran's banking system and international banks affect the import of machinery, raw materials, intermediate goods, and semi-finished products, it is natural that the activities of economic units will decline, and these units will have to reduce their workforce to survive. With the increase in unemployment, the average purchasing power and the level of public demand will also decrease, which will even affect units that produce or supply basic and essential goods, reducing their sales and negatively impacting their employment rates. With the decline in public demand, unemployment will develop in a chain reaction, and so-called unemployment will bring about more unemployment. In this context, over 40 percent of Iranians are seeking jobs, and according to a ministry official, 20,000 PhD graduates are unemployed.