Over the past more than a decade, Iran’s economy has been trapped in chronic stagnation, structural inflation, and a continuous decline in purchasing power. Reports from the World Bank, the International Monetary Fund, and even domestic media indicate that Iranian society has entered a stage of persistent poverty. In this situation, households have neither the ability to save nor the possibility to invest, nor hope for a sustained improvement in their living conditions.
What makes this crisis more dangerous is the transformation of poverty into a self-reinforcing cycle. In Iran’s vicious cycle of poverty, rising costs of housing, food, healthcare, and transportation reduce purchasing power. The decline in purchasing power, in turn, destroys effective demand.
Urban Poverty in Iran: The Collapse of the Economy of Life in Major Cities
According to published data, the population living below the poverty line has increased at an unprecedented rate over the past two decades. If around 9 million people were below the poverty line in the mid-2000s, now tens of millions are either in poverty or at risk of absolute poverty. Even state-run media in Iran have spoken of a sharp rise in absolute poverty; a phenomenon once limited to deprived regions but now affecting the urban middle class as well.
Rent-based economy and the continuous reproduction of poverty
One of the main reasons for the formation of the vicious cycle of poverty in Iran is the economy’s dependence on oil revenues and rent-seeking policies. Rather than leading to sustainable development, the oil-based economy has become a tool for expanding corruption, opaque distribution of resources, and strengthening unaccountable institutions within the Iranian regime. In such a structure, productive investment has been replaced by speculation, brokerage, and non-productive activities.
In recent years, a large portion of social capital has shifted toward non-productive markets such as foreign currency, gold, land, and housing. The reason is clear: production in the economy controlled by Iran’s regime lacks security and returns. Independent investors face constant uncertainty, systemic corruption, and a lack of legal protection. As a result, capital is diverted from production into activities that only generate more inflation and inequality.
The housing market is a clear example of this crisis. Over recent years, housing prices have multiplied several times, while household incomes have never kept pace. The result of this gap has been the gradual exclusion of millions of people from the housing market. Many families have been forced to move to city outskirts, live in smaller homes, or spend a large portion of their income on rent.
Sanctions have also played an important role, but the current crisis cannot be reduced solely to sanctions. Many countries have been under external pressure, yet transparent and accountable economic structures have prevented the collapse of people’s livelihoods. The main problem in Iran is the combination of sanctions with mismanagement, institutionalized corruption, and the prioritization of political and security objectives over the economic interests of society.
Erosion of the middle class and the expansion of social insecurity
The vicious cycle of poverty in Iran is not limited to declining incomes; it has now led to widespread social erosion. The middle class, once the pillar of economic and cultural stability in society, is gradually collapsing. Families that previously could afford housing, proper education, and healthcare are now facing crises in meeting basic living expenses.
Official statistics show that the share of food expenses in household budgets has sharply increased. This means people are spending a larger portion of their income simply to survive. At the same time, nutritional quality has declined and consumption of essential goods has fallen. Reduced caloric intake alongside rising food prices is a clear sign of expanding food poverty in the country.
The labor market situation has become even more critical. The expansion of informal employment, temporary contracts, and lack of insurance has turned millions of workers into precarious labor. Many workers and employees, despite being fully employed, live below the poverty line. This phenomenon, known as the “working poor,” is one of the most dangerous signs of economic collapse.
Rising internal migration is another part of this crisis. Households migrate to smaller cities or outskirts to escape the high cost of living in major metropolitan areas. However, this relocation often means lower quality of life, weaker public services, and the expansion of informal settlements. As a result, poverty shifts from city centers to the periphery, creating a broader social crisis.
The reality is that Iran’s economy is no longer merely facing a period of recession or inflation. What has emerged is a stable structure to produce poverty. A structure in which social inequality is reproduced, economic opportunities become more limited, and the gap between a small, privileged minority and the majority of society grows wider every day.
The World Bank has referred to Iran’s “lost decade” of economic development; a decade in which millions of people fell below the poverty line. However, the main issue is not only the decline in incomes. The deeper crisis is the gradual destruction of the possibility of economic recovery within the current framework. When a political and economic structure is built on monopoly, corruption, and repression, poverty is no longer a temporary crisis; it becomes part of the governing system itself.
