Tyranny of numbers

Recently the World Bank updated the poverty lines it publishes for countries in different income categories from the 2011 PPP version to 2017. The WB lines are used primarily to obtain comparable poverty rates across the globe. They often differ from national poverty lines that governments use to decide who gets anti-poverty assistance and who does not. Iran does not have an official national poverty line, though from time to time official reports appear that offer poverty lines, as did the Ministry of Labor earlier this month. The Iranian government bases its cash and in-kind assistance to the poor on its own criteria. In this post, I update my previous estimates of Iranian poverty rates to the new WB poverty lines.

The strength and the longevity of protests led by young women, later joined by young men, that have engulfed Iran since mid-September suggest that youth grievances go beyond strict dress codes. Years ago, in 2006, I directed the Middle East Youth research program at Brooking Institution’s Wolfensohn Center for Development. In this post I revisit the topic of youth social exclusion, which a few years later would be recognized as the main impetus to the Arab Spring protests.

The latest report by the Statistical Center of Iran (SCI) for Q2 of the Iranian year 1401 (21 June to 20 September 2022) shows a total of 23.8 million employed compared to 23.4 million a year ago. The increase of 374,000 jobs is smaller than the size of the cohort of half a million new job seekers and, more importantly, falls short of the one million new jobs President Ebrahim Raisi promised during his presidential campaign in 2021.

The increase in total employment is somehow less disappointing if you consider that employment in industry and services rose by 685,000, which would have been closer to the one million jobs target had agriculture not lost 300,000 jobs between summer 2021 and 2022. For the second quarter, services added more than half a million jobs. Industry added another 122,000 jobs, which is not a stellar performance but much improved from the loss of 160,000 jobs spring over spring. Employment in agriculture was down in both spring and summer quarters of this year.

The divergent experiences of agriculture and the other two sectors suggests that the loss of jobs in agriculture may be due to factors special to that sector, such as the decade long drought. Clearly, the government cannot do much about it in the near future, but all previous governments are collectively responsible. Lack of regulation to control the extraction of underground water from common aquifers, and subsidies to electricity and diesel fuel that run the water pumps that are rapidly depleting Iran’s precious aquifers are two of the principal culprits.

The recent protests make it unlikely that the government can do much about energy prices or hasten job growth any time soon. So, to reach the government’s target of two million new jobs by this summer something must be done about easing restrictions on Iran’s external trade and the political crisis that has engulfed the country in the past two-and-a-half months.

Back to the employment report. The unemployment rate for the 15+ population was down by 0.7 percentage point, to 8.9%, despite a slight increase in the number of people participating in the labor market. The unemployment rate of young workers (18-34 years old), fell by more (1.4 percentage points), to 16.2%. These changes show that the economy was probably growing this summer, albeit slowly.

The unemployment rate for women also fell, though by less than for men. Women’s unemployment rate is more than twice that of men– 17.2% vs. 7.3% in summer 2022. A similar ratio held for the the age group 18-34 years old, 29.3% for women vs. 13.1% for men.

A quick note about the data. The numbers reported here are based on SCI quarterly report. Since for the past several months, the SCI site has been inaccessible from outside Iran, I place their latest employment report (in Persian) in the link below. I hope that the loss of access to SCI reports is temporary because in this day and age when news outlets report from each other, internet reports can be highly misleading. For example, a news site that claims to operate under an official license from Iran’s Ministry of Culture and Islamic Guidance last week reported the loss of “over 3 million” jobs in one year. It based this claim on a report by the usually reliable Eghtesad News but without providing a link.

Surprisingly, despite the fact that timely information about the speed with which prices rise is published regularly at the end of each month, there is a debate (link in Persian) whether inflation is rising or falling. The facts are not in dispute, but their interpretation is. The monthly rate of inflation has slowed down considerably in the last three months but that is not the only way to measure inflation.

If you are a regular reader of this blog, you are not surprised by the inflation data for Mordad (the Iranian month ending August 21). As in previous cost-push price increases, inflation spiked three months ago following the removal of food subsidies, but in the last two months it has moderated. Last month prices rose by under 2 percent (annual rate=26.3%), much lower than in June and July. Prices will moderate further if a nuclear deal is reached and sanctions ease.

There is no shortage of grievances in Iran, so explaining the recent protests that have engulfed the country is not hard. The economy has stagnated for over a decade and Inflation has been very high. But the timing of the protests suggests a connection between the protests and President Ebrahim Raisi’s program to cut food subsidies. Some media reports speak of “bread protests”, but the price of the staple bread has not changed.

In an IIEA panel held (virtually) on March 9, 2022, Nadereh Chamlou asked how sanctions have impacted women’s employment (about min 1:22 in the video). My answer was that identifying the impact of sanctions on women’s employment is difficult but that I thought that Covid hit women harder than sanctions. The loss of female employment has been observed around the world, where women had to quit their jobs to care for their children whose schools were closed, or had other Covid-related extra household work. Later on, Hashem Pesaran questioned my conjecture on the importance of Covid for women’s employment, which is why after the panel I looked more carefully at the labor force survey data, which confirm my statement.

The data from LFS for the past ten years show that the number of women employed reached its maximum during 2018-2019 at 4.3 million, when sanctions were toughest. This number fell to 3.7 million in 2020, most likely because of Covid since sanctions did not intensify in 2020. Furthermore, this decline was not matched by decline in men’s employment as the ratio of female to male employment also fell in 2020 for all age groups (see Table below). For prime age workers (25-54 years old), this ratio fell from 24.4% in 2019 to 21.3% in 2020. Roughly twice as many women lost their jobs in 2020 compared to men (665,000 vs. 357,000).

The latest data from the Statistical Center of Iran (SCI) for inflation show that prices rose faster last month (the Iranian month of Dey ending on January 20) compared to the month before. At that time, inflation was on its way down from its peak of 59% annual rate in September to 22% in November. Last month it was back up to 32% last month. This is potentially bad news for the Raisi government, which is keen to show that his government can control inflation and dispel endless rumors that Iran’s economy is on the brink.