With the signing of the Iranian Nuclear Deal and subsequent easing of economic sanctions, new opportunities will arise for Iranian workers to compete in the global market. Due to high fertility rates in the recent past, Iran has a large working-age population that stands to perfectly capitalize on these developments, allowing the country reap its demographic dividend. Iran cannot afford to miss this window of opportunity.
Iran is among a few countries in the Middle East and North Africa, and in the Muslim world more generally, that has completed the “demographic transition”— a shift from high to low mortality and fertility. This transition historically occurs when economies develop, as societies convert from largely rural agrarian based systems to predominantly urban industrial systems, and education and health improves. Death rates typically decline before birth rates do, however, resulting in an interim period of rapid population growth.
Adhering to this pattern, mortality rates in Iran dropped in the 1970s and 1980s, especially among infants and children, while fertility rates remained high — each woman on average gave birth to six or seven children. This resulted in a more than two-fold population increase within just 30 years, from 34 million people in 1976 to 71 million in 2006.
Near the turn of the 21st century, Iran’s fertility rate settled around the replacement level, close to two births per woman. Today, it is even lower, estimated to be around 1.8 births per woman. Given that Iran’s baby boomers are now in their reproductive years, the sheer number of couples having children gives momentum to the country’s population growth. According to projections by the United Nations Population Division, Iran’s population could grow to between 87 and 115 million people by 2050, depending on future fertility levels.
Given Iran’s rapid fertility decline and increased life expectancy, the population’s age distribution has changed radically in the past few decades. The working-age population (ages 15 to 64) grew from 52 percent of the total population in 1986 to 71 percent in 2011, presenting the country with a “demographic window of opportunity” and positioning it to reap its demographic dividend, should the appropriate policies be adopted to create jobs for those who are looking for them.
A demographic window of opportunity can occur when a country’s age distribution shifts more toward people in the working-age group relative to those that are considered elderly or minors. With fewer dependents to support, a country has the potential for rapid economic growth. The opportunity must be seized before the share of the working-age population shrinks. In Iran, the proportion of the elderly population ages 65 and over is expected to grow rapidly from 6 percent in 2011 to 20 percent by 2050. Now is the time for Iran to reap the benefits of its demographic dividend.
Notably, the benefits of a demographic dividend can only be realized if the right social and economic policies are in place to enable a young, educated population to enter the labor force and contribute to increased productivity and economic growth. Fortunately, Iran’s working population is well educated—one-quarter of workers possess a university degree.
Within the next four years, the four million students now enrolled in higher education will be poised to enter the job market. That said, the current labor climate is extremely tight: an estimated 2.5 million to 3.0 million working-age adults are unemployed and looking for a job, with a higher unemployment rate among university graduates than among less-educated job seekers. Unemployment is high even among university graduates with technical degrees, such as in computer science (30 percent), the biological sciences (26 percent), and engineering (22 percent).
With the recent nuclear deal’s easing of economic sanctions on Iran, the country has a much-needed opportunity to participate in the global economy on a greater scale, as well as to create the jobs necessary for a large and educated labor force. Iran has experienced a significant brain drain since the Islamic Revolution in 1979. But, with the easing of sanctions, Iran could benefit from its large diaspora — which largely lives in the West — by drawing them in as investors or by connecting their businesses outside of the country to those inside of it.
Countries generally have only one chance to benefit from the demographic dividend as they go through the demographic transition. This so-called “first” demographic dividend yields a transitory bonus, because the population grows old and eventually its share of working-age adults shrinks. A “second demographic dividend” is possible if workers save and invest for retirement, thereby transforming the initial bonus into increased assets and sustainable development.
Iran cannot afford to miss this demographic window of opportunity, which coincides with the opportunity to join the global economy. It is time for Iran to benefit from its human capital, reap its demographic dividend, and raise its national income by empowering its young and educated labor force to compete in the global market. These steps would, in turn, help Iran strengthen its economic goals, both domestically and abroad.