It is unthinkable that the policies in place now be scrapped or overhauled overnight. Iraq still has a lot of security and political problems that will take precedence over policies to do with a future workforce. However Iraqi Kurdistan is relatively stable and could well begin to tackle this problem. And there are many other ways to tackle this problem of an oversized public sector.
One of these may well involve a universal pension scheme.
Any such package would need to competitive and able to be slowly integrated into the private sector so that small and medium sized businesses can offer their employees' pension schemes or contribute to the government scheme, via taxes.
A pension scheme for all would immediately eliminate the fear of being left destitute in one’s old age and would also make it acceptable for the government to get tough on public sector employees by cutting numbers or demanding more productivity.
Why? Individuals would no longer have to worry about how to survive in their old age as their pensions are guaranteed. Incentives could be pushed into the private sector by giving them options to contribute more, and thus have a larger pension fund.
When there is a social welfare safety net at the end of the road then the government cannot be expected to provide jobs in the public sector – or at least, it can justify not providing them. And it can focus on encouraging private enterprise by adopting better policies.
However currently things seem to be going the opposite way in Iraq. In Baghdad the state seems to be trying to more tightly control all industry and enterprise in Iraq. This is making it almost impossible for private enterprise to expand and is leading the country down the road toward a Saudi Arabia-like situation where a rentier economy exists and nearly all income flows from one central source.
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