Revenues from Iraq's nationalized oil industry once paid public sector salaries, something now forbidden. Increased smuggling and domestic taxes cannot fully offset this loss, in part because Iraq's domestic tax base remains small. As Iraq's military and security apparatus almost certainly are paid first from these funds, the rest of the public sector suffers the most from today's smaller budgets. The UN Secretary-General's Oil for Food reports hint at the effects. Poorly paid teachers and oil workers must supplement their small incomes, often at the expense of full attention to their formal jobs.
Similar problems affect nurses, doctors, engineers, warehouse managers and other civil servants.
Working without proper equipment, often part-time, their expensive skills decline. Some observers worry that the breakdown in formal employment is breeding a culture of opportunism and corruption. For example, Iraq's electrical sector is barely holding production steady at one third its 1990 capacity even though government expenditure in this sector consistently exceeds plans. Electrical shortages, worst during the hot summers, spoil food and medicine and stop water purification, sewage treatment and irrigated agriculture, interfering with all aspects of life. Last summer, a power plant accident threatened a catastrophic failure of the national grid.