Systems Thinking in Investigating the Youth Unemployment Problem in Iran

Document Type : Research Article

Authors

Ramezan khosravi

Akram Esmaeili Avval

Department of Industrial Engineering, Faculty of Engineering, University of Gonabad, Gonabad, Iran.

10.22067/jstinp.2025.94882.1170

Abstract

Youth unemployment in Iran is a long-standing and complex issue. It results from the interaction among structural barriers, behavioral patterns, and economic shocks, which reinforce one another over time. This study employs a qualitative system dynamics (SD) model to examine how these mechanisms sustain high unemployment among young people. The model is presented through a Causal Loop Diagram (CLD). It draws on evidence from research, policy reports, and theory to map key feedback loops in the labor market. The analysis identifies several reinforcing loops. These include educational inflation, skill mismatch, informal employment traps, and economic contraction due to sanctions. Each loop intensifies unemployment. In contrast, balancing loops, such as public-sector hiring and vocational training, offer only short-term relief. These feedbacks explain why isolated policies often fail to produce lasting change. The findings highlight key leverage points. These include better alignment between education and employment, stronger labor-demand policies, and improved labor-market information systems. While qualitative, the model offers a solid foundation for future simulations and for designing feedback-aware strategies to reduce youth unemployment in Iran and similar contexts.

Keywords

Youth unemployment

System dynamics

Causal loop diagram

Labor market policy

Skill mismatch

---

References

Arulampalam, W., 2001. Is unemployment really scarring? Effects of unemployment experiences on wages. The Economic Journal, 111(475), pp.585-606. https://doi.org/10.2139/ssrn.251990.

Cahuc, P., and Hervelin, J., 2024. The effect of workplace vs school-based vocational education on youth unemployment: Evidence from France. European Economic Review, 162, p.104637. https://doi.org/10.2139/ssrn.4137320.

Cefalo, R., and Kazepov, Y.,2024. Toward a modular understanding of school-to-work transitions: Comparing Italy and Austria. International Journal of Comparative Sociology, 66, pp.807-830. https://doi.org/10.1177/00207152241295985.

Charalampidis, N., 2020. On unemployment cycles in the Euro Area, 1999–2018. European Economic Review, 121, p.103329. https://doi.org/10.1016/j.euroecorev.2019.103329.

Clark, A., Georgellis, Y., and Sanfey, P., 2001. Scarring: The psychological impact of past unemployment. Economica, 68(270), pp.221-241. . https://doi.org/10.1111/1468-0335.00243.

Farber, H. S., Herbst, C. M., Silverman, D., and Von Wachter, T., 2019. Whom do employers want? The role of recent employment and unemployment status and age. Journal of Labor Economics, 37(2), pp.323-349. https://doi.org/10.1086/700184.

Fergusson, R., and Yeates, N., 2021. Global youth unemployment: History, governance and policy. Edward Elgar Publishing. https://doi.org/10.1111/bjir.12657.

Gregg, P., and Tominey, E., 2005. The wage scar from male youth unemployment. Labour Economics, 12(4), pp.487–509. https://doi.org/10.1016/j.labeco.2005.05.004.

International Labor Organization (ILO)., 2022. Global Employment Trends for Youth 2022: Investing in transforming futures for young people. Geneva: International Labour Office.

Jo, C., Kim, D. H., and Lee, J. W., 2023. Forecasting unemployment and employment: A system dynamics approach. Technological Forecasting and Social Change, 194, p.122715. https://doi.org/10.1016/j.techfore.2023.122715.

Kekre, R., 2023. Unemployment insurance in macroeconomic stabilization. Review of Economic Studies, 90(5), pp.2439-2480. https://doi.org/10.1093/restud/rdac080.

Kelishomi, A. M., and Nisticò, R., 2022. Employment effects of economic sanctions in Iran. World Development, 151, p.105760. https://doi.org/10.1016/j.worlddev.2021.105760.

Kelishomi, A. M., and Nisticò, R., 2024. Economic sanctions and informal employment. Labour Economics, 89, p.102581. https://doi.org/10.1016/j.labeco.2024.102581.

Maguire, S., 2020. One step forward and two steps back? The UK’s policy response to youth unemployment. Journal of Education and Work, 33(7-8), pp.515-521. https://doi.org/10.1080/13639080.2020.1852508.

Mendolia, S., and Walker, I., 2015. Youth unemployment and personality traits. IZA Journal of Labor Economics, 4(1), p.19. https://doi.org/10.1186/s40172-015-0035-3.

Nazareno, L., and Schiff, D. S., 2021. The impact of automation and artificial intelligence on worker well-being. Technology in Society, 67, p.101679. https://doi.org/10.1016/j.techsoc.2021.101679.

Rafiei, M., and Van Dijk, H., 2025. Not your average candidate: overqualified job applicants in the eyes of hiring practitioners. Personnel Review, 54(2), pp.680-696. https://doi.org/10.1108/pr-02-2023-0103.

Salehi-Isfahani, D., 2011. Iranian youth in times of economic crisis. Iranian Studies, 44(6), pp.789-806. https://doi.org/10.1080/00210862.2011.570510.

Schmidpeter, B., and Winter-Ebmer, R., 2021. Automation, unemployment, and the role of labor market training. European Economic Review, 137, p.103808. https://doi.org/10.1016/j.euroecorev.2021.103808.

Speckesser, S. S., Gonzalez Carreras, F. J., and Kirchner Sala, L., 2019. Active labour market policies for young people and youth unemployment: An analysis based on aggregate data. International Journal of Manpower, 40(8), pp.1510-1534. https://doi.org/10.1108/ijm-03-2018-0100.

Sterman, J., 2002. System Dynamics: systems thinking and modeling for a complex world. MacGraw-Hill Company.

Vedder, R., Denhart, C., and Robe, J., 2013. Why Are Recent College Graduates Underemployed? University Enrollments and Labor-Market Realities. Center for College Affordability and Productivity (NJ1).

Yokoyama, I., Obara, T., Kiyomoto, A. S., Kusada, K., Edamura, K., and Inui, T., 2024. Endogenous decisions on acceptable worker-job mismatch level and the impact on workers’ performance. Japan and the World Economy, 72, p.101283. https://doi.org/10.1016/j.japwor.2024.101283.