A small percentage of labor force in Iran manages to collect unemployment benefits in the event of losing their jobs.
According to a study on unemployment insurance in the year ending March 2020, only 260,000 out of three million jobless people (1.74 million of whom held a job before becoming unemployed) received unemployment benefits.
That is to say only 8.6% of the total number of unemployed Iranians (15% of those held a job before becoming unemployed) received unemployment benefits, the Persian-language daily Shargh reported, citing the data released by Social Welfare Department of the Ministry of Cooperatives, Labor and Social Welfare.
Researchers of the study believe that 8.8 million people or 30% of the total number of Iran’s employed population can potentially receive unemployment benefits.
Ambiguities regarding the wording of the Unemployment Insurance Law of September 1990, which lead to different interpretations and inconsistencies in the implementation of the law, are said to be the main reason behind the limited extension of unemployment benefits in the country.
In practice, Article 2 of Iran Unemployment Insurance Law and its “reasons other than his or her own fault” part is often given a wide interpretation for temporary contracts.
The article says, “According to this law, an unemployed person shall be defined as an insured person ready for work, made unemployed due to reasons other than his or her own fault. Those insured persons, recognized by the relevant ministry and affirmed by the Labor High Council as temporarily unemployed due to changes in economic structure, shall also be subject to the rules and regulations of this law. Insured persons made unemployed due to the occurrence of unforeseen and natural disasters such as flood, earthquake, war, fire, etc. upon the recommendation of the regional Labor and Social Affairs Department shall be eligible to receive the unemployment insurance benefit.”
The number of temporary employment contracts started increasing since early 1990s. More than 95% of workers in Iran are reportedly working with temporary contracts that are renewed every one, three or six months. Some family businesses and small-scale entrepreneurship were removed from the list of jobs subject to the Islamic Republic of Iran Labor Law.
Despite efforts made in 2000s and 2010s to expand the coverage of income earners with temporary contracts, many of them won’t be entitled to unemployment benefits once their contracts of employment end.
Termination of employment contracts was the reason behind the unemployment of 60% of people in the year ending March 2018.
In addition to income earners with temporary contracts, the self-employed, holders of voluntary insurance policies and foreign citizenship, can’t collect unemployment insurance either.
By and large, they constitute 30% of the Social Security Organization of Iran’s insured workforce.
Financing the System
Iran’s Unemployment Insurance Fund is financed by employers who pay 3% of the total salary and benefits to their employees who are subject to Iran Labor Law and Social Security Law. Legally, the government is not mandated to contribute to the fund that pays benefits to those who become unemployed. Any payment by the government amounts to aid.
Restricted financial resources and lack of participation on the part of government have imposed a heavy burden on the fund. Expenses paid by the fund include payments to insured persons and those who have become unemployed, costs of training courses for the unemployed, administrative expenses, staff salaries and the treatment costs of the unemployed and their families.
In addition, assistance to employers and bankrupt businesses and supporting those who have lost their jobs due to the occurrence of unforeseen and natural disasters have created a budget deficit.
The percentage of cost to revenue of the Unemployment Insurance Fund increased from 96% in the year ending March 2002 to 118% in the year ending March 2011, but decreased slightly to 107% in the year ending March 2014. Notably, figures higher than 100% suggest the fund’s budget deficit.
A total of 240,000 people were added to the number of the unemployed receiving benefits in the year ending March 2019. The total number of people covered by the fund stood at 465,000 in that year. The fund’s resources hovered around 49 trillion rials ($214 million) while its expenditure stood at 51 trillion rials ($222 million) in the year under review, which is indicative of its budget deficit.
In the year ending March 2020, the average payment by the fund was nearly 27 million rials (about $118) that is 1.8 times higher than the minimum wage. In general, the total payment by the fund was 2.57 times higher than the minimum wage last year.
The slow exit rate from unemployment is one of the challenges facing unemployment insurance program in Iran. Some claim that the extended duration of unemployment benefits in Iran is to blame for extended unemployment and the intentional abuse of unemployment benefits.
More than 70% of those on the dole only exit to employment when they’ve exhausted their maximum benefit period. The exit rate is, of course, not the same for all; data show women and single individuals exit from the unemployment benefit program sooner than others. Also, the higher the benefit level, the longer people stay in the insurance program.
Unemployment benefits may also reduce job search efforts, as the absence of active recruitment agencies reduces the probability of workers finding well-paid jobs.
According to Article 7 of Iran Unemployment Insurance Law, the total duration of the payment of the benefit since the beginning of its allocation shall be a maximum of 36 months for single persons and 50 months for married persons or those with dependents.
Insured persons, ages 55 or older, receive unemployment benefits up to the retirement age. The minimum benefit is 55% of average earnings that must increase by 10% for each of the first four dependents. However, the total benefit should not be less than the minimum wage, or exceed 80% of average earnings of the insured.
