Parliamentary Research Center: Coronavirus Will Cause 2 to 6 Million People to Lose Jobs

The Parliamentary Research Center, by examining Iran’s economic situation affected by coronavirus, has estimated the consequences until the end of the current year as unemployment for 2 to 6 million people, and stated that the impact on lower deciles will be greater.

The Parliamentary Research Center in a report has assessed the macroeconomic dimensions of the coronavirus outbreak in Iran and estimated that Iran will be dealing with the economic consequences of the virus until the end of 2020 and between 2 million 870 thousand to 6 million 431 thousand of current employees will lose their jobs due to the consequences of this disease.

The Parliamentary Research Center in its review points out that the coronavirus outbreak occurred in Iran when the country’s economy “had gone through two difficult years of 2018 and 2019. The reduction in fixed capital formation in Iran’s economy, according to this center’s report, has caused the potential production capacity of the economy to decrease and even achieving the welfare level of nine years ago, which is 2011, is difficult.

The high inflation rate for the two mentioned years and the prediction of inflation above 25 percent for the current year, according to the report, have caused “many businesses to lose the ability to continue their activities,” a situation that has put Iran’s economy in recession with uncertainty.

The Parliamentary Research Center in explaining the current situation adds: “The decrease in demand for Iran’s exports (and generally the decrease in global trade) affects total demand from the foreign trade side. In the domestic sector as well, total demand is affected both due to the decrease in household income and the decrease in some goods and services that are related to increased virus spread (such as transportation, restaurants and hotels, clothing, etc.). On the other hand, the total supply of the economy is also facing a supply shock due to disruptions in the supply chain of raw materials and limitations on the activities of some trade units.”

The Meaning of Parliament’s Report for Household Livelihoods in Iran

The Parliamentary Research Center says that under different scenarios, between 5.7 to 11 percent of economic output will decrease under current conditions and “although all income groups will be affected by the new situation, the impact on lower deciles (more deprived) will be greater.” What is the reason?

The report says that only about 13 percent of first decile households and 24 percent of second decile households paid retirement insurance premiums in 2018 and are under (non-medical) insurance coverage. This ratio in the tenth decile (wealthier) is 35 percent. In other words, “support that businesses provide in the form of waiving employer and employee insurance contributions or support in the form of unemployment insurance payments have had low precision in reaching lower income deciles and will provide the most support from middle and upper deciles.”

Beyond that, “any support under current conditions will most likely be financed from inflationary sources and consequently will be at the cost of imposing inflation on the economy. Therefore, if support is directed to formal labor, a large portion of the labor force, which is mostly in lower income deciles, will be deprived.” This means that “middle and upper deciles are supported at the cost of imposing inflation on the entire society and especially on lower deciles.”

The Government’s 5 Trillion Toman Package

Simultaneously with the Parliamentary Research Center’s report, Masoud Babaei, director general of employment support and unemployment insurance at the Ministry of Labor, told IRNA that “the government has allocated 5 trillion tomans to support the livelihoods of those who have been forced to lose their jobs during the coronavirus outbreak, which will be injected into the unemployment fund to support those who have been unable to continue working due to business closures in the coronavirus epidemic.”

However, the point is that “under normal conditions, if someone loses their job and, like those covered under labor law, has paid 3 percent unemployment insurance premium, they can, upon requesting unemployment insurance use at labor offices and after going through administrative procedures, receive up to 80 percent of their monthly salary as unemployment benefits.” This is not the case for a large portion of first and second deciles, namely the more deprived groups.

Masoud Babaei reported the registration of 760 thousand people in the unemployment insurance system and said that 650 thousand people were identified as eligible to receive unemployment insurance.

According to him, unemployment insurance applicants in high-risk occupations will receive unemployment insurance until the end of April, and “low-risk occupations that, by presidential order, should begin their activities.” He said that employees in this category are scheduled to receive unemployment insurance until the end of March. Also, the start of payment, the amount of payment, and the duration of payment have not yet been announced, and the resumption of unemployment insurance payments to eligible persons is also “subject to the national coronavirus response headquarters confirming whether, with the continuation of the coronavirus outbreak and the closure of workshops, the eligible persons are entitled to renewed benefits or not.”

The Most Vulnerable Among the Vulnerable

In Iran, there is no shortage of people who work without insurance, without minimal work safety, and with wages lower than the minimum determined wage. Recently, ILNA news agency in a report, citing some studies, wrote that women are the largest number in this group: “Last year, people with wages lower than the minimum salary and sometimes up to half the determined amount went to work. Among these, women, for various reasons, are more willing to do such work than men. They may be covered by their husbands’ insurance, so they more easily accept the lack of insurance. They may be female heads of household and feel a strong need for income, however meager. Based on this, they accept agreement with employers to receive lower wages. These informal workers are separate from that group of women who work at home but have no management over the sale of their products and income. Such conditions may worsen in the post-coronavirus period.”

Hassan Rouhani himself acknowledged that the amount of assistance the government provides to the weaker sectors of society is negligible, but also said that greater support is currently beyond the government’s capacity.

The International Monetary Fund in its latest report on the impact of the coronavirus crisis on the world’s economic situation predicts that Iran’s economic growth in the current year will be negative for the third consecutive year and gross domestic product in this country in 2020 will decline by six percent.

This international institution has estimated that this year inflation in Iran will be slightly over 34 percent and negative economic growth and severe inflation will continue next year.

The problem of a sharp decline in oil exports and their prices is another problem that has confronted the oil-based economy of the Islamic Republic with a tremendous challenge, which was not easy to overcome even without the coronavirus outbreak.

Source: DW