Economy, Domestic Economy
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Bloated Workforce Blights Economy

Costs imposed by the bloated workforce of some companies have strained Iranian pension funds’ finances.
Costs imposed by the bloated workforce of some companies have strained Iranian pension funds’ finances.
The retirement age in other countries is between 60 and 65 whereas in Iran people call it quits at the prime age of 40 or 50

Economists have time and again warned about the dire financial conditions of pension funds in Iran and that they are likely to go under in the not-too-distant future.

The costs imposed by the bloated workforce of some companies have strained pension funds’ finances, according to deputy minister of cooperatives, labor and social welfare, Hojjatollah Mirzaei.

Addressing a press conference on Saturday, Mirzaei said the government owes around 1,650 trillion rials ($43.09 billion) to pension funds, an amount equal to 70% of their total assets.

“Esfahan Steel Company’s staff doubled from 8,000 to 16,000 under the former administration and Iran Tobacco Company has 6,000 people on the payroll, thanks to the employment policies of former president Mahmoud Ahmadinejad’s final years in office,” he was quoted as saying by the Persian daily Shargh. 

“The budget needed for upgrading industrial machinery is spent on salaries, or distributed among shareholders.” 

The deputy minister said the retirement age in other countries is between 60 and 65 whereas in Iran people call it quits at the prime age of 40 or 50. 

“The wife and children of deceased pensioners continue to enjoy social security benefits and this has delayed pension plans by up to 90 years,” he said.

Based on international standards, the ratio of pension receivers to the workforce should be 1:6 whereas in Iran pensioners outnumber contributors by 1:0.9 or 1:0.5, according to Mirzaei. 

He referred to the parliament proposal of making women eligible for receiving pension after 20 years of work regardless of age and said the bill was rejected by the Guardians Council—the oversight body that reviews legislation to ensure compliance with Iran’s Constitution and the Islamic law, because it was against the principles of Resistance Economy.

Resistance Economy is a set of principles outlined by the Leader aimed at bolstering domestic production and cutting dependence on oil revenues.

Mirzaei believes that if executed, women’s early retirement would impose expenses close to 50 trillion rials ($1.3 billion) and 300 trillion rials ($7.78 billion) on the Civil Servants Pension Fund and Social Security Organization respectively, and drive one-third of women out of the job market to make room for men.

  Pension Funds’ Businesses

The Civil Servants Pension Organization recorded a rate of return of 120% in the current Iranian year (March 2016-17), generating 20 trillion rials ($522.32 million) compared to 8 trillion rials ($208.93 million) in the Iranian year to March 2014, the official told the presser.

Four of the country’s 18 pension funds, namely the Civil Servants Pension Organization, the Iranian Social Security Organization, Iran Steel Pension Fund and Farmers, Villagers and Nomads’ Social Insurance Fund, operate under the auspices of the Ministry of Cooperatives, Labor and Social Welfare. 

“In fact, Iranian pension funds are the major investors of different economic entities, including steel companies, petrochemicals, pharmaceuticals, transportation and tourism. About 16.5% of the country’s cement, 33% of steel, 21% iron ore, 10% petrochemicals, 40% of pharmaceuticals and 17% of country’s auto production belong to the ministry’s four pension funds. These four funds account for 85% of Iran’s pension coverage,” Mirzaei said. 

The Iranian Social Security Organization recorded a decent profit of 40 trillion rials ($1.04 billion) in the Iranian year to 2015, but other businesses run by pension funds are anything but profitable. 

For instance, Esfahan Steel Company’s accumulated debts stand at 65 trillion rials ($1.69 billion) whereas it pays 10 trillion rials ($261.16 million) annually,” he concluded. 

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