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Case Analysis 28 July, 2020

The Overeducation Crisis in Iran

Nader Habibi

Nader Habibi is the Henry J. Leir Professor of Practice in the Economics of the Middle East at Brandeis University’s Crown Center for Middle East Studies. Before joining Brandeis University in June 2007, he served as managing director of economic forecasting and risk analysis for Middle East and North Africa in Global Insight Ltd. Professor Habibi has more than 30 years of experience in teaching, research and management positions; including vice-president for research in Iran Banking Institute (Tehran), assistant professor of economics in Bilkent University (Ankara), research fellow and lecturer on political economy of Middle East at Yale University. He has done extensive research on the topic of overeducation in Iran and the rest of the Middle East.

Introduction

The people of Iran place a very high value on higher education. One of the most important aspirations of parents is to send their children to a good university so that they can graduate with the credentials to find a good job and become economically successful. There is nothing wrong with this aspiration and we know that education at any level has positive benefits for the society. However, when the majority of households send their children to universities a country might find itself with an excess supply of university graduates. If the economy provides insufficient numbers of jobs for university graduates, then the country confronts a crisis when many of them end up unemployed or having to accept jobs that do not match their level of education. Iran is among a list of countries that have experienced this type of overeducation crisis in the past decade, seen in very high unemployment rates among university graduates. 

This crisis began in 1990s. In 1960s and 1970s, with economic growth relatively high and enrollment in universities low, university graduates were economically successful and enjoyed a high social status. This encouraged many parents to seek the same outcome that they enjoyed for their children. As a result, the demand for university education rose sharply in 1970s, becoming very strong at the onset of the 1979 Islamic Revolution. After the Iran-Iraq war (1980-88), the government responded to the growing demand by trying to increase the capacity of higher education institutions, leading, in a short span of time, to a rapid expansion of university enrollment and a sharp increase in the number of university graduates.

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