Spotlight on Iran

February 20, 2013 - Esfand 2, 1391 Editor: Dr. Raz Zimmt

       Struggling to make ends meet: Iran’s workers step up fight to raise minimum wage
  •  erosion of workers’ wages as a result of the sharp price increases.
  • The talks on the revision of the minimum wage have highlighted differences between the approach of the workers’ representatives and that of the employers’ representatives. The workers are saying that the minimum wage should rise by tens of percent, claiming that it has to reflect the actual increase of an average family’s consumption basket and not just the official inflation rate. The employers, on the other hand, are arguing that, given the economic crisis that is gripping the productive sector, the minimum wage has to be revised by less than 20 percent. They are saying that they have no ability to compensate the workers for the erosion of their wages, and that it is the government that needs to help the workers.
  • The discourse on the increase of the minimum wage reflects the growing frustration among the Iranian public about the rising cost of living and the effect of inflation on Iranians’ ability to fulfill their basic needs. The reservations voiced


The Supreme Labor Council is soon expected to make a decision on revising Iran’s minimum wage ahead of the new Iranian year. The issue is drawing substantial public and media attention in light of the economic crisis and theby the employers over a considerable increase in the minimum wage reflect the growing distress of the productive sector as a result of the sanctions and of the government’s economic policy.

The Supreme Labor Council is soon expected to make a decision on revising Iran’s minimum wage ahead of the new Iranian year (1392), which begins on March 21, 2013. The council, made up of representatives of the government, the workers, and the employers, is responsible for the annual revision of the minimum wage, which affects nearly 12 million workers in Iran. The minimum wage is revised as per Clause 41 of the Labor Law, which states that the revision shall be made according to the inflation rate and in order to guarantee the livelihood of the workers’ families.

The council’s most recent revision of the minimum wage was in March 2012. Last year it was raised by approximately 18 percent from 330,000 tomans to 389,700 tomans per month (approximately 320 dollars at the official exchange rate and 110 dollars at the free-market exchange rate). Last week the council held a meeting during which representatives of the government, the workers, and the employers presented their positions on the revision of the minimum wage. A final decision on the issue will likely be made in the next few weeks. The issue has been at the center of public and media attention recently in light of the economic crisis and the erosion of workers’ wages as a result of the sharp price increases and the fluctuations in the foreign currency exchange market.

Media in Iran released various estimates about the anticipated increase in the minimum wage ahead of the council’s decision. Mehr News Agency speculated that if the minimum wage is increased according to the average monthly inflation rate this past year, it will likely be set at 474 to 501 thousand tomans per month.

The required revision to the minimum wage according to the inflation rate (Mehr, February 5)

Month

Inflation rate (in percent)

Minimum wage (in tomans)

Farvardin

21.8

474,654

Ordibehesht

22.2

476,213

Khordad

22.4

476,993

Tir

22.9

478,941

Mordad

23.5

481,279

Shahrivar

24

483,228

Mehr

24.9

486,735

Aban

26.1

491,412

Azar

27.4

496,478

Dey

28.7

501,544

Bahman

?

?

 

The talks on the revision of the minimum wage have highlighted differences between the approach of the workers’ representatives and that of the employers’ representatives. The workers’ representatives are saying that the minimum wage should increase by tens of percent to compensate them for the erosion of their wages. The employers’ representatives, on the other hand, are arguing that, given the economic crisis that is gripping the productive sector, the minimum wage has to be revised by less than 20 percent. They are saying that they have no ability to compensate the workers for the erosion of their wages, and that it is the government that needs to help the workers with the means it has available.

The workers’ position on the increase in the minimum wage

In the past several months the workers’ representatives have stepped up their fight for a considerable increase in the minimum wage. In December 2012 representatives of the Free Union of Iranian Workers presented the minister of labor and welfare with a petition signed by 10,000 people which included a demand to increase the minimum wage in light of the economic crisis and the rising costs of living (http://iranlaborreport.com/?p=2134).

According to the workers’ representatives, the recent years’ increase in the minimum wage has been unable to compensate them for the erosion of their wages caused by the sharp price increases. The minimum wage, they said, needs to be revised not only according to the official inflation rate released by the Central Bank, but also according to the actual changes in the consumption basket of an average family of four. Valiollah Salehi, the workers’ representative in the Supreme Labor Council, announced recently that even a 30-percent increase in the minimum wage will not be sufficient to cover the needs of the workers. He said that in recent years the minimum wage has been revised only in accordance with state interests and has been inconsistent with the spirit of the Labor Law, aimed to guarantee the needs of the workers and their families. Valiollah noted that a situation in which there are poor workers in Iran must not be allowed, and that the workers should not pay the price of the economic difficulties facing some of the factories (Tabnak, February 11).

