Youth Unemployment: Causes and Factors

The Statistical Center recently announced in its latest labor market report that unemployment reached 10.6% in the last 12 months and 10.8% in the spring of this year. The first question that comes to mind is how accurate and reliable these statistics are. Definitions of employment and unemployment and methods of collecting labor market statistics in Iran have been a serious subject of dispute among domestic and foreign experts. The method of collecting labor market statistics is also a serious point of criticism based on statistical sampling and its generalization to the entire statistical population. Such a method is seriously criticized considering the heterogeneity of Iran's labor market. Moreover, the statistics published by the Statistical Center of Iran, especially those related to inflation and employment, have always been inconsistent with the statistics of the Central Bank, which adds to the doubts. Additionally, Iran's labor market has an informal sector that is not fully reflected in the statistics. Although officials and government institutions have declared the unemployment rate in Iran in recent years to be between 10% and 12%, this figure does not align with other statistics such as investment levels, economic growth rates, or the operational capacity of economic enterprises. Logically, with a decrease in economic growth and a decline in the current capacity of economic enterprises, the unemployment rate should increase. Finding such a relationship among Iran's economic variables is difficult. For the reasons mentioned, some differentiate between official and real statistics, believing that the real unemployment rate is much higher than the official government rate. However, if we take these statistics as the basis for our analysis, there is broad agreement that the unemployment rate among educated youth, especially women, is significantly higher than the overall average and exceeds it by more than double. According to the latest statistics from the Statistical Center of Iran, the unemployment rate for youth aged 15-24 shows that 25.0% of the active population in this age group was unemployed during the period under review. Thus, despite the relatively high literacy rate of the community's human resources compared to other countries in the region and the high average level of education, the Iranian economy, due to structural problems and being marginalized in the global economy, is unable to create jobs for these educated youth. This mismatch between the massive supply of labor and the limited demand for it—due to structural constraints—is not a problem that can be solved with short-term economic policies such as quick-return enterprises or increasing public sector demand. If the government intends to solve the cyclical unemployment problem—directly resulting from cyclical recession—by increasing its demand in the labor market, it should be expected to increase hidden unemployment—by creating false employment in government offices. Such an action could further incapacitate government agencies, increase current government expenses, and, given the government budget deficit, raise the risk of inflation. The unemployment problem of graduates relates to both the supply and demand for labor. Part of this problem is also due to the mismatch between higher education institutions and the labor market and its developments, as the function of education in Iran does not align with labor market needs. Additionally, the international isolation of Iran's educational system, particularly its higher education system, and credentialism are other issues that have diminished its capacity to produce practical professional skills. Iran's workforce must be able to compete in the international labor market. Simultaneously, if Iranian enterprises are to compete in the international market for services and goods, their workforce must also have the capability to compete in the international labor market. Each year, between 800,000 and one million new workers enter the market, while a significant number become unemployed due to recession. Therefore, the unemployment issue is much more complex than the inflation problem. According to five-year development plans and the vision document, to alleviate the acute unemployment problem in Iran, the growth rate must reach at least 8% and be sustained over a long period. The average economic growth rate in Iran over the past thirty years has not even reached half of this figure. Furthermore, in recent years, economic growth has not been sustained and has even regressed. Therefore, it is difficult to accept that the unemployment problem in general and the unemployment problem of young people and higher education graduates can significantly decrease in the short term within the framework of current structures and policies. The relationship between economic growth and employment is bidirectional. With economic growth, employment increases, and increased employment lays the groundwork for growth. Thus, economic growth is contingent upon solving the unemployment problem, especially youth unemployment.