Inverse Relation of Higher Education, Employment Prospects

A study conducted for clarifying the connection between pay and higher education in Iran reveals that surprisingly people with university degrees have lower chances of landing jobs compared with those who do not pursue higher education.

According to a report by Financial Tribune’s sister publication Donya-e-Eqtesad Persian-language economic daily, the study showed that the higher the level of education, the more time it takes such people to find jobs.

The research, which draws on statistics and figures on the Iranian job market in the fiscal 2014-15, was conducted by Keyvan Eslami, a PhD candidate in economics at the University of Minnesota, and Mohammad Karimi, a lecturer at the University of Washington Tacoma.

The researchers point out that people with higher education receive 9% lower salaries in comparison with those without higher education.

What is worthy of notice is that pursuing higher education for men would mean a 10% decline in income throughout their lifetime, whereas for women, higher education leads to a 9% increase in income.

The research confirms that the unemployment rate among university degree holders is considerably higher than among non-degree holders. More specifically, the case is more severe for women than for men.

Another study by the High Center for Education and Research on Management and Planning—an entity operating under the Presidential Office—shows long-term unemployment at alarming levels, especially among college graduates and women.

This study, which analyzed data for the second quarter of the fiscal 2015-16, showed 40% of Iran’s jobless fall into the long-term unemployed category. The ratio is higher among women at 52%, while over a third of jobless men have been searching for work for over a year.

Notably, the problem is more acute among college graduates who are deemed more skilled, with 49.2% of unemployed graduates seeking a job for over a year. The figure falls to 33% for those without university degrees.

Back to Eslami and Karimi’s study, a glance at the annual average salaries of people in the fiscal 2014-15 shows that, for instance, an ordinary worker had an annual average salary of 33 million rials ($863) while a doctor received 71 million rials ($1,858) on average. Now the question arises whether it is economical for an ordinary worker to cover the costs of studying medicine and slog through seven years for becoming a doctor just to fill the 38-million-rial ($994) gap?

The duo’s study reveals that if a man chooses to obtain a bachelor’s degree, he would lose the present value of his income by 9.9%. However, the case is the reverse for women, as getting a bachelor’s degree would lead to an increase of 8.6% in the present value of their incomes.

Present value (PV), also known as present discounted value, is the value of an expected income stream determined as of the date of valuation.

The Ministry of Cooperatives, Labor and Social Welfare has recently launched the so-called Internship Action Plan with the stated aim of creating 150,000 jobs annually for university graduates. The plan targets university graduates of ages 23 to 32 in all majors as well as employers and centers willing to hire interns. The ministry will introduce job applicants to economic entities based on a set of specifications and priorities as well as the economic entities’ job vacancies.

The internship program will last from four to six months and the interns will be paid one-third of the minimum wage for the current fiscal year (March 2017-18), which stands at 9.3 million rials ($244.7) per month. Employers make no commitment to hire interns that complete the internship program, but a pilot plan conducted last year indicated that about 70% of the interns were employed by companies.

  Gravest Economic Challenge

Economists are unanimous that high unemployment is among the gravest challenges facing Iran’s economy.

The Statistical Center of Iran’s latest report on the country’s unemployment shows the rate in the first quarter of the current fiscal year (March 21-June 21) stood at 12.6%, registering a 0.4% rise compared with last year’s corresponding period and a 0.1% increase compared with the previous quarter.

About 3.36 million Iranians were unemployed this spring, including 10.6% of men (2.24 million) and 20.8% of women (1.11 million) of ages 10 and above. The unemployment rate was 14.4% for urban areas and 7.8% for rural areas. The youth unemployment rate, i.e. the proportion of population of ages between 15 and 29, stood at 26.4% in spring, indicating a 1.5% rise compared with last year’s corresponding period and a 0.9% increase compared with the previous quarter.

SCI put the first quarter’s labor force participation rate—the proportion of population of ages 10 years and above that is economically active either employed or looking for work—at 40.6% or 26.67 million people, which marks a 1.1% rise year-on-year and a 1.7% increase compared with last winter.

Men’s and women’s economic participation rates were put at 64.5% and 16.4% respectively. The rate was 39.8% for urban areas and 43% for rural areas. Part-time employees constitute 10.2% of Iran’s employed population. The services sector employed 49.8% of the Iranian population, whereas industrial and agricultural sectors provided 31.5% and 18.7% of the population with jobs respectively.

Although the country is said to be among the top five countries in terms of job creation, as it generates as many as 704,000 jobs annually on average, according to senior presidential advisor, Masoud Nili, the trend is largely negated by the sharp rise in the number of job-seekers.

“The huge wave of young people seeking employment was ignored by planning officials in the past and now President Rouhani’s administration is caught up in its thrall,” Nili said.

In the first decade after the Islamic Revolution of 1979, Iran experienced a baby boom and the population became larger and younger.

The Iranian population is now estimated to be about 80 million, with roughly 60% of ages 30 and younger.

There were 9.3 million infants and children in the country in the fiscal 2007-8, according to the National Population and Housing Census of that year.

“Ten years later, those children became teenagers and Iran had around 20 million students, which brought additional pressure on the Education Ministry,” the presidential advisor has been quoted as saying.

Slamming the mushrooming higher education centers in the past 10 years, Nili said the unemployed baby boomers were somehow put out of sight, thanks to their widening participation in higher education.

According to the economist, former governments kept a lid on unemployment rates since the growth of universities acted as shock absorbers, offsetting the impact of this vast labor force.

Nili puts the unemployment rate of graduates at 41% and said youth unemployment has had serious repercussions for the government.