Iraq’s Road to Recovery: Strengthening Human Capital for Economic Growth

The World Bank's 2024 report on Iraq highlights the country's significant human capital challenges, including low education outcomes, high youth unemployment, and poor healthcare. It calls for urgent reforms in governance, education, and job creation to harness Iraq's demographic potential for sustainable growth.

The World Bank's 2024 report, presents a comprehensive analysis of Iraq’s human capital challenges and opportunities for recovery. Produced by the World Bank, it underscores Iraq’s lagging human capital development, comparing its performance to regional peers and highlighting the factors that have contributed to this stagnation. Iraq's Human Capital Index (HCI), as measured by the World Bank in 2021, reveals that a child born just before the COVID-19 pandemic could expect to achieve only 41% of their full productive potential by the age of 18. This figure is significantly lower than the Middle East and North Africa (MENA) regional average of 57%. The report attributes this disparity to a combination of factors, including Iraq's historical fragility, conflicts, political instability, and inadequate public services, which have impeded investments in human capital development. These issues are compounded by the country’s heavy reliance on oil revenues, which has limited diversification and the capacity for sustained human capital growth.

Early Childhood Struggles Undermine Future Potential

The report highlights Iraq’s critical human capital issues across various stages of life, emphasizing that the country's demographic structure provides an opportunity to harness its young population for economic growth—a potential demographic dividend. However, to do so, Iraq must first address significant challenges in education, health, and employment. Starting with early childhood, the report reveals that child mortality rates remain high compared to regional peers. For instance, under-five mortality rates in Iraq are far above the MENA average, exacerbated by inadequate healthcare services, early childhood education gaps, and poor maternal health. Only 32% of children participate in organized learning activities before primary school, and just 11% of children aged five are enrolled in early childhood education. High fertility rates, early marriages, and widespread poverty contribute to poor child health outcomes, further complicating efforts to build a strong foundation for future human capital.

Education Gaps Widen in School Age Years

As children grow older, Iraq faces significant challenges in its education system. While primary school enrollment rates are relatively high, participation drops sharply in secondary education. Only 57% of children attend lower secondary education, and even fewer—33%—make it to upper secondary education. The average Iraqi child completes just 6.9 years of schooling, and when adjusted for the quality of education, this figure falls to only 4 learning-adjusted years. This is far below the regional average of 7.6 learning-adjusted years. The education system is plagued by inadequate infrastructure, large class sizes, and a lack of trained teachers, all of which diminish the quality of education and contribute to low completion rates. These challenges are especially pronounced in rural areas, where access to education is more limited, and gender disparities persist, with girls less likely to attend school than boys.

Youth Unemployment Crisis Requires Urgent Solutions

The youth population, which represents a large portion of Iraq’s demographic profile, faces even greater hurdles. With 37% of young people aged 15 to 24 classified as "Not in Education, Employment, or Training" (NEET), Iraq has one of the highest youth unemployment rates in the region, reaching nearly 36%. The problem is particularly severe for young women, 52% of whom are NEET, compared to 22% of young men. Youth unemployment is largely driven by a mismatch between the skills acquired in education and the demands of the labor market, as well as limited opportunities for formal employment. Vocational training programs are underdeveloped, and many young people find themselves working in the informal sector, where jobs are unstable, low-paying, and lack social protection.

Women Face Persistent Barriers in the Workforce

For the working-age population, the challenges continue with high unemployment and low labor force participation, particularly among women. In 2021, only 10.6% of working-age women were active in the labor market, compared to 68% of men. Even those who do find employment often work in the informal sector, which accounts for nearly 67% of total employment in Iraq. Informal jobs lack social security and other legal protections, leaving workers vulnerable to economic shocks. Furthermore, the report highlights that Iraq's healthcare system is ill-equipped to address the growing burden of non-communicable diseases (NCDs), such as diabetes and cardiovascular diseases. These diseases account for the majority of adult morbidity and mortality, yet Iraq’s hospital-centric health system limits early detection and treatment. Many Iraqis face catastrophic healthcare costs, as out-of-pocket expenditures are rising due to inadequate social health protection measures.

A Path Forward for Human Capital Recovery

In terms of solutions, the report outlines several key reform areas for Iraq to improve its human capital outcomes. These include enhancing governance and accountability, increasing public investment in education and healthcare, and improving service delivery. The report stresses the need for cross-sectoral coordination between government agencies and emphasizes that Iraq must prioritize human capital development in its national strategies. To harness the demographic dividend, Iraq must invest in its youth by expanding access to quality secondary education and vocational training and creating job opportunities, particularly in the private sector. The report concludes that Iraq’s path to recovery depends on addressing these systemic challenges through comprehensive reforms, which will allow the country to capitalize on its young and dynamic population and foster sustainable, inclusive growth.