Iran’s labor market is coming under growing pressure as the economic fallout from the recent military conflict with the United States and Israel spreads across factories, workshops and service industries. Rising layoffs are rapidly turning unemployment insurance into one of the government’s biggest fiscal and social challenges, adding fresh strain to an already fragile state budget.
Officials say they are trying to accelerate unemployment insurance payments and support damaged businesses, but the scale of layoffs and the shortage of financial resources are raising concerns about whether the system can withstand a prolonged economic shock.
Authorities at the Ministry of Cooperatives, Labor and Social Welfare say they have simplified the unemployment insurance application process in response to worsening economic conditions. Labor Minister Ahmad Meydari recently said the government was reviewing applications submitted by workers affected by wartime disruptions and production losses.
Under the new procedures, employees of workshops with fewer than 20 workers can submit applications online through the national labor relations platform without visiting labor offices in person. Employers with more than 20 workers are required to provide group layoff lists directly to labor authorities so applications can be processed faster.
Meydari said eligible workers should theoretically receive unemployment benefits less than a week after registration. The ministry has also launched a hotline operating 18 hours a day to answer workers’ questions and follow up on cases, presenting the measures as part of a broader effort to preserve labor market stability during a period of severe economic uncertainty.
Substantial Burden
The financial burden created by the layoffs is already becoming substantial. On May 16, Ali Asghar Bayat, head of the High Council of Social Security Retirees, announced that 223,000 people had applied for unemployment insurance since military attacks began on February 28. Before the conflict, roughly 80,000 people were already receiving unemployment support, meaning the total number of beneficiaries may now approach 300,000.
Bayat said Iran’s Social Security Organization previously needed 210 trillion tomans ($1.18 billion) every month to cover pension and unemployment obligations, but the latest wave of layoffs is expected to increase that figure sharply. If authorities pay each newly unemployed worker 10 million tomans ($56) per month, wartime layoffs alone would add more than 2.2 trillion tomans ($12.4 million) in monthly expenses. Should the number of applicants eventually rise to one million people, the unemployment insurance bill could climb to 10 trillion tomans ($56.2 million) every month.
The growing unemployment bill comes at a time when Iran’s fiscal position was already under pressure from structural deficits, inflation and weak investment. Economists warn that a sustained rise in layoffs could deepen pressure on public finances while also weakening consumer spending and economic growth.
Earlier this month, Deputy Labor Minister Malek Hosseini described labor market conditions as “very difficult” and acknowledged that the government faces serious financial limitations. Still, he said authorities are trying to prevent temporary disruptions from turning into permanent business closures.
One of the ministry’s support programs offers subsidized loans to businesses employing between two and 50 workers that have continued paying insurance contributions. Under the plan, firms can receive financing equal to the monthly minimum wage for each employee—currently around 22 million tomans ($124)—for a two-month period. The loans carry a six-month repayment schedule with a 9% rate, equivalent to an annualized 18%. The government says the initiative is designed to support nearly 1.8 million workers and help businesses survive until economic conditions stabilize.
Officials, however, remain cautious about introducing broad insurance exemptions or contribution holidays because social security revenues are considered essential for both unemployment benefits and pension payments. Labor authorities argue that weakening contribution inflows could widen fiscal imbalances and potentially fuel inflation if the government is forced to finance shortages through monetary expansion.
At the same time, officials stress that not all sectors face the same level of risk. Some jobs, including freelance and home-based work, may recover relatively quickly once economic conditions improve, while workshops directly damaged during the conflict could disappear permanently. Authorities have also emphasized the importance of securing raw materials for key industries such as steel and petrochemicals in order to prevent wider industrial disruption and additional layoffs.
Long Waiting Lists
Despite official promises of fast processing, many unemployed workers report long delays in receiving benefits. According to field reporting by Donya-e-Eqtesad newspaper, some applicants who registered during the conflict are still waiting after five weeks with their files under review, while unofficial estimates suggest the process could take as long as three months in some cases.
For households already struggling with high inflation and economic uncertainty, such delays can create serious financial pressure. Workers who lose their jobs often experience an immediate collapse in income while rent, food and utility costs continue rising. Many families are therefore being forced to rely on savings or borrowing simply to cover basic expenses while waiting for support payments.
Some analysts believe the delays themselves reflect deeper funding shortages within the unemployment insurance system. When financial resources become constrained, institutions tend to slow approval processes to avoid creating new unfunded obligations. As layoffs rise and waiting lists grow longer, Iran’s unemployment insurance system is increasingly becoming not only a social safety net, but also a major test of the government’s fiscal endurance.
