With a quick look at the mere 27-percent increase in the salaries of Iran’s workers in the new Persian calendar year (starting on March 21) and the country’s 50-percent inflation rate, we realize that Iranian workers will become even poorer during the year ahead.
The cabinet of Iranian regime President Ebrahim Raisi has supposedly taken measures to prevent anticipated inflation. But the trend of rising prices of basic goods and services since March 21st shows that anticipated inflation is only one of the factors contributing to the increase in the actual inflation rate.
Since last week, the currency exchange rate in Iran’s free market has begun to increase once again, and the U.S. dollar is gradually crossing 550,000 rials mark. This increase is another signal to the economy that prices are rising regardless of government decisions, and as a result, the 27 percent increase in workers’ salaries in the early months of the new Persian year has lost its usefulness.
In Iran, the standard annual salary for a worker is decided in February. This is determined by the so-called “Salary Committee,” composed of representatives of workers, their employers, and the government. This committee determined a 57 percent wage increase for the year 2022-2023. However, the inflation rate has increased at an even faster pace, rendering the wage increase meaningless.
Labor representatives in Iran say that this year’s decision by the Salary Committee does not even cover even half of last year’s inflation rate and this year’s inflation rate. This means that household incomes across Iran will be impacted by inflation. As long as household incomes do not increase by the same rate as the increase in the prices of basic goods and services, the purchasing power of households or their real income, which is adjusted for inflation, decreases.
According to the definition of the International Labor Organization, real income is a measure to maintain the standard of living and well-being. In inflationary conditions, since price increases are not uniform, the price of some goods and services, such as daily exchangeable goods, may change, but salaries, which are fixed according to contracts, remain the same. Therefore, when the purchasing power of those with fixed incomes decreases, real income erosion occurs, which is actually the biggest cost of inflation.
In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.
Iran’s workers become poorer
In the four currency crises that Iran’s economy witnessed in the years 2000, 2012, 2020, and 2022, the basket of goods and services consumed by working-class households was more affected than any other group. Official statistics, published sporadically by the regime’s Statistical Center and the Central Bank, show that housing expenses (rent), food and transportation expenses, which make up more than 70 percent of the urban household consumption basket in Iran, have imposed the greatest pressure on workers.
Furthermore, studying the Misery Index, which is a combination of unemployment and inflation rates, is another indication of workers’ depreciating living conditions. These circumstances have placed the most inflationary pressure particularly on seasonal workers.
The latest official report from the Statistical Center regarding Iran’s unemployment rate in the winter of 2022-2023 placed unemployment rate at 9.7 percent and the inflation rate in January and February 2023 at 47.7 percent. The combination of these two figures reaches more than 57 percent, indicating the worsening circumstances of Iran’s working-class community. However, these statistics are highly doubtful, and the Iranian regime certainly does not publish the real statistics to show the true situation.
It is not just inflation that has caused concern for the future of Iran’s workers. Temporary contracts and delayed paychecks have doubled the pressure on workers while employers attribute paycheck delays to government debts.
Iran’s economic structure has made the government the largest employer. In addition to the government, khosulati, or “semi-state” companies are the second largest employers in Iran.
(Khosulati is a combination of two words: khosusi (private) and dolati (government-owned). These are companies that, although apparently private, are somehow affiliated with government-backed organizations. That is, people who have accurate information about the body and depth of government programs and can predict the economic future are at the head of these companies. Most of these companies are managed by IRGC officials and their affiliates. Khosulati companies have effectively become sources of embezzlement and rent for the government.)
Khosulati companies have gradually become larger in the past two decades due to the government’s inability to pay its debts. The growth of this sector of the economy, which is largely the biggest beneficiaries in the Iranian economy, has posed significant challenges to workers’ lives and their future because they operate apart from the government in dealing with seasonal and contract workers.
As a result, labor protests over living conditions, wages, and contracts mostly go unresolved, and workers are constantly at risk of being fired. Since these companies are somewhat dependent on the government, they also benefit from government support and intervention in their decisions, and they are not held accountable by anyone.
Workers dismissed for protesting
Almost two decades following the transfer of companies that were sold to non-governmental entities, funds, and sales to compensate for the government’s budget deficit, workers remain under the most pressure from these changes. Workers who were at the forefront of management changes were sometimes laid off or simply not paid. Even their protests go unresolved because during these transfers, the buyer is mainly a non-governmental or military entity, or a retirement fund.
Recent labor protests have at times been accompanied by political demands. However, the employers’ first reaction to these types of protests has been to collaborate with security institutions, in addition to firing the workers. This happened during the protests of Haft Tappeh Sugarcane Company workers in the city of Shush, located in Khuzestan Province, southwest of Iran.
Following the protests that took shape after September 2022 and the killing of 22-year-old Mahsa Amini in police custody, workers across Iran joined the protesters. These protests immediately adopted a political tone.
Reports of dismissals, detentions, and the imprisonment of workers in recent months indicate the sensitivity of security institutions to labor protests. This is a matter that regime supreme leader Ali Khamenei directly addressed in his speech this year on Labor Day.
This year, the latest plot of the government and khosulati companies aimed at silencing labor protests is to expel protesting workers and replace them with others willing to work under such conditions. Given the promises of Solat Mortazavi, the Minister of Cooperatives, Labor, and Social Welfare, to create half-a-million jobs in the new Persian calendar year, it seems that protests can be equivalent to firing and replacing new workers so that the Labor Ministry’s statistics can be updated.