38% YOY Rise in Poverty Line Per Capita in Fiscal 2020-21

EghtesadOnline: Poverty line per capita increased by 38% year-on-year to reach 12.54 million rials ($45.93) per month in the fiscal 2020-21 due to high food and housing inflation rates, says the Ministry of Cooperatives, Labor and Social Welfare in a first-of-its-kind official report titled “Poverty Monitor” about the status of poverty and households’ welfare in the last Iranian year (ended March 20, 2021).

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25 August 2021

The Statistical Center of Iran has put average annual inflation of fiscal 2020-21 at 36.4%. It was 39.1% for the “Food and Beverage” group and 25.3% for the “Housing and Utilities (electricity, gas and water)” group.

Poverty thresholds, the minimum income needed to avoid poverty, are updated annually for inflation using the Consumer Price Index, and adjusted for family size.

The ministry’s report put the poverty line for three- and four-member households at 27.58 million rials ($101.02) and 33.85 million rials ($124), respectively.

Poverty rate increased from 22% in the fiscal 2017-18 to 32% in the fiscal 2019-20, suggesting that 32% of the population of the country, i.e., 26.5 million people (one-third of the population) lived below the poverty line in the fiscal 2019-20, which is the highest poverty rate registered in the past 10 years.

As a result of the sharp increase in poverty line due to the mismatch between households’ spending and income, more families have probably fallen below the poverty line and consequently poverty rate was bound to increase in the last fiscal year (March 2020-21).

The share of food in total expenditure of a household can be a poverty indicator in a region or a country. Evidence shows that poor people have to spend a higher share of their income on food. The higher this share, the lower is the welfare of the region or country.

According to data from the Central Bank of Iran’s Shaparak, the country’s nationwide payment network, the share of food in households’ total expenditure reached 23.4% in the fiscal 2020-21, indicating a 22.1% increase compared with the year before. Household expenses were on the decline from fiscal 2019-20 to the second month of the fiscal 2020-21, i.e., the month ending May 20, 2020.

Over fiscals 2017-18 to 2020-21, the gap between poor and rich households in the share of food in households’ total expenditure reached 4%.

The report also ranks Iranian provinces’ poverty status based on the indexes of Shaparak (share of food in households’ total expenditure) and the Cooperatives Ministry’s “Iranian Welfare Database”.

Poverty was highest in Sistan-Baluchestan and lowest in Tehran, it says. Eleven out of 20 poorest counties in Iran are located in Sistan-Baluchestan Province and three in Kerman Province.

In the fiscal 2019-20, households falling in the first income decile (those with the lowest income) spent 33% of their total expenditure on food while households falling in the 10th decile (those with the highest income) spent 26% of their total expenditure on food.

The first income decile in Sistan-Baluchestan spent 50.6% of their total expenditure on the provision of food and beverages (the highest share of food spending to total expenditure) against 25.9% of the spending by households living in Gilan who fall in the first income decile (the smallest share of food spending to total expenditure).

Employment statistics pertaining to fiscal 2020-21 suggest that the outbreak of coronavirus resulted in the loss of 1.5 million jobs in the first quarter of the last fiscal year (March 20-June 2, 2020). Notably, 100% of the lost jobs were informal employments on which low-income deciles depended. Underemployment accounted for more than 600,000 jobs out of 1.5 million lost jobs in Q1 of the last fiscal year. The first three low-income deciles accounted for 51% of informal employment compared with 22% of informal jobs held by the first three high-income deciles.

As a result, low-income deciles received a lower share of government’s coronavirus financial support. However, the ministry’s 10-million-rial per head ($36.63) coronavirus loans proved to be a more effective policy for low-income households and increased their spending. Other coronavirus support policies were effective for official workforce and high-income households.

The outbreak of Covid-19 led to a decline in sales of many businesses. Data by Iran’s nationwide payment network show the real value of transactions over 10 months to Jan. 19, 2021, decreased by 90% in air transportation sector, 79% in production of movies and music, 67.5% in travel agencies services, 38.4% in sports, entertainment and cultural activities, and 35.6% in legal and accounting activities compared with the same period of the year before.

The “Poverty Monitor” report also indicates a decline in per capita income that is calculated by dividing the country’s income (gross domestic product) by its total population. The minimal economic growth of the country during the past decade and the rise in population has resulted in a downward trend in per capita income.

Iranian households lost 34% or one-third of their per capita income in the fiscal 2019-20 compared with the fiscal 2011-12. The decline in per capita income has manifested in the constant decline in the welfare of Iranian people over the decade.