The Fight to Reduce Iran’s Poverty Rate: Growth, but No Cigar


TEHRAN — Iran is a nation frequently in the headlines, often for its geopolitical conflicts with the United States and Saudi Arabia and involvement in regional wars. As a result, Iran’s poverty rate receives scant media attention.

Due to the inaccessibility of much of the Islamic Republic’s demographic data, the last estimation of Iran’s poverty rate is from 2007. It was then 18.7 percent. In 2016, Iran experienced a significant increase in its GDP following relief from sanctions. Growth in oil exports has also propelled the economy forward and, excluding a dip in 2014, the World Bank reports the poverty rate has declined since 2007.

These statistics can be misleading. In terms of income, Iran is deeply divided. Despite overall growth in GDP per capita, average household expenditure fell by 1.5 percent among the poorest Iranian households. Income growth was almost exclusively seen in wealthy, urban households.

The urban-rural divide is stark. Much of Iran’s growth in the past decade from economic modernization efforts has barely affected the rural population. The boom-and-bust cycles in Tehran and other cities, where fluctuating oil prices and loosening sanctions can bring windfalls, are largely urban phenomena. Iran’s poverty rate estimations suggest the number of rural Iranian’s in poverty more than doubled between 2012 and 2014.

The government of the Islamic Republic is often interventionist in dealing with poverty. When energy prices have spiked, cash transfers have been used to reduce the impact on poor Iranians. Upon taking office, President Hassan Rouhani commented that there is “no evil greater and worse than unemployment and poverty.”
Rouhani has been reluctant to commit the state fully to reducing Iran’s poverty rate.

The cash subsidy program introduced by Rouhani’s predecessor, Ahmadinejad, has largely been dismantled. Considering how important Iran’s fixed government investment has been to its previous periods of economic success, this is an ominous sign for the nation’s poor.

This may have contributed to an increase in unemployment. Iran’s growing young and urban population has struggled to find work despite more than half a million jobs being created in the past year. The youth unemployment rate has risen to 29 percent.

Rouhani will likely continue to enjoy strong support among the young, as his relatively liberal approach to social issues and relations with the West attracts Iranians alienated by the theocratic tendencies of the opposition party.

The president’s rhetoric appears to suggest a desire to reduce Iran’s poverty rate despite the limited steps he has taken in practice. Restoring the subsidies that give poor Iranians financial safeguards against fluctuating energy prices could help balance its increasingly divided income classes.

A renewed focus on the poorest in Iranian society accompanied Rouhani’s 2017 reelection. Campaign commitments included tripling cash handouts to those in poverty and a wider financial support network for the urban working class. If his actions match his rhetoric, he could be on the road to reducing Iran’s poverty rate after a period of both rising inequality and growing unemployment.

Jonathan Riddick
Photo: Flickr


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