Iraq's unemployment crisis: A European solution?

Shafaq News

27-02-2025

Shafaq News/ Each year, approximately 350,000 graduates enter Iraq's labor market, only to face an economy constrained by limited job opportunities. With an overstretched public sector and an underdeveloped private sector, the unemployment crisis raises significant concerns about long-term economic sustainability and social stability.
Iraq's Unemployment Crisis
Iraq's economy is heavily reliant on oil, with petroleum exports accounting for over 90% of state revenue. While this generates substantial income during high oil price cycles, it also renders the economy vulnerable to price fluctuations. The lack of economic diversification limits job creation in vital sectors such as manufacturing, agriculture, and technology.
Economic researcher Ahmed Eid described the Iraqi economy as 'stuck in a cycle of oil dependence, making it highly vulnerable to global price swings and limiting job creation in other sectors.'
As a result, the unemployment rate remains alarmingly high, standing at 16.5% overall, with youth unemployment reaching 36%. According to the Parliamentary Committee on Labor, Social Affairs, and Displaced Persons, nearly 15 million Iraqis are unemployed.
'The government cannot absorb these numbers, and the private sector remains stifled by bureaucracy and weak infrastructure,' Eid told Shafaq News.
Another factor behind the high rate of unemployment is the dominance of the public sector in Iraq's labor market places a significant burden on state finances. According to the 2024 census results, 67% of the workforce is employed in the public sector.
'This overreliance on public-sector employment has marginalized private industries,' MP Jawad Al-Yasari explained to Shafaq News. 'It forces many Iraqis to seek government jobs instead of contributing to the development of other sectors.'
Another pressing issue is the mismatch between education output and labor market needs. Between 2015 and 2023, Iraqi universities and institutes produced over 1.1 million graduates, yet fewer than 200,000 secured public-sector jobs within the same period. This suggested an employment entry rate of less than 20%.
Economist Karim Al-Hilu argued that 'no government can single-handedly employ 350,000 graduates annually,' emphasizing the importance of aligning education with labor market demands.
The lack of diversification means Iraq is missing out on opportunities in key sectors such as technology, manufacturing, and tourism. 'Iraq has yet to leverage emerging industries such as technology, which could employ skilled graduates if supported by government policies,' Eid noted.
Once a key pillar of Iraq's economy, agriculture has declined due to outdated policies, insufficient financing, and limited technological investment. Eid pointed out that 'similar issues plague the banking and financial sectors, where structural weaknesses prevent them from effectively supporting entrepreneurs and small businesses.' These barriers further hinder private-sector growth, limiting employment opportunities for graduates.
Reforms and Economic Revival
In response to these challenges, economic experts and policymakers advocate for structural reforms aimed at revitalizing the private sector. One notable step is the Retirement and Social Security Law enacted in 2023, which extends protections to private-sector workers, offering retirement benefits and incentivizing employment outside government roles.
Speaking with Shafaq News, MP Ibtisam Al-Hilali stressed the importance of 'reviving the private sector by fostering investment, modernizing factories, and supporting entrepreneurship.' She clarified that parliamentary support for the Social Security Law has encouraged some graduates to consider private-sector jobs.
'Parliament intends to take further steps to boost private-sector employment,' she said.
To further reduce public-sector dependency, MP Al-Yasari proposed additional measures, including implementing a 'one job per person' rule, banning dual employment, and prohibiting government employees from taking secondary jobs such as taxi driving.
'Restructuring the economy and supporting the private sector through legislation that protects investors and provides a stable work environment is essential,' Eid underscored.
The researcher explained that without such reforms, many Iraqi graduates will face limited employment options, increasing migration tendencies, and leading to significant losses in human capital.
A European Blueprint for Reform
Al-Hilu suggested that Iraq can learn valuable lessons from European economies, where employment is more evenly distributed between the public and private sectors. In Europe, only 15-20% of jobs are in the public sector, while 80-85% are in the private sector.
'Governments there have invested in industries and services that offer competitive wages, job security, and social benefits, making private employment attractive,' Al-Hilu told Shafaq News.
A key distinction between Iraq and European labor markets is the availability of social protections. Al-Hilu noted that 'Iraqi youth working in the private sector lack economic and social assurances,' which discourages them from seeking private-sector employment.
'Many Iraqis who migrate to Europe do so because of the security and benefits that private employment offers, including social security and pensions,' he remarked.
A critical element of the European model is vocational education. 'Unlike Iraq, where university degrees dominate, European countries prioritize vocational training to align education with labor market needs,' Al-Hilu explained, 'This reduces unemployment and ensures a steady supply of skilled workers.'