New US Sanctions and the Nightmare of Unemployment in Iran

Ali Rabiei, Iran's Minister of Labor, states that by the end of the current year, pressure on the economy will increase, and as a result of new US sanctions, one million jobs will be lost in Iran. According to government officials, to improve the economy in Iran, approximately $50 billion needs to be attracted annually to achieve high and sustainable economic growth, reduce unemployment, and enhance purchasing power and living standards. With the implementation of US sanctions, it seems that the dream of attracting foreign investment should be considered lost. Before discussing the consequences of sanctions on the labor market in Iran and sketching a somewhat vague picture of the impact of sanctions, it is worthwhile to address the current unemployment situation in Iran. According to the latest report from the Statistical Center of Iran, the unemployment rate for individuals aged 10 and older in the spring of this year was 12.1%, showing a 0.5% decrease compared to the same season last year. Thus, the number of unemployed in this season reached over 3.3 million. This unemployment statistic for the first quarter of the year is not complete and accurate, as it is based on limited statistical sampling, and those who have worked at least one hour a week are also defined as employed. Therefore, estimating the overall unemployment rate, including both fully and partially unemployed, at around 20% may not be surprising. It should also be noted that this data pertains to a time when Iran's economic relations with the world were still in place under the shadow of the implementation of the JCPOA, during which crude oil exports to the global market and imports also set records. Although no official statistics on economic growth rates have been published, estimates indicate positive growth. What are the characteristics of unemployment in Iran? Unemployment in Iran is structural, and a significant reason for this is the extrinsic, inward-looking, and rent-seeking structure of Iran's economy, as well as its non-competitive nature, which has little capacity for entrepreneurship. The Iranian economy is very weak in terms of job creation capacity, such that while some jobs are created, others are lost, as Iran's industries are outdated and uncompetitive, and most jobs created are in the service sector and are unstable. In international comparisons, countries that rank high in job creation have expanding export markets and new industries replacing traditional and old ones. Therefore, any sanctions will significantly affect the employment and unemployment rates of this extrinsic, inward-looking, and rent-seeking structure. The impact of US sanctions on employment in Iran The initial shocks and psychological-economic tremors resulting from the US withdrawal from the JCPOA and the dissemination of news related to sanctions have manifested in the unemployment rate during the summer season. However, since the employment and unemployment rates for the summer of this year have not been published, it is not possible to provide an accurate estimate. Nonetheless, the cessation of activities of Iranian enterprises or the exit of foreign firms and the flight of domestic capital from Iran have certainly had effects on the labor market. With the onset of sanctions, their real effects on the labor market become evident, as sanctions reduce capital circulation and investment, both long and short term, and consequently the growth rate. Furthermore, with the implementation of sanctions, Iran's exports, including oil, as well as imports of raw materials, intermediates, and technology will face disruptions. Naturally, if sanctions affect the import of intermediate and semi-finished goods, it will reduce the sales and activities of economic units, and these units will have to reduce their workforce for survival, negatively impacting their employment rates. An increase in unemployment in one enterprise and one industry means an increase in unemployment for other enterprises and industries that have reciprocal trade with each other. As unemployment spreads and increases, the average purchasing power and overall public demand will also decline, leading to a situation where unemployment begets more unemployment. What are the consequences of losing one million jobs for households? The consequences of job loss are complex and multifaceted. Therefore, the increase in unemployment does not occur in a vacuum and interacts with dozens of other economic variables. For example, in Iran's specific conditions and under the new US sanctions, job losses coincide with rampant inflation, which some officials say will exceed 25%, and for food items, 100%. The consequence of such a situation is the spread of misery and poverty among households. However, simultaneously with this process, two other economic actors, namely enterprises and the government, will also suffer serious damage.