How Much of the Iranian Household Budget is Spent on Food and What Are the Consequences?

According to a report by the economic and livelihood statistics website Donya-e-Eqtesad, 52% of the minimum wage for a four-person Iranian household in Ordibehesht 1403 was spent on food. A year earlier, this share was higher, around 58%. In both cases, Iranian households spend more than half of their income on food, which, compared to global and even regional averages, indicates the poor conditions of Iranian wage earners and the country's macroeconomics. This article addresses this issue. Engel's Law: The Share of Food in the Expenses of Rich and Poor Households. Ernst Engel, a 19th-century German statistician and economist, proposed a theory that has consistently been confirmed in practice: that income and food expenditure are inversely related, meaning that as household income increases, the share spent on food decreases, even if they consume more food. Conversely, the poorer the household, the larger the share of income spent on food. Engel's Law was fundamental, and many economists have followed his work. John Maynard Keynes referenced Engel's Law in his theory of "the marginal propensity to consume and save," stating that the wealthy always consume a smaller portion of their income, thus not significantly increasing demand in the macroeconomy ("The General Theory of Employment, Interest, and Money," 1936). Milton Friedman, the Nobel Prize-winning economist of 1976, expanded Engel's Law with the hypothesis that households consume based on their expected long-term income rather than their current income ("The Consumption Function Theory"). The works of Keynes and Friedman, with two different economic perspectives, along with many other economists, demonstrate that Engel's Law regarding the relationship between income and food expenditure is fundamental and enlightening for understanding citizens' consumption behavior and government economic policies. We also apply this theory to examine the share of food in Iranian households' budgets. Food expenditure of Iranian households compared to developed and developing countries. In advanced market-based economies, households spend a smaller percentage of their income on food compared to households in developing countries, resulting in greater purchasing power for other goods; in developing countries, due to market inefficiencies and inadequate infrastructure, food becomes more expensive, forcing households to spend a larger percentage of their income on food. As the above chart shows, Iranian households spend an even larger share of their income on food compared to households in other developing countries like Nigeria and Kenya. Iranian households also spend a larger share of their income on food compared to the Middle East average. In Middle Eastern countries, the share of food expenditure from household income ranges between 13% to 20%, while in Iran, it exceeds 50%. Qatar, the United Arab Emirates, and Saudi Arabia keep food costs low through subsidies and supportive policies, allowing their citizens to have more income for other expenses. These data and figures indicate the economic backwardness of the Islamic Republic and the economic pressure that Iranian families endure. Sanctions are not the reason for this backwardness; it is the government's command economy that has prevented Iran from growth and development even before the sanctions and since its inception. The third chart (below) shows that in the past 50 years, about 45 of which fall under the Islamic Republic, the economic growth of most Middle Eastern countries has exceeded that of Iran: Qatar has grown more than 20 times, Oman 17 times, Saudi Arabia 5 times, and even Iraq nearly 4 times more. The more than 50% share of food forces Iranian households to buy less or cheaper, lower-quality food; as a result, the share of many food items like meat and dairy products has decreased on Iranian family tables. The Statistical Center of Iran, whose data is preferred by the ruling governments over the Central Bank, has reported food costs indicating that the caloric intake of the Iranian household's "food basket" is estimated at around 1930 kilocalories, while the required amount is 2500 kilocalories. The increasing share of food expenditure prevents Iranian households from adequately meeting other life necessities such as housing, healthcare, and education. Iranians are trapped in the morass of the current bankrupt rentier-command economy. Following inadequate and unsuitable food, they suffer from obesity and diseases, but as mentioned, due to reduced purchasing power, they cannot afford treatment, leading to chronic illnesses. Malnutrition particularly impacts the physical and cognitive development of children. One must also add the school dropouts of children to their malnutrition. According to the Research Center of the Islamic Consultative Assembly, one-third of students have been forced to drop out. The outlook is also bleak. Food prices continue to rise, increasingly burdening Iranian household consumption. During the two and a half years of Ebrahim Raisi's presidency, the inflation rate has consistently been above 30% and often exceeded 40%. The Statistical Center of Iran estimated the monthly, not annual, growth rate of onion prices at about 30% in Ordibehesht 1403, and Tejarat News reported that the price of onions increased by 1233% during Ebrahim Raisi's presidency. The Ministry of Welfare has included items in the standard consumption distribution table. Among these items, the prices of rice (8 kg), meat (4 kg), chicken (8 kg), eggs (4 kg), oil (3.2 kg), legumes (4.8 kg), sugar (2 kg), milk (12 kg), pasta (2.8 kg), yogurt (10 kg), and cheese (1.6 kg) in the standard consumption for a four-person family increased from 4,782,517 tomans in Ordibehesht 1402 to 6,085,122 tomans in Ordibehesht 1403. Government officials insist on a decrease in the inflation rate in 1403, but a decrease in the inflation rate does not mean cheaper prices, but rather only means that the prices of essential goods are rising at a slower pace. The history of 34 months of an unfinished presidency. Iranians have repeatedly taken to the streets in protest against rising food prices from the Qajar era to the Islamic Republic. During the Nasir era, in 1240, women beat one of the grain and bread hoarders and confronted Naser al-Din Shah without a veil, demanding a reduction in bread prices. He ordered the execution of the mayor and a reduction in bread prices. Five years later, women in Shiraz gathered in the city square to protest rising bread prices and sent a telegram of complaint to the Shah. In Tabriz, women led by Zeynab Pasha attacked the hoarders' warehouses and distributed grain among the poor. During the Islamic Republic, people have also taken to the streets multiple times to protest against inflation; for instance, during Hassan Rouhani's presidency in Dey 1396, protests erupted in various cities in Iran against rising prices and were suppressed. The protests of Aban 98 also stemmed from the increase in gasoline prices, which was severely suppressed. During Ebrahim Raisi's presidency, in Ordibehesht 1401, people protested against the announcement of the "Market Regulation Headquarters" regarding the price increases of chicken, eggs, and dairy products for "price adjustment and alignment" by flooding the streets and stores. Nevertheless, since there is no prospect of a decrease in inflation and the share of food in expenses, it is not unexpected that rising prices will again drive people to the streets.