The unemployed insured person’s average daily wage or salary for the calculation of unemployment benefit shall be the total insured person’s income in the last 90 days before unemployment, divided by the working days in this period.
Iran's Labor Market in Q1
The Statistical Center of Iran's latest report on the country's labor market shows Iran’s unemployment rate, the proportion of jobless population of ages 15 and above, stood at 9.8% in the first quarter of the current Iranian year (March 20-June 20), indicating a 1.1% decline compared with the same period of last year.
A total of 2,505,336 Iranians were unemployed in Q1.
Men’s unemployment stood at 9% while the rate for women hovered around 13.7%.
Over 1.9 million men and 602,074 women of ages 15 and above were jobless in Q1, according to the latest SCI report.
The unemployment rate was 10.7% for urban areas (2.03 million people) and 7.3% for rural areas (472,634 people). This is while SCI put Q1 labor force participation rate—the proportion of the population of ages 15 and above that is economically active either employed or looking for job—at 41% or 25.46 million people, registering a 3.7% decrease year-on-year.
Men’s and women’s economic participation rates were at 67.9% and 14.1% respectively.
About 21.07 million men and 4.39 million women of ages 15 and above were economically active in Q1, i.e., they were either employed or looking for a job.
Coronavirus Impact
The outbreak of coronavirus and its associated challenges have had a significant impact on Iranians in terms of labor force participation—the proportion of the adult population (ages 15 and above) who are employed or seeking jobs.
“A total of 2.76 million people [1.3 million men and 1.46 million women] were added to the number of inactive labor force in the first quarter; 14.8% of the employed population and 37.2% of unemployed population of the same period of last year were added to the population of people outside the labor force this year,” says Javad Hosseinzadeh, the head of SCI.
These individuals aren’t included in unemployment calculations, which only include people looking for work. This means that the fall in labor force participation translates to people not searching for work, chiefly due to the outbreak of coronavirus, and consequently a decline in unemployment rate.
"A decrease in the unemployment rate isn’t necessarily a sign of an improving economy. When people stop looking for jobs and drop out of the labor force, the unemployment rate will decline even though the true employment situation hasn’t improved. For an economy to run satisfactorily, the decline in unemployment rate must couple an increase in both economic participation and employment rates," the SCI chief said.
Hosseinzadeh referred to an unprecedented decline in average working hours due to the pandemic and said the average working hours have decreased from 45.8 hours per week in the Q1 of last fiscal year to 40.4 hours per week this spring.
Generally, during the first quarter of the current year, 56.1% of the employed population worked 44 or more hours per week and 36.7% put in fewer than 44 hours while 7.2% were temporarily absent from work, he added.
And in a further sign of the impact of coronavirus on Iran’s labor market, the official said, “Out of 20 groups that economic activities are divided into, only five groups reported an increase in their employed population in Q1 compared with last year’s similar period. The highest increase in the number of employees was posted for healthcare and social workers, and the sharpest decline was registered in fields, such as agriculture, industries and manufacturing, retail and wholesale, transportation, education, hotels and restaurants.”
Filing for Unemployment Over Coronavirus
The Ministry of Cooperatives, Labor and Social Welfare has registered a 94% decrease in the number of people filing for unemployment benefits during the month ending May 20 compared with that of the month ending March 19, according to Masoud Babaie, an official with the ministry.
A total of 851,864 people filed for unemployment benefits from February 29 to June 20, of whom 711,800 were found to be eligible for unemployment benefits, he was quoted as saying by IRNA.
“As per a decision by the National Coronavirus Taskforce, the fiscal month ending May 20 was the last month coronavirus unemployment benefits would have been available and the applicants had until June 20 to register at Bimebikari.mcls.gov.ir,” he said.
“A total of 18,255 people filed for unemployment benefits during the month ending June 20; their list will be sent to the Social Security Organization this week. Applications for benefits do not need to be evaluated by related commissions; they will be certified ,if they meet the requirements outlined on the website.”
With 151,724 applications, Tehran registered the highest number of unemployed workers in the country whereas North Khorasan recorded the lowest number of workers losing their jobs in the wake of the coronavirus outbreak with 4,391 files.
The second highest number of unemployment applications was recorded by Fars Province with 73,195, followed by Isfahan with 65,436 and Khorasan Razavi with 48,964.
The southern province of Khuzestan, which is now an epicenter of the virus, registered 31,942 official unemployment applications.
Mazandaran and Gilan, which emerged as the hardest-hit provinces at the start of the pandemic in Iran, have recorded 30,880 and 21,579 unemployment files. The amount of the unemployment benefit is 8.25 million rials per month that would be granted for three months.
