Editor’s Note: The Middle East Youth Initiative has released a new study that explores youth transitions in Iran in depth, exploiting longitudinal data to track youth preferences and outcomes as they move from the education system into the labor and marriage markets. Diana Greenwald interviewed coauthor Djavad Salehi-Isfahani to discuss some of the paper’s main findings.
Middle East Youth Initiative (MEYI): How does your new study with Daniel Egel – “Youth Transitions to Employment and Marriage in Iran: Evidence from the School to Work Transition Survey” – improve our understanding of youth transitions from previous work on the subject?
Djavad Salehi-Isfahani: The big difference is in the type of data we use. Our previous study used cross-sectional data; this paper relies mainly on retrospective information. What we learned from our earlier study was a series of snapshots of youth in transition. In this paper we are actually able to follow individual youth (up to age 29) as they leave school, change jobs, and get married.
MEYI: This study confirms your earlier findings that educated young men in Iran suffer from the highest unemployment rates. Besides the demographic pressures – with Iran experiencing one of the most severe youth bulges in the region – what are some other institutional and behavioral reasons for this? Do you think the appeal of a university education for younger generations is being reduced as they witness the experiences of this cohort that is now facing challenges in the labor market?
Salehi-Isfahani: As we have previously noted, the reasons for the stalled transitions are several. First, the sheer size of the new cohort that is entering the labor market is much greater than Iran’s labor market could absorb, even if it were more efficient. Second, the inflexible labor market favors older, employed workers (insiders) over younger, new entrants, even though the latter are more educated and perhaps better equipped with new skills. Only 5 percent of those over 30 are unemployed, compared to 25 percent for those under 30. Third, the skills that young workers bring to the labor market are out of sync with what employers need. This is because of the emphasis that public sector employers and the education system place on degrees rather than skills.
The increasing unemployment of educated youth does not seem to have reduced the appeal of university education. Instead it seems to have ratcheted up the desire for credentials. This year, nearly one million youth took part in the entrance examinations for Master’s degrees, compared to 1.3 million for undergraduate education! Production of Master’s degrees is the fastest growing industry in Iran, with active participation from the private sector.
MEYI: One of the surprising findings in this study was the high degree of job mobility between the informal and formal sector among Iranian youth (and here you were specifically looking at the data for young men). To what extent do you think this mobility is voluntary?
Salehi-Isfahani: I wish we knew, but we cannot tell from the data. But if I had to guess, I would say that it is to a large extent involuntary. The higher mobility is mainly due to the response of employers to the high cost of laying off workers. They have exploited the labor law that allows employers to offer short-term contracts, which they renew periodically. These type of contracts do not provide either party—employer or the employed—to fully invest in the job or, as economists would say, firm-specific human capital. The incentive is simply not there when the contract is for less than a year. So, turnover for these jobs is high. Overall turnover is still low, though, because older workers have tenure.
MEYI: Your paper presents a complex picture of how marriage affects young women’s propensity to join the labor force in Iran. In looking at the reported activities of young women in the Statistical Center of Iran’s School to Work Transition Survey five years before and two years after marriage, you find that the share of these women who are employed does not change with the onset of marriage. Yet, in looking at their responses to the “willingness to work” questions and their actual reported labor force participation, you find that married women are less likely to want to work and less likely to be participating in the labor market. What could account for these seemingly divergent stories?
Salehi-Isfahani: This is an excellent question. I think the answer is that those who are employed are different from the general female population, to whom the attitude question is posed and who participate less. Presumably, the employed women have higher preference for work and have demonstrated that by working. The other interesting thing we learn from the fact that the employment rate remains constant before and after marriage is that marriage is not career ending for Iranian women. I believe that in Egypt similar evidence points in the opposite direction, that marriage reduces the probability of working.
MEYI: The study concludes by noting that there is still much research to be done to identify causation in some of the observed relationships, such as those between employment and marriage, for example. How can new research begin to tackle these questions, and what methodologies should be used?
Salehi-Isfahani: The difficulty in this type of work is that the data reveals the outcome of several decisions which are jointly made. For example, we find that, for men, being employed increases the probability of marriage. But what we do not know is whether men who want to marry are more likely to seek employment, so the causation could be the opposite of what we expect. We need to find an exogenous source of variation in employment, such as a jobs program that affects some but not all youth, to be able to infer the causal effect of employment on marriage. This type of answer is much more useful for policy than correlations because it offers insight into where the binding constraints are, say, for marriage. Is it really employment, housing, or age imbalance in the marriage market?