Tyranny of numbers

Rising unemployment and joblessness, 2006-2011

Posted in Employment, General by Djavad on July 21, 2013

The performance of the outgoing Ahmadinejad administration is in large part tied to its record of job creation during his tenure.  Just before the presidential election, Professor Masoud Nili of Sharif University, one of Iran’s most prominent economists, created a stir when he criticized, on national television, this record.  His claim of near zero net new job creation between the census years of 2006 and 2011 was considered controversial but it should not have been because he was basically reading the numbers off the census tables.

According to the census tables published by the  Statistical Center of Iran (SCI), the number of employed persons in 2011 was 20.55 million compared to 20.48 million in 2006, a mere increase of less than 70,000 in 5 years, or 14,000 jobs per year.

A fair point would be to focus on older workers because during this period universities, real and fake, expanded their enrollments, absorbing many young people away from, presumably, very low-paid jobs.  The number of child workers actually decreased, which is a good thing, as they probably went to school instead.  To reduce the effect of schooling, let us look at older workers: the number of employed persons aged 20-64 increased by 634,000, and for those aged 25-64 by 1.34 million.  These figures give a more positive impression than the decline of 70,000 we get for all ages, but they are still well below the rate of job creation in the past and the potential of Iran’s economy.  The other caveat to the more positive picture is that not everyone going to school is doing so out of choice.  Some do so because they see no job prospects.  The jobless rate, which allows for going to school for older workers to be some sort of unemployment, was actually up for all ages (see below).

Let us first look at unemployment rates for different age groups.  Previously, using survey data, I have shown that unemployment, especially for youth, has been rising (for example here).  Census numbers say the same thing.

Below are two graphs that tell the main story behind the deterioration of the labor market during 2006-2011 for men and women of all age groups.

unemploymentbyage_men unemploymentbyage_women
Source: Statistical Center of Iran, censuses of 2006 and 2011.

These graphs show several salient, if not, fixed, features of Iran’s labor market: unemployment rates of youth is higher than adults, and women higher compared to men (except for older workers).  They also show something new and shocking, that unemployment has increased for all ages, including older workers, between the two census years.  This is unusual because during 1996-2006 unemployment for adults over 30 had held steady, and for some age groups it had even declined. But then the economy had created about 6 million jobs, a vastly superior performance than recent years.

Rising youth unemployment is not very surprising because the revolution baby boomers have been entering the labor market at rates 4-5 times the rate older workers retire.  What is new and shocking is the increase in unemployment of older workers.  This increase is obviously bad for older workers, but it is especially bad for younger workers.  Consider male workers aged 25-29 in 2006, many of whom waited several years to get a job.  In the past, the wait would be rewarded by a job as they entered the low unemployment ages of 30+.  But not for this group, because by 2011 when they reached their early 30s, the unemployment rate for men 30-34 years old had jumped from 6.6% to 8.9%. If you include discouraged workers the picture worsens still.  This means that for young men hope as well as their actual condition declined in 2006-2011.

These findings are especially worrying because in the last several years the size of the cohorts entering the labor market has been diminishing.  Yes, Iran’s youth bulge is passing by while youth unemployment is yet to abate because the ability of Iran’s economy to create jobs has also diminished.  Who or what is to blame is a longer story to  pursue another day.

Turning to joblessness, the jobless rates (defined as the ratio of all people without jobs to total population, or one minus the employment rate) has also increased over the five-year period in question, as these graphs below show.

joblessbyage_men joblessbyage_women

Jobless rates are high for young and old people because most young people are in school and most older ones are retired.  Increase at the two ends can sometimes be a good sign, if the young stay in school longer and the old can afford to retire earlier.  But nothing of the sort has been taking place in Iran.  The increase of jobless rates for the middle age groups is the sure sign that the economy has been on the decline.

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8 Responses

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  1. […] inflow of oil revenues opened a floodgate to cheap imports that hurt local production, causing jobless growth. Thanks to a more realistic value for the rial, the local production of most consumer goods has […]

  2. Reading Rouhani « LobeLog.com said, on October 9, 2013 at 8:16 am

    […] inflow of oil revenues opened a floodgate to cheap imports that hurt local production, causing jobless growth. Thanks to a more realistic value for the rial, the local production of most consumer goods has […]

  3. William said, on August 23, 2013 at 10:00 am

    How can we trust the numbers that the SCI puts out? Also, Will removal of intn`l sanctions do anything for youth unemployment – or what would the economy need to subjugate theses consistently high youth unemployment figures?

    • Djavad said, on August 23, 2013 at 10:37 am

      Sometimes. SCI may at times massaged the unemployment data to get a positive message out but as long as they provide the raw data, such as the 2% samples I use here, I trust their numbers. No one knows how to fudge survey data when you have so much of it — annual labor force surveys, expenditure surveys and others. They al give very similar results so I have confidence in the SCI surveys I use but not always in their press releases.

  4. Baddu said, on August 14, 2013 at 8:58 pm

    Isn’t there some contradiction when some of these writers claim that sanctions are never effective in bringing about policy change and at the same time they admit that the nation has wisely changed course by electing pragmatists to office?

    • Djavad said, on August 23, 2013 at 10:42 am

      Yes, there is a contradiction here. Sanctions have shown Iranians and their politicians how the global economy works and how exposed they are to it. The question is now that they wise up to this fact, how will they change their behavior, get along (taamol) with the big powers that rule the global economy (no so flat after all), or will they gear up for more autarky. Right now they are trying the first path. I am not sure how long they will stay on it if the US keeps thinking that better deals are ahead with even more sanctions. This is where the hawks in the US may be wrong in thinking that sanctions and Iranian responses are monotonic and therefore predictable.

  5. Baddu said, on August 3, 2013 at 9:35 am

    I wonder if you have had the time to check out important lead articles of Donyaye Eqtesad regarding ‘civil campaign against sanctions’, appearing the last few days : July 27, 31 and Aug. 3. E.g.

    http://www.donya-e-eqtesad.com/news/743944/

    Would you be kind enough to comment.

    • Djavad said, on August 6, 2013 at 2:01 pm

      Thank you for drawing my attention to this lead article in DE. I am aware of the call for civil action against sanctions by prominent Iranian economists. I agree with the thrust of all these sentiments. As you may know I have been writing against sanctions for a while (starting I think with this short article (http://belfercenter.ksg.harvard.edu/files/Salehi-Isfahani_DI-Policy-Brief_Iran-Youth.pdf). I think the big impact would be on Iranians here who oppose sanctions or would like to oppose them but fear the reaction of their more radical dissidents abroad (many supported sanctions or said very little against it).

      I am less optimistic about the impact of such a movement on those who impose sanctions, for two reasons. First, the signatories are likely to be unknown in the West, and this would limit the impact of the movement on Western politicians and the public. Second, a related point, the West is suspicious of a movement inside Iran that is not in opposition to the Iranian government, so they may view the call to reduce sanctions as a way to improve the bargaining position of the Iranian government.


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