Tyranny of numbers

The rapid increase in the price of meat in the last few months has turned this food item of dubious health value into the lightning rod for the suffering of Iranian consumers.  Viewers of the BBC Persian program may recall a stark graphic that purported to show that the amount of red meat that a minimum wage worker could buy has declined from 74 kg per month in 1357 (1978) to 10 kg in 1397 (2018).

Quite apart from the silliness of measuring living standards with consumption of red meat, anyone with a rudimentary knowledge of living standards in Iran would have questioned a decline of this magnitude over the 40-year period.  Any editor interested in accuracy would have ordered the story fact checked.  Alas, when it comes to Iran’s economy fact checking seems unnecessary, especially if the “facts” in question confirm a reporter’s own bias or fit the prevailing negative stereotypes about Iran.

Here is the graphic in question. The caption reads, “With minimum wage, how many kilograms of red meat can you buy? The left column is for 1978 and the right for 2018. The minimum wage numbers on the second row are 1700 toman (17,000 rials) per month for 1978 and 11,100,000 in 2018.

It is easy to see why the ratio of 7.4 to one for a minimum wage worker’s consumption of red meat is not true.  I cannot locate the original numbers from the sources listed, but the sources could be wrong too.

To start with, the minimum wage in 1357 was 6300 rials per month, not 17000 rials (see Farshid Yazdani, Minimum wage in Iran, Goftegu no. 55; link in Persian).  The latter is for 1358 (1979), after the revolutionary government had raised the minimum wage by 2.5 times.

Taking the correct figure for 1978 and considering that the Consumer Price Index rose by about 1000 times during 1978-2018 (from 0.341 to 345), the real minimum wage must have risen by 70 percent in 2018 compared to 1978. Not a surprise if you consider that per capita GDP increased by the same amount during this period (see my recent posts here and here).

With such a sizable increase in the real minimum wage, how could its purchasing power in terms of meat have declined by a factor of 7.4?  For this to have happened, the price of meat must have increased faster than the CPI, which it did, but not by much.  In 2018 red meat sold for 3000 time more than in 1978, rising from about 330 to about 1,000,000 rials per kg.

According to these figures, the 1978 minimum wage which could buy about 20 kg of red meat in 1978, bought 11 kg in 2018, lower by a factor of 2, not 7.4.  It is also important to note that we do not know if we are comparing meat of the same quality.  People (and reporters) like to mention the highest price they have seen or heard for effect.

Consider these meat prices you can find on the internet today (digikala.com). If you take the lower priced meat as comparable to the meat reported for 1978, then the two minimum wages buy the same amount of meat.

There is one more important fact to note.  The comparison so far does not take into account that Iranians consume more animal protein now than they did in 1978.  The ability of the average consumer to afford red meat may be lower, but his or her total intake of meat (red meat plus chicken) has increased.

In the 1970s, Iran’s poultry industry was in its early stages and chicken was not an important part of the Iranian diet.  In 1975, the average Iranian consumed 16.4 kg of red meat and 3.3 kg of chicken per year (Mojtahed, PhD dissertation, Iowa State University, Table 14); these numbers today are 12 kg for red meat and 29 kg for chicken.  The drop in consumption of red meat is more than offset by increased consumption of chicken, doubling the total intake of animal protein from these two sources. The comparison of the amount of chicken bought with the monthly minimum wage then and now (more than a fourfold increase) confirms the positive nutritional effect of the rise of chicken in the Iranian diet.

One final note.  Iran’s economy has been hit hard with sanctions, which in the best of circumstances calls for a 5-10 percent cut in spending by the government, the private sector, and consumers.  After all, for consumers, red meat might not be a bad place to cut back.

Note: In an earlier version of this post, I had quoted meat consumption figures as per month; I have corrected them to be per year.  Thanks to a kind and well informed reader who pointed it out.