The economically active population, including employed and unemployed people, reduced by 1.62 million in the second quarter of the current fiscal year (June 21-Sept. 21), indicating a 3.1% decline in labor force participation rate compared with the corresponding period of last year.
According to a report by Majlis Research Center, the research arm of the Iranian Parliament, 22.3% of the unemployed and 8.9% of employed persons were added to the population of economically inactive in Q2. Had they joined the population of people looking for job, the unemployment rate of the period under review would have been 18.5% rather than the official 9.5% announced by the Statistical Center of Iran.
The MRC report noted that of the more than 1.62 million people in the active population that dropped out of the labor market in Q2, 1.01 million were women and 615,651 were men. The second quarter’s economic participation rate fell by 3.1% year-on-year to reach 41.8%.
In fact, women experienced the biggest job losses in Q2. Out of 1.2 million people who lost their jobs in Q2, 460,000 were men and 750,000 were women. Men and women’s participation rates dropped by 2.7% and 3.5% to hit 69.5% and 14.1%, respectively.
The services sector accounted for the biggest share of the unemployed: out of 1.2 million persons who lost their employment in Q2, 817,000 were from the services sector. Out of 22 groups of economic activities, only three groups, namely “financial and insurance activities”, “construction” and “administrative activities and support services” saw a growth in employed population. The sharpest declines were registered by “accommodation and food services”, “information and communications” and “art, leisure and entertainment”.
MRC Puts Q1 Jobless Rate at 24%
The official unemployment rate, according to the Statistical Center of Iran, 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.
But the actual rate is higher than the official figure, at 24%, when taking into account people who dropped out of the labor force during the period, an earlier report by Majlis Research Center showed.
Given the significant rise in the number of economically inactive people, the unemployment rate is a misleading economic indicator when it comes to analyzing the impact of coronavirus crisis on the labor market.
Salaried workers make up a small fraction of total employees in Iran. In actuality, self-employed persons account for the bigger share of employment.
The impact of Covid-19 has been more pronounced on the labor market participation rate rather than the unemployment rate. This is important because SCI doesn’t count people as being unemployed if they’re not in the labor force. To be counted as part of the labor force, people must be available to work or actively looking for a job.
At present, the government is pursuing two plans to tackle the unemployment during the pandemic: loan payments and unemployment insurance payments.
Studies by the Ministry of Cooperatives, Labor and Social Welfare show the unemployment insurance plan has been more welcomed by people, since the government has failed to employ incentive mechanisms to safeguard the employed for the economic entities; it has pit the unemployment insurance scheme against the loan payment plan rather than making the two policies more compatible and complementary.
The MRC report goes on to say that when compared with other provinces, underprivileged provinces have benefited less from these two plans thanks to the higher share of unofficial employment there, i.e. jobs without health and retirement benefits. The underprivileged provinces are bound to suffer more from the consequences of the outbreak of coronavirus, if the government fails to address concerns in this regard.
SCI Chief on 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 in 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 are not included in unemployment calculations, which only count people who are 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 with 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 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 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 such fields as agriculture, industries and manufacturing, retail and wholesale, transportation, education, hotels and restaurants.”
