Higher Education Policies and the Emerging Over-education Crisis in the Middle East

Student enrollment in higher education institutions has rapidly increased in most Middle Eastern countries in recent years. Governments have shown a strong commitment to higher education, and there has been broad support from politicians and citizens for establishing more universities and increasing access to higher education. However, in recent years, the supply of university graduates in many fields of education has exceeded the labor market demand and the unemployment rate among university graduates has increased. Unfortunately, so far this high unemployment rate has not led to a reduction in student enrollment. Instead, some Middle Eastern countries have fallen into an “over-education trap,” according to Nader Habibi, Professor of Economics and Middle East Studies at Brandeis University.

The over-education trap, as defined by Habibi, includes the following process: university graduates who cannot find employment in their university majors will eventually accept low-skill and semi-skilled jobs that do not require a university degree. In doing so they reduce the employment opportunities for high school graduates, who would have been employed for these jobs traditionally. Consequently, high-school graduates face higher unemployment rates (crowded out by university graduates), and many will conclude that their only option for avoiding unemployment is a “university education.”

Habibi presented his talk, Higher Education Policies and the Emerging Over-education Crisis in the Middle East, at the Center for International and Regional Studies on February 19, 2017. He argued that there must be a balance between quality and quantity of education in the region. “Getting a degree in physics and then getting a job in chemistry or another job that requires a university degree is not big a waste of resources; you’re still a university graduate working in some other field,” Habibi said. “But if you are a university graduate and you are working in a field that does not really need the skills of a university education then you have to think about the resources you (and the government) have devoted to your education.”

Habibi began his research on conditions of higher education in Egypt, Iran, and Turkey about four years ago. Along with local research partners in these countries, he has conducted research on the earnings of university graduates, examined the motivations behind why individuals choose to get degrees, interviewed policymakers, and studied higher-education planning patterns.

There is strong cultural demand for higher education everywhere, but this was not the case forty or fifty years ago, he explained. “In 1976, it was unheard of for university graduates to be unemployed in Iran, but in 2011 the unemployment rate for university graduates was nineteen percent.” Habibi reported that in many MENA countries today, the unemployment rate for people with university degrees is higher than high school graduates.

In the past two decades, because of the political acceptance of privatization of higher education, policymakers have been able to expand higher education without expanding the government expenditure by the same proportion. Therefore, in a way, the fiscal burden of expansion has been reduced through privatization. “In these countries, enrollment has increased, but the burden of education on government has not increased,” Habibi said. Politicians did not foresee that increasing enrollment would become a massive burden. “The cost of education is to a large extent a burden on the entire society,” he said, “so we should justify the return to education not just for the individual but for the entire society, by taking into account the massive government investment in tertiary education.”

A common feature among Middle Eastern countries is that governments take a very active role in educational planning, Habibi said. This is not the case in Europe and the United States, where a large number of universities are private, and governments do not really have much control over admission and enrollment policies. He said there are two primary justifications for governments expanding educational opportunities in higher education, economic justification (labor market demand for university skills) and social demand.

Labor market justification arises from manpower planning. Based on long-term forecasts for economic growth and industrial development, the government estimates the amount of skilled labor that is needed in each specific field. Social demand for higher education, on the other hand, is based on the desire of students and their families for higher education, according to Habibi. Social demand is generally larger than the labor market demand because citizens observe that university graduates tend to earn more income, hold a higher social status, and have improved social interactions and opportunities. While there are many obvious social and cultural benefits to having a more educated population, he said, “You also have to look at the employment and labor market conditions for university graduates.”

Habibi shared some statistics about recent spikes in university enrollment. Between 1995 and 2015, Iran and Turkey each saw enrollment increase by almost five hundred percent. With a population of ninety million, Egypt has 2.5 million university students enrolled at present; Turkey’s population of eighty million has five million university students. Egyptian citizens aged 25-29 who hold a university degree increased by an astounding eighty percent in this timeframe.

Universities in Iran expanded very rapidly, especially since 2005, “because of political reasons and because of populist pressure,” Habibi reported. If you are a graduate in computer science or law, he said, you should have good opportunity for employment. However, “we see surprisingly high unemployment rates in these and some other university majors like architecture and civil engineering.” He reported that in Iran in 2016, the unemployment rate for male university graduates was thirteen percent, and 65.5 percent for females.

Habibi and his colleagues observed that in every country policymakers received some practical recommendations for addressing the issue of over-education through workforce planning, (for example, estimating the labor market need for university programs, and admitting students according to set requirements). But in every proposed case, he said, “solutions were rejected by policymakers because social demand for higher education was so strong that they could not say no to families that wanted to send their children to university. . . . Rather than focusing on labor market demand, politicians focused on satisfying the social demand for higher education, which has now resulted in unemployment and underemployment.”

Habibi cited two countries that have been able to contain the problem of over-education, Germany and Singapore. Germany uses vocational training programs in high schools that are popular and effective, and many students choose the vocational education for manufacturing jobs because they find good-paying jobs after graduation. This system has worked because there is cooperation between the private sector corporations and the vocational training schools, Habibi said. Singapore has been successful in resisting populist demand and puts strict limits on university admissions. The government achieved this by reducing the role of the ministry of higher education in determining the enrollment quotas for universities, and it has empowered the ministry of manpower to play a more important role in higher-education planning. As a result, enrollment limits are closely linked to labor market demand projections for each university major.

“There are some steps that can be taken to prevent over-education, but they will require political will,” Habibi said. He cited the need for economic planning and a “cap and trade” concept, where a cap is placed on the number of students admitted into each major (for example civil engineering), and universities then compete for enrollment permits. He said the over-education crisis reminds him of the issue of inflation, and how countries manage to fight it. Using this analogy he said, “As long as the parliament is in charge of monetary policy it is hard to fight inflation because members of parliament would like to satisfy their constituency by increasing government expenditures and they will force the central government to finance the budget deficit by printing more money. However, when the central bank of a country is independent the politicians cannot force it to print money and cause inflation.” Transferring the higher education enrollment decisions to an independent body away from political and social pressures, can have a similar effect in preventing over-education.

Nader Habibi is the Henry J. Leir Professor of 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 with Global Insight Ltd. Habibi has more than twenty-eight 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 the political economy of the Middle East at Yale University.

Article by Jackie Starbird, Publications and Projects Assistant at CIRS.