Financial Tribune - A sound understanding of Iran’s population dynamics is of paramount importance for understanding its potential for development in the long run.

That’s how the opening lines of a recent publication by Stanford Iran 2040 Project–an academic initiative of Stanford University that serves as a hub for researchers from across the world, particularly scholars of the Iranian diaspora—read.

The project is aimed at conducting research on economic and technical matters related to the long-term development of Iran and evaluating their possible implications in a global context.

The analyses presented in this study and published on Iranian-studies.stanford.edu are primarily based on the results of Iran’s 2016 and previous censuses and data from Iran’s National Organization for Civil Registration, Iran’s Ministry of Higher Education, the Population Division of the United Nations Department of Economic and Social Affairs, and the World Bank. A summary of the study follows:

In the second half of the 20th century, Iran completed its demographic transition from high to low mortality and, with a time lag, from high to low fertility. This transition first resulted in a high population growth rate that slowed later due to rapid fertility decline, causing the population to reach a point where it now resembles a two-edged sword.

On the one hand, the rapidly expanding population has been linked to nearly every problem confronting the nation: unemployment, poverty, water scarcity, undernourishment, urban pollution and the soaring domestic use of energy. On the other hand, the rise in the share of working-age population can potentially serve as a driver for economic growth and development.

Transient Opportunity

The extent to which Iran can harness this transient opportunity primarily depends on its human capital endowment and the capacity of its economy for creating new employment.

According to the 2016 census, Iran’s population reached close to 80 million while its growth rate dropped to 1.2% a year—a rate similar to today’s world average but substantially lower than its peak a few decades earlier.

Between the 1976 and 1986 censuses, Iran’s population grew from 34 million to nearly 50 million, corresponding to an average annual growth rate of 3.9% (3.2% from natural increase and 0.7% from net migration).

A decade later, however, Iran surprised the world when the results of its 1996 census showed a rapid decline in the population growth rate due to a record fertility decline. In a mere 10-year period, the country’s total fertility rate declined from 6.2 births per woman in 1986 to 2.5 births per woman in 1996.

Iran’s fertility decline stands out not only for its fast pace but also for occurring in the absence of a coercive government policy (e.g., China’s one-child policy) or the legalization of abortion (e.g., Turkey). Iran’s current TFR is estimated at 2–2.1 births per woman, which is close to the replacement level (i.e., 2.1 births per woman) but higher than the average TFR for the more developed countries.

The country’s fertility decline has had a significant impact on its age composition. The ratio of children (younger than 15) and elderly (65 and older) to the working age population (ages 15 to 65), known as the age dependency ratio, decreased from 0.95 in 1990 to 0.45 in 2005.

With fewer dependents to support, Iran is currently in the midst of a demographic window of opportunity which will last about four decades before its working-age population starts to diminish in the mid-2040s. The opportunity must be seized now before the share of the working-age population shrinks and the population grows older.

Growth Uncertainty

Iran has reduced illiteracy among youths and has significantly increased its capacity for higher education.

The total number of students enrolled at universities almost doubled between 2006 (2.3 million) and 2016 (4.3 million) with women constituting nearly half of student enrollments in higher education programs.

By 2026, Iran is projected to accommodate a large number of highly educated people when more than half of its citizens of ages 25–34 are expected to hold a bachelor’s degree or higher.

Whether this positive trend in Iranians’ education will translate to economic growth is subject to uncertainty because of the chronic high unemployment rates. In fact, the tight job market has been a driving force for many graduates to continue their education beyond their bachelor’s degree.