A tiny fraction of Iran’s population, about eight percent, can be considered as wealthy. The large majority is either poor or middle-income. The rich are experiencing exponential growth in wealth while the number of poor swells and has doubled in three years.
The Iranian Welfare Database (IWD), which only monitors people who receive government cash subsidies, reported that 77.4 million of Iranians receive the paltry monthly payment (less than $2). Thirty-five percent of this population segment is poor, 57% middle income and eight percent rich. Financial data on seven percent of Iranians is not available, the Persian-language daily Shargh reported.
IWD said 5.8 million Iranians are rich. According to the classification by the Ministry of Cooperatives, Labor and Social Welfare, wealthy households who receive cash subsidies mainly are in the tenth income decile. They are divided into two categories: government employees and non-government employees.
These two groups with 5.8 million people, account for 8% of the households. More than 98% of them own a car; 91% of rich households who are on government’s subsidy list own Justice Shares compared to 61% of households who donot have government employees.
Justice Shares are shares of government-owned companies given free to the six lowest income deciles almost 16 years ago. Shareholders were not allowed to sell the shares until recently. Now they can sell 60% of their portfolio.
The rich employed and non-employed households are classified within the 10% of the population, i.e. the tenth decile. But only a tiny fraction of them are the so-called billionaires.
Ahmad Maydari, a former deputy minister of cooperatives, calls them “the rich hundredth”. A population that according to last year’s Forbes report include 250,000 Iranians whose wealth exceeded one million dollars and live mostly in Tehran.
Where Does the Money Come From?
Almost 68% of government employees are among the top three high-income deciles, Hamid Pourmohammadi, a senior official with the Plan and Budget Organization, told Fars News Agency last year.
According to the Forbes report, wealthy Iranians made their fortune in the stock market and cryptocurrency; the wealth was mostly gained thanks to their access to insider information and energy rents!
Forbes said the number of mega-rich Iranians grew by 21.6% in 2020, while average growth in this particular group in the world was not more than 6.3% during the period under review.
The return on Iran’s capital market jumped by an unprecedented 625% between March and July 2020 from the same period the year before. The Standard and Poor’s 500, or the S&P 500 index, which tracks the performance of 500 large companies listed on stock exchanges in the United States, registered a return rate of only 16%. The report also underlines the fact that cryptocurrency mining in Iran is tempting thanks to the very low electricity prices.
27 Million in Absolute Poverty
Meanwhile, according to a report by the Persian-language newspaper Hamshahri, citing the Ministry of Cooperatives, Labor and Social Welfare, 27.1 million Iranians live in absolute poverty.
Making a bad situation worse is the fact that only 30% of poor families are covered by national humanitarian organizations, namely, the Imam Khomeini Relief Foundation and the State Welfare Organization; 70% of the poor in Iran receive no financial assistance of any sort.
A report by the Social Security Organization Research Institute says the army of poor has almost doubled in three years. “In the three years between March 2017 and 2020, the population living below the poverty line has more than doubled.”
Last year, the Statista Database announced that Iran ranked eighth in the world in terms of the Misery Index.
Workers and Pensioners
The IWD noted that the middle class in Iran is mostly comprised of laborers, retirees and government employees.
A total of 13.9 million households or 57% of the total households who receive cash subsidies fall into middle-income deciles, it added. These households are divided into four categories based on economic clout, income and employment.
The first category includes government workers and pensioners accounting for 2.2 million households or 15.8% of the total middle-income households. Sixty-four percent of these households own a car and 91% own Justice Shares. On average, hardly 24% of poor households own a car and 82.5% own Justice Shares.
The second group includes laborers and those working in the private sector. They account for six million households or 43.3% of the total middle-income households. An average of 66% of households in this category own a car and 70% have Justice Shares.
The third segment comprises non-governmental retirees. They include 2.4 million households or 17.3% of the total middle-income families; 46% of these households own a car and 72% hold Justice Shares.
Households without a fixed income are classified in the fourth category. They account for three million households or 21.7% of the total middle-income households. On average, 75% of these households own a car and 67% have Justice Shares. These households relatively enjoy better economic and living conditions compared with the first three peers despite having less job security and lacking insurance protection.
Rising Income Inequality
“It’s apparent that poverty will rise when the average economic growth rate for 10 years has been zero and the 20-year period average of household income has not increased relative to their expenses,” Davoud Souri, an economist, said.
“Rent-seeking and speculative practices plus corruption makes a small fraction of people richer and richer.” Souri added.
“This is despite the fact that tax revenue has increased in the past 10 years. Notably, the burden of taxation has been on employees and this reflects income discrimination and the inequitable distribution of wealth.”
He added that, “The widening income gap could lead to the decline of the middle class and emergence of only two classes, the rich and the poor. If and when the country’s wealth is owned by very few people, the general public will be deprived of economic opportunities.”