Shahpour Ehsani-Rad, also an activist for workers’ rights, has warned that this year the workers will not give up the demand to have their wages revised and will not agree to anything less than a 25-percent increase of wages. He noted that there has been an abnormal increase in the inflation rate this past year, which has caused a significant increase in the expenses of workers’ families (Jaras, February 15). Another workers’ representative, Abdollah Mokhtari, also demanded a substantial rise in the minimum wage. The expenses of the workers’ families have grown by two times this year, he said, and the revision of the minimum wage has to reflect this sharp increase. Davoud Amiri, a workers’ representative from North Khorasan Province, warned that if the Supreme Labor Council does not take into account the price increases in its decision on revising the minimum wage, the workers will appeal the decision to the Supreme Administrative Court. Amiri stressed that receiving a sufficient salary that is consistent with the workers’ expenses is their absolute right (Jaras, February 13).

Majles member Ali-Reza Mahjoub, the head of the workers’ lobby in the Majles, expressed his support for the workers’ position on the minimum wage and announced that it needs to be doubled. He defined the employers’ proposal to raise the minimum wage by a moderate 15 percent as “unrealistic and unreasonable”, and argued that a minimum wage of less than 800 thousand tomans is not enough to cover the minimal life requirements of the workers in the current economic conditions (Tabnak, February 12).

The Iranian media, too, said that the workers should be compensated for the ongoing erosion of their wages. The reformist daily Mardom Salari argued that half of Iran’s population are unable to cover their minimal expenses. An editorial published by the newspaper on February 11 said that over 30 million people (workers and their family members) will be affected by the decision to revise the minimum wage, and that the minimum wage has to provide the workers and their family members with economic welfare that includes food, clothes, housing, education, health, leisure, and entertainment.

The daily pointed out the growing difference between the minimum wage and the line of poverty, currently set at 900 thousand tomans in smaller cities and 1.5 million tomans in Tehran and other big cities. According to the daily, the minimum wage is insufficient for the basic food needs of an average family of four, which amount to approximately 600 thousand tomans.

Figures on wage erosion and the increasing cost of the consumption basket

As part of the public discourse on revising the minimum wage, the media recently published up-to-date figures that demonstrate the ongoing erosion of workers’ wages and the need for a considerable increase in the minimum wage to allow them to keep up with their day-to-day expenses.

On February 5 the conservative website Khabar On-line released figures indicating a considerable erosion of the minimum wage compared to the inflation rate in the past two years. The website cited figures provided by Iran’s Central Bank and Statistical Center (SCI), according to which in the past 34 years the minimum wage has increased by an average 3 percent more than the inflation rate. While the average inflation rate between the years 1978 and 2012 was 19 percent, the minimum wage increased by an average 22 percent per year.

This figure, however, does not reflect the ongoing erosion of the minimum wage since the early 1980s. In 1980 – 1989 there was a considerable erosion of the minimum wage as a result of the economic crisis brought on by the Iran-Iraq War. During that time, the prices of products and services sharply increased by over 280 percent, while the minimum wage rose by less than 30 percent. After the war was over, the minimum wage did increase in accordance with the rise of the inflation rate, but that was not enough to compensate the workers for the erosion of their wages during the first decade of the revolution. What is more, in the past two years prices have once again increased by over 10 percent more than the increase of the minimum wage.

Comparison between the rise of the inflation rate and the increase of the minimum wage

Year

Minimum wage (tomans)

Increase of minimum wage (percent)

Inflation rate (percent)

Difference between increase of minimum wage and inflation rate (percent)

