SCI Reviews Q2 Labor Market

EghtesadOnline: Iran’s unemployment rate, the proportion of jobless population of ages 15 and above, stood at 9.5% in the second quarter of the current Iranian year (June 21-Sept. 21), indicating a 1% decline compared with the same period of last year.

News ID: ۷۵۱۲۲۷

10 October 2020

The Statistical Center of Iran put Q1 labor force participation rate—the proportion of the population of ages 15 and above that is economically active either employed or looking for job—at 41.8%, registering a 3.1% decrease year-on-year.

Employment is defined as persons of working age engaged in any activity to produce goods or provide services for pay or profit, whether at work during the reference period or not at work due to a temporary absence from a job, or to working-time arrangement.

The total number of Q2 employed population was 23.54 million, down 1.21 million compared with the same quarter of last Iranian year.

The services sector employed 48.1% of the Iranian employed population, whereas industrial and agricultural sectors provided 33.4% and 18.5% of jobs respectively.

The services sector consists of wholesale and retail trade; restaurants and hotels; transport, storage and communications; financing, insurance, real estate and business services; as well as community, social, education, health and personal services.

The center provides two figures for the youth unemployment rate: the proportion of the population between 15 and 24 years and those between 18 and 35 years.

The youth unemployment rate of those between 15 and 24 years stood at 23.1% in Q2, posting a 3% decrease while the unemployment rate of those between 18 and 35 years stood at 16.9%, posting a decline of 1% YOY.

Underemployment, the condition in which people in a labor force are employed for less than 44 hours of service per week, stood at 9.3% of the employed population, 36% worked more than 49 hours per week.

Decline in Labor Force Participation

The outbreak of coronavirus and its associated challenges have had a significant impact on Iranians in terms of labor force participation.

The decline in Q2 labor force participation rate (3.1%) despite a drop in unemployment rate was also the case in the first quarter of the current fiscal year (March 20-June 20).

Labor force participation fell by 3.7% to 41% (or 25.46 million people) in Q1. Men’s and women’s economic participation rates were 67.9% and 14.1% respectively in the same period.

According to SCI, 21.07 million men and 4.39 million women of ages 15 and above were economically active in Q1, i.e., they were either employed or looking for job.

“A total of 2.76 million people [1.3 million men and 1.46 million women] were added to the number of inactive labor force in the first quarter. About 14.8% of the employed population and 37.2% of unemployed population of the same period of the last year were added to the population of people outside the labor force this year,” says Javad Hosseinzadeh, the head of SCI.

These individuals are not included in unemployment calculations, which only capture people who are looking for work. This means that the fall in labor force participation translates to people not searching for work, chiefly due to the outbreak of coronavirus, and consequently a decline in unemployment rate.

Iran’s unemployment rate, which is calculated by dividing the number of unemployed people by the total number in the labor force and then multiplied by 100 stood at 9.8% in Q1, indicates a 1.1% decline compared with the same period of last year. A total of 2,505,336 Iranians were unemployed in Q1.

"A decrease in the unemployment rate isn’t necessarily a sign of an improving economy. When people stop looking for jobs and drop out of the labor force, the unemployment rate will decline even though the employment situation hasn’t improved. For an economy to run satisfactorily, the decline in unemployment rate must couple with an increase in both economic participation and employment rates," the SCI chief added.

Hosseinzadeh referred to an unprecedented decline in average working hours due to the pandemic and said the average working hours have decreased from 45.8 hours per week in Q1 of last fiscal year to 40.4 hours per week this spring.

Generally, during the first quarter of the current year, 56.1% of the employed population worked 44 or more hours per week and 36.7% put in fewer than 44 hours while 7.2% were temporarily absent from work, he said.

And in a further sign of the impact of coronavirus on Iran labor market, the official said, “Out of 20 groups that economic activities are divided into, only five groups reported an increase in their employed population in Q1 compared with last year’s similar period. The highest increase in the number of employees was posted for healthcare and social workers, and the sharpest decline was registered in fields such as agriculture, industries and manufacturing, retail and wholesale, transportation, education as well as hotels and restaurants.”

Over 730K Lost Jobs Due to Covid-19

A total of 1.03 million unemployment insurance payments have been made since the start of coronavirus outbreak in mid-February to Sept. 15.

According to Masoud Babaie, an official with the Ministry of Cooperatives, Labor and Social Welfare, 730,902 people have lost their jobs due to the disease.

“The discord between the number of unemployment relief payments and the number of unemployed persons is that some workers lost their jobs in the month ending March 19 and therefore received three unemployment payments whereas others became redundant in the month ending April 19 and only got two payments,” he was quoted as saying by IRNA.

Noting that each payment was worth 11 million rials ($37) on average, the official said, “Thus far, 249,229 workshops and economic enterprises have laid off employees due to Covid-19.”

Service Providers Constitute Majority of Unemployed

Fifty-nine percent of all workers who lost their jobs due to the outbreak of coronavirus were service providers, according to Babaie.

“Sixty-two percent of businesses affected by the virus were also involved in the services sector. Workers in the industries and agriculture sectors accounted for 31% and 1% of the jobless due to coronavirus respectively. Nearly 31% and 3% of the virus-affected businesses were in industries and agriculture sectors, respectively,” he said.

“Close to 12,500-13,500 people typically file for unemployment benefits annually. However, over 871,400 applied for unemployment insurance following the outbreak of coronavirus by July 31, of whom 730,882 were subject to the three-month relief program. Since then, 107,000 new unemployment claims have been registered. These individuals will be subject to Article 7 of Iran Unemployment Insurance Law,” he was quoted as saying by Mehr News Agency.

According to Article 7 of Iran Unemployment Insurance Law, the total duration of the payment of the benefit since the beginning of its allocation shall be a maximum of 36 months for single persons and 50 months for married persons or those with dependents.

Insured persons, aged 55 or older, receive unemployment benefits up to the retirement age. The minimum benefit is 55% of average earnings that must increase by 10% for each of the first four dependents. However, the total benefit should not be less than minimum wages or exceed 80% of average earnings of the insured.

The unemployed insured person’s average daily wage or salary for the calculation of unemployment benefit shall be the total insured person’s income in the last 90 days before unemployment, divided by the working days in this period.