Does Increasing Wages Mean Improved Living Standards?

Protests against declining purchasing power, falling living standards, and discrimination were reflected in the slogans of recent demonstrations in cities across Iran. Mehrdad Lahouti, a member of the Budget Consolidation Commission, states: "Next year, the salaries of government employees earning less than 5 million tomans will increase by 10 to 18 percent." This official adds: "According to the commission's resolution, the salaries of heads of branches, ministers and their deputies, members of parliament, and governors will not increase next year." The question here is whether merely increasing salaries can actually enhance the real purchasing power of government employees? Additionally, can the parliament's decision to freeze the salaries of some high-ranking officials reduce discrimination among various income groups? It cannot be denied that the per capita income of Iranian citizens has decreased over the past four decades (1355-1394). According to official statistics published within Iran, the national per capita income at constant prices (adjusted for inflation) shows a nearly 30 percent decrease during the mentioned period. Meanwhile, per capita income in other regional countries – such as Turkey, South Korea, and Malaysia – has consistently increased and reached several times the per capita income of Iran. Several factors explain this decrease in per capita income at constant prices. The decline and volatility of economic growth in Iran, as well as the phenomena of inflation and unemployment, are among the most important factors contributing to the decrease in Iran's per capita income at constant prices. However, other factors have also played a role in this trend, such as allocating economic resources to military expenditures (war and political and military interventions in other countries) and corruption in management, which are significant factors in the reduction of per capita income in Iran, meaning a decrease in the real purchasing power of Iranian labor. Although wages have increased in recent years, the rate of annual inflation has outpaced the increase in wages. In the context of chronic stagflation in the Iranian economy, two main factors generally reduce real purchasing power and disrupt household budgets. First, severe inflation reduces household purchasing power, and second, rising unemployment negatively impacts average household income. Meanwhile, in recent years, many services that were previously considered public services, such as educational services or social insurance, are no longer provided by the government or have become expensive. Therefore, households must pay for these services themselves. It should also be noted that in addition to the conditions of stagflation, the income redistribution system in Iran's rentier economy is also ineffective and has not been able to effectively prevent the spread of poverty. Consequently, the poverty line has increased in the past eight years, and more families have been pushed into poverty. Does increasing wages mean an increase in purchasing power? Although the government had previously planned to raise employee salaries, it seems that with the emergence of protests in the streets, the government's motivation to increase these salaries has intensified in order to somewhat reduce the dissatisfaction of government employees. However, this level of salary increase, considering the decline in the purchasing power of the rial over the past four decades and the reduction in public welfare services provided by the government, cannot restore living standards to previous levels. While the government and parliament are trying to showcase some form of anti-discrimination policy regarding the increase in government employee salaries next year, discrimination in Iran is structural and institutionalized, and is not limited to income discrimination. Discrimination in the distribution of political power and social status also exists within the framework of governance. Most high-ranking officials in the ruling bureaucracy benefit from extensive visible and hidden rents. The ratio of the salaries of these officials compared to their rent revenues and resources is very small. Therefore, measures such as freezing their salaries for a year cannot solve the problem of economic discrimination in Iran. An anti-discrimination budget policy should focus on rent reduction from the budget. Although the government and parliament are attempting to display an anti-discrimination policy regarding the increase in government employee salaries next year, discrimination in Iran is structural and institutionalized, and is not limited to income discrimination. Discrimination in the distribution of political power and social status also exists within the framework of governance. Most high-ranking officials in the ruling bureaucracy benefit from extensive visible and hidden rents. The ratio of the salaries of these officials compared to their rent revenues and resources is very small. Therefore, measures such as freezing their salaries for a year cannot solve the problem of economic discrimination in Iran. An anti-discrimination budget policy should focus on rent reduction from the budget.