1974 – 1975

315

1975 – 1976

393

24.8

9.9

14.9

1976 – 1977

456

16.0

16.6

-0.6

1977 – 1978

540

18.4

25.1

-6.7

1978 – 1979

630

16.7

10.0

6.7

1979 – 1980

1,701

170.0

11.4

158.6

1980 – 1981

1,905

12.0

23.5

-11.5

1981 – 1982

1,905

0.0

22.8

-22.8

1982 – 1983

1,905

0.0

19.2

-19.2

1983 – 1984

1,905

0.0

14.8

-14.8

1984 – 1985

1,905

0.0

10.4

-10.4

1985 – 1986

2,160

13.4

6.9

6.5

1986 – 1987

2,160

0.0

23.8

-23.8

1987 – 1988

2,280

5.6

27.7

-22.1

1988 – 1989

2,490

9.2

28.9

-19.7

1989 – 1990

2,490

0.0

17.4

-17.4

1990 – 1991

3,000

20.5

9.0

11.5

1991 – 1992

5,001

66.7

20.7

46.0

1992 – 1993

6,801

36.0

24.4

11.6

1993 – 1994

8,982

32.1

22.9

9.2

1994 – 1995

11,682

30.1

35.2

-5.1

1995 – 1996

16,000

37.0

49.4

-12.4

1996 – 1997

20,721

29.5

23.2

6.3

1997 – 1998

25,446

22.8

17.3

5.5

1998 – 1999

30,153

18.5

18.1

0.4

1999 – 2000

36,183

20.0

20.1

-0.1

2000 – 2001

45,801

26.6

12.6

14.0

2001 – 2002

56,790

24.0

11.4

12.6

2002 – 2003

69,846

23.0

15.8

7.2

2003 – 2004

85,338

22.2

15.6

6.6

2004 – 2005

106,602

24.9

15.2

9.7

2005 – 2006

122,592

15.0

10.4

4.6

2006 – 2007

150,000

22.4

11.9

10.5

2007 – 2008

183,000

22.0

18.4

3.6

2008 – 2009

219,600

20.0

25.4

-5.4

2009 – 2010

263,520

20.0

10.8

9.2

2010 – 2011

303,000

15.0

12.4

2.6

2011 – 2012

330,300

9.0

21.5

-12.5

2012 – 2013

390,000

18.1

28.7

-10.6

 

To gain further support for their position on a considerable increase of the minimum wage, the workers’ representatives in the Supreme Labor Council presented figures demonstrating the sharp increase in the cost of a consumption basket for an average family of four.

Monthly expenses of an average family of four (as presented by the workers’ representatives, based on Central Bank data and the prices of 12 basic products and services, Asr-e Iran, February 5)

Description

Relative share of expenses (percent)

Month of Dey (December – January 2012) (rials)

Month of Azar (November – December 2012) (rials)

Food

28.49

6,727,813

6,508,937

Smoking

0.52

122,796

118,801

Housing

28.60

6,753,789

6,534,068

Footwear

6.22

1,468,831

1,421,046

Furniture

6.26

1,478,277

1,430,184

Health and medications

5.54

1,308,252

1,265,690

Transportation

11.97

2,826,673

2,734,731

Communications

1.63

384,919

372,396

Culture and leisure

3.8

897,357

868,163

Education

2.07

488,823

472,920

Restaurants and hotels

1.72

406,172

392,958

Various products and services

3.18

750,946

726,515

Total expenses for a family of four

100

23,614,648

22,846,393


Monthly expenses of an average family of four on 18 basic food products

Product

World daily per capita consumption (grams)

Iran’s daily per capita consumption

Monthly per capita consumption (kilograms)

Monthly consumption for a family of four

Market price range per kg (rials)

Bread

68

320

9.60

38.40

345,600

Rice

60

100

3.00

12.00

660,000-540,000

Pasta

20

0.60

2.40

39,600-46,800

Dairy

60

33

1.00

4.00

183,200-155,592

Potatoes

70

2.10

8.40

58,800-42,000

Green vegetables

356

280

8.40

33.60

504,000-436,800

Other vegetables

356

280

8.40

33.60

445,200-346,080

Fruit

400

260

7.80

31.20

686,400-569,400

Red meat

100

50

1.50

6.00

1,656,000-1,392,000

Fish

50

25

0.75

3.00

360,000-270,000

Poultry

67

2.01

8.04

402,000-365,820

Eggs

66

25

0.75

3.00

102,000-93,600

Milk

822

240

7.20

28.80

351,360

Cream

67

2.01

8.04

178,488

Cheese

33

1.00

4.00

320,000

Butter

8

0.25

1.00

120,000

Oil

40

1.20

4.80

202,666-188,266

Sugar

45

1.35

5.40

105,300-95,580

Total

14

 

 

 

6,727,813-5,850,185

The position of employers’ representatives on raising the minimum wage

In contrast to the workers’ representatives, the employers’ representatives, as already mentioned, said that they are unable to compensate the workers for the erosion of their wages, and that the responsibility for helping them rests with the government. Davoud Javani, chairman of the Employers Union, said recently that the revised minimum wage should be between 459,840 and 467,640 tomans. He noted that the employers will not agree to raise the minimum wage by more than 20 percent. According to Javani, the government has not given the employers sufficient support in recent years, which is why they cannot be the only ones to bear the burden of the price increases. The government has to compensate the workers in various ways, such as paying cash benefits or issuing ration stamps (Asr-e Iran, January 26).

Hossein Ahmadizadeh, another representative of the employers, also argued that it is the government that has to protect the workers by paying special cash benefits. He noted that the employers have no ability to make up for the substantial difference between the workers’ wages and expenses, and that the employers’ expenses have also increased this past year. He warned that a sharp increase of the minimum wage will lead to the shutdown of many factories, which are already forced to operate at limited capacity (Alef, February 18).