Private Sector VS Public Sector jobs and Employment in Iraq, with some Iraqi Local Economy Insigh

As all Iraqis know, it is very rare that a public sector employee is fired except for an egregious offense. While favoritism, nepotism, social connections and bribery contribute to an unequal playing field when applying for private sector jobs. In fact, there are many reasons compelling young people to prefer public sector jobs. Another important benefit of public sector employment is the presence of a reliable pension plan. In addition, there are a large number of paid holidays and personal time off (PTO) days, compared to the private sector. This single fact might be the most important reason behind the poor service one experiences when interacting with the Iraqi public sector civil services’ entities. Compared to Private sector, where employees can find themselves jobless at any given point during their career. On the other hand, private sector jobs typically pay double the compensation compared to a similar public sector equivalent job function.

This article will be talking to you, about you, and on your behalf … If you are a young Iraqi with a college degree, and among those who are working in the private sector, either by choice, or because you could not find a suitable opportunity to join the public sector, then we are in the same boat!

Many young Iraqi graduates dream about landing a public sector job, this is a big problem. For this issue to be solved, we need to understand the underlying root causes: What is so special about public sector jobs in Iraq that makes many young people willing to do anything to land one? By “anything” I mean using connections, favoritism, or the paying of bribes that could reach thousands of dollars, just to get a job that would not pay more than a few hundred dollars a month, at best. As an investment, the math doesn't add up here!

In fact, there are many reasons compelling young people to prefer public sector jobs. Working in the public sector ensures job security for life.

This, in my opinion, is the main reason . As all Iraqis know, it is very rare that a public sector employee is fired except for an egregious offense. It is common knowledge that only a minister or a deputy minister level employee can fire a public sector employee ranked below them.

On the other hand, private sector jobs typically pay double the compensation compared to a similar public sector equivalent job function. However, job security is nowhere to be found in the private sector in Iraq. Private sector employees can find themselves jobless at any given point during their career. This does vary depending on the organization and its internal management system.

This article attempts to identify the most common causes and discuss the implications.

Approach/Results

The absence of job security in the Iraqi private sector is mainly linked to either the lack of existing laws and regulations, or when present, the lack of its enforcement. The existing laws and regulations are woefully outdated and are based on customs that are no longer relevant in today’s modern Western leaning Democratic societies.

The majority of updates to these older laws and regulations are predominantly in favor of the employer rather than the employee. Furthermore, even these weak and outdated laws are not properly enforced, resulting in violations by the private sector employer without fear of reprisal. A simple example of this can be seen in the significant portion of private sector employees who lack the basic protections of an employment contract.

Another important benefit of public sector employment is the presence of a reliable pension plan. It may not equal the traditional pensions traditionally provided by the private sector (in a perfect scenario); it’s guaranteed to provide a basic safety net that the average Iraqi can count on for a decent life in retirement.

The private sector pension system is on much more shaky ground, and the guarantee is not as strong as that in the public sector, if it existed at all, in the first place. Furthermore, a private sector employee in Iraq rarely has an employment contract, and is therefore rarely registered in the social security system.

Without a registered employment contract, there is no pension plan to talk about. Occasionally one sees taxation and social security deductions without the benefit of an employment contract in place, this could result from the manipulation done by the employer, and therefore, the future benefits under these conditions are severely restricted.

According to the currently applicable labor law, if the employee is registered in the social security system in the private sector, there will be a monthly deduction of 5% from the base salary in addition to 12% of the base salary paid by the employer, totaling 17%, these deductions are accumulated in the social security department and paid back to the individual only when they are unemployed for over a year.

But it is not paid back entirely! The amount typically paid back is less than half of this amount (or 8% to 8.5% out of the deducted 17%).

This amount is made in either a one-time lump sum payment, or paid out on a monthly basis that would fall woefully short in covering the basic needs of an individual, let alone a family! (within this scenario, which is also common, what financial security are we talking about here?!)

Another main reason why many Iraqi youths prefer a less paying public sector job over a job in the private sector, is the minimal level of effort required in the majority of public sector jobs. In addition, there are a large number of paid holidays and personal time off (PTO) days, compared to the private sector.

This tends to fuel a cycle of cynicism and self-defeat that has a dampening effect on the ambitions of generations of Iraqis.

In a public sector job, the employee does not usually need to develop further knowledge and skills, nor continuously enhance their performance, once the job is secured. This is the opposite of what is seen in the private sector industry, where one has to prove their value on a daily basis. This single fact might be the most important reason behind the poor service one experiences when interacting with the Iraqi public sector civil services’ entities.

If you work in a private sector job, then you realize that your job might be the cost of poor performance and lack of development of skills.

One more point I would like to discuss is the corruption in private sector employment in Iraq. Favoritism, nepotism, social connections and bribery contribute to an unequal playing field when applying for private sector jobs. In these cases, qualifications and skills play a little role. Equal employment opportunities are not practiced in Iraq.

Conclusions / Further Work 

In my point of view, the solution to this dilemma is not demanding more public sector jobs be created, but rather encouraging the private sector to play by the existing rules and regulations in employment laws, and passing additional laws to strengthen the power of the private sector employee, with more protections and enforceable rights.

Levelling the playing field between employer and employee has a long history in the labor laws of Western societies, that at various times has seen the advancing and/or receding of labor unions. I am not advocating for labor unions here, but establishing for the fact that when one side holds all the power, society is weakened and is no longer on a sustainable path.

It is well known that the public sector wage costs in Iraq form a significant portion of the national budget every year. This, combined with the dangerously high levels of corruption, represents a substantial impediment to the economic development so sorely needed in Iraq.

With the rising demand for renewable, sustainable, clean and green energy across the entire globe, the future of global demand for oil is expected to gradually decrease. This poses what could be the most dangerous economic threat to Iraq’s future, as oil exports form up to 95% of Iraq revenues. This is a very important issue that Iraq needs to face. Planning alternatives and solutions in advance is critical.

Empowering, stabilizing, regulating, and encouraging the private sector in Iraq has the potential to strengthen the economy, reduce the dependence on public sector employment, and create an economically viable middle-class that can strengthen the Iraqi economy.

This is a noteworthy issue that needs to be addressed as soon as possible. Planning solutions in advance is a must. Empowering the private sector in Iraq is a major factor in creating a sustained internal economy, including the renovation and development of industry and agriculture. Creating more jobs will result in better internal cash flow, followed by internal financial stability, that will have a positive impact on all other life aspects in Iraq.

A healthy private sector that is held accountable to shareholders, the public, and its employees, is the key contributor to a healthy economy. I pray that the existing Iraqi government wakes up to this urgent need before it is too late, so that we might live to see our grandchildren enjoy the fruits of their efforts.

References

The Iraqi Labor Law (Act 37 of 2015) in action since (13/4/2015): (https://iraqld.hjc.iq/LoadLawBook.aspx?page=1&SC=020220164139899