The Second Phase Of Subsidies Elimination: What Will That Mean For The Working Class?

Ever since the end of Iraq-Iran war in late 80’s, in accordance with the wishes of international financial organizations, World Bank, World Trade Organization, International Monetary Fund…, one main goal of every single administration in Islamic Republic of Iran (IRI) has been to eliminate all subsides that have been established in Iran throughout years of working people’s struggles.

Although elimination of subsidies was always discussed during Rafsanjani’s two terms (1989-1997) and Khatami’s two terms (1997-2005), mainly due to fear of a social backlash, this undertaking was never actualized until the second term of Ahmadinejad’s administration, 2009-2013; during which all popular protests against electoral fraud were violently and forcefully crushed, and repression of labour organizing had been intensified, leaving the popular movements in Iran at one of their lowest point. The method proposed for elimination of subsidies was publicized as “goal orientation of subsidies” (a terminology taken directly from US Republican lexicon) in the form of giving cash payments to people, while raising the prices of all items that had been previously subsidized, such as heating, gas, electricity, food items,… Although all independent economists correctly warned against such an approach, pointing out to the tsunami of inflation that it would create in Iranian economy, nonetheless they went ahead with handing out cash payments, calling it “First Phase” of subsidies elimination. Ahmadinejad never got an opportunity to implement the second phase, due to internal political and economic obstacles the first phase created, coupled with implementation of extensive international sanctions.

As a result during Ahmadinejad’s tenure the volume of liquidities in Iran jumped from 68,000,000,000 Tomans in 2003 to more than 500,000,000,000 Tomans in 2013. A seven fold increase, which was followed by a very modest gain in annual GDP from 2009 to 2001, while Iranian GDP actually shrunk by 1.9% in 2012 and 5.8% in 2013. World Bank estimates for 2014 in Iran is %1 growth. This brief juxtaposition provides a basic frame work for the root causes of current inflation in Iran.

Two years ago, IRI’s own “Statistical Centre” had determined average cost of living for a family of four in cities as 1,200,000 Tomans and 840,000 Tomans in country side. However this year’s official wage increase by “Supreme Labor Council” (government’s official labor organization) was only 25% to 609,000 Tomans. This is in clear violation of IR’s own Labor Code, which according to its Article 41 worker’s wages must be determined in proportion to prevailing rate of inflation and adjusted cost of living. The current rate of inflation has been reported anywhere from 36.7% to 41%. Thus according to “Association of Trades Councils” in the past two years workers’ purchasing power has been decreased by 75%. Same organization has estimated the current line of poverty as 1,800,000 Tomans (approximately about $700.00). It has also reported that majority of workers are not able to even meet their “caloric needs,” meaning that majority of workers live under poverty line and in hunger.

While Hassan Rouhani had promised during his campaign to increase all wages according to inflation rate, he clearly has no intention of fulfilling that, following the same deceptive path of all previous “promises” by IRI officials.

Minimum wages of 609,000 Tomans approximately equals $200.00 (1$= 3,000 Tomans). According to some reports in the past few days a dollar has been exchanged for up to 3310 Tomans. This makes the cost of labor in Iran one of the cheapest in the region and the world, as compared to China’s minimum wage of $280 per month or the Turkish minimum wages of $580. Thus the CEO of “Auto parts makers association” Najafi’manesh asserts that “cheap labor (is) an incentive for foreign investments and expansion of automotive industries in Iran”.

What is often forgotten is the fact that Labor Code, which is a total formality and in reality is never administered or implemented, only applies to shops with more than ten workers, while more than half industrial productions in Iran are done in shop with less than ten workers, thus depriving them from even these meager protections.

Another significant point to keep in mind is the prevalence of temporary work force in Iranian economy. According to a January 2014 report by ISNA 80% of Iranian workers are working by “blank contacts” (this refers to contracts where workers simply only sign their names, but all other details are left to employers, which leaves the employees with zero protection or benefits of any kind). These temporary contracts vary from three days, to two weeks, twenty days, one month to three months.

Taking all the above facts and figures into consideration, the question is whether people in Iran, particularly the most disadvantaged section of the working classes and the poor would be able to endure such sufferings any more. Iran moving towards revolts or not? We shall see.


1) “Inflationary tsunami and revolt of the poor in Iran” (Sunami tavarom va shoresh tohi dastan) Arash Zehforosh.

2) “They’re taking away whatever is left from the poor and disposed” An interview with Dr. Raiesdana about elimination of subsides.

This article was originally published in May 2014 by Hoshang Tarehgol in the English Bulletin of IASWI (International Alliance in Support of Workers in Iran).〈=en

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