EghtesadOnline: The coronavirus has hit hard at an estimated 2.8 million businesses and six million jobs in Iran, according to the director general of Policymaking and Job Department of the Ministry of Cooperatives, Labor and Social Welfare.
“By being hit hard, I mean, these businesses were either forced to close down, or reduce their capacity substantially,” Alaeddin Azvaji added.
Early projections by the ministry put the number of jobs at stake at approximately one million, which were mostly in businesses whose main activities revolved around Iranian New Year holidays and purchases of spring merchandise. But later in May, the impact of the disease on businesses went deeper and wider.
“At first, getting past the coronavirus crash seemed like a V-shaped recovery but then it transformed into a W-shaped recovery, following the second wave of coronavirus in late June. Of course, the second wave was not as severe as the first in March and April,” Azvaji told the Persian-language daily Shargh.
“The ministry had devised a few scenarios to manage the potential levels of the pandemic’s impact on jobs and businesses. Between 50,000-80,000 billion rials [$213-341 million] were needed to carry out these plans. Paying a fraction of small enterprises’ remunerations in the form of ‘income subsidy’ or insurance incentives for the workers of large companies were among our plans to prevent job losses and even help create more employment opportunities.”
Noting that a total of 850,000 insured workers have applied for three-month coronavirus unemployment benefits, the official said, “Estimates show that the outbreak of coronavirus has hit more than 1.2-1.3 million economic enterprises with more than 2.6 million uninsured workers. These figures might have changed over the past six months; some of this unemployed people might have been reemployed.”
In April, the government announced it would allocate 50,000 billion rials ($213 million) to Unemployment Insurance Fund to support those who have lost their jobs amid the viral outbreak. Applicants were asked to fill out online forms for unemployment benefits at the newly-designed website Bimebikari.mcls.gov.ir within 30 days, instead of going personally to the ministry’s bureaus.
“The government tried to stimulate minimum demand by handing out loans worth 10 million rials [$42] to households. The second measure was to grant loans to private sector employers, the self-employed and the uninsured. The program included 14 groups, including 880 businesses. This was the first time a mechanism was provided to identify uninsured workers through executive organizations,” Azvaji said.
Studies show unofficial workers and those without health and retirement benefits, are more vulnerable to the crisis. Under the program, the individuals who were working at sport clubs and educational and service centers received the government’s coronavirus loans.
“The Economic Taskforce of the National Headquarters to Fight Coronavirus provided a total of 200 trillion rials [$852 million] as loans with a lending rate of 12% and the repayment period of two years through banks,” he said.
Estimates show economic enterprises applied for nearly 120 trillion rials [$511 million] in loans and close to 30 trillion rials [$128 million] have been paid till now.
Azvaji added, “We tried to make the registration process for taking out loans quick and easy. As we speak, banks are in different stages of approving the applications, signing contracts or paying the loans. Some eligible businesses are yet to register for loans.”
Decline in Unemployment, Labor Force Participation
The outbreak of coronavirus and its associated challenges have had a significant impact on Iranians in terms of labor force participation—the proportion of the adult population (ages 15 and above) who are employed or seeking jobs.
Labor force participation fell by 3.7% to 41% (or 25.46 million people) over the first quarter of the current Iranian year (March 20-June 20). Men’s and women’s economic participation rates were 67.9% and 14.1% respectively in the same period.
According to the Statistical Center of Iran, 21.07 million men and 4.39 million women of ages 15 and above were economically active in Q1, i.e., they were either employed or looking for a job.
“A total of 2.76 million people [1.3 million men and 1.46 million women] were added to the number of inactive labor force in the first quarter; 14.8% of the employed population and 37.2% of unemployed population in the same period of last year were added to the population of people outside the labor force this year,” says Javad Hosseinzadeh, the head of SCI.
These individuals aren’t included in unemployment calculations, which only capture people who are looking for work. This means that the fall in labor force participation translates to people not searching for work, chiefly due to the outbreak of coronavirus, and consequently a decline in unemployment rate.
Iran’s unemployment rate, which is calculated by dividing the number of unemployed people by the total number of laborers, then multiplying by 100 stood at 9.8% in Q1, indicating a 1.1% decline compared with the same period of last year. A total of 2,505,336 Iranians were unemployed in Q1.
"A decrease in unemployment rate isn’t necessarily a sign of an improving economy. When people stop looking for jobs and drop out of the labor force, the unemployment rate will decline even though the true employment situation hasn’t improved. For an economy to run satisfactorily, the decline in unemployment rate must couple with an increase in both economic participation and employment rates," the SCI chief said.
The total Q1 employment rate was 36.9% (22.96 million), down 2.9% compared with the same quarter of last Iranian year. Employment rates for men and women were 61.8% and 12.2%, respectively, which constituted 19.17 million men and 3.78 million women in Q1.
Employment rate was 35.7% or 16.99 million in urban areas and 40.8% or 5.97 million in rural areas.
Hosseinzadeh referred to an unprecedented decline in average working hours due to the pandemic and said the average working hours have decreased from 45.8 hours per week in Q1 of last fiscal year to 40.4 hours per week this spring.
“Generally, during the first quarter of the current year, 56.1% of the employed population worked 44 or more hours per week and 36.7% put in fewer than 44 hours while 7.2% were temporarily absent from work,” he added.
And in a further sign of the impact of coronavirus on Iran labor market, Hosseinzadeh said, “Out of 20 groups that economic activities are divided into, only five groups reported an increase in their employed population in Q1 compared with last year’s similar period. The highest increase in the number of employees was posted for healthcare and social workers, and the sharpest decline was registered in fields such as agriculture, industries, manufacturing, retail and wholesale, transportation, educational centers, hotels and restaurants.”
SCI provides two figures for the youth unemployment rate: the proportion of the population between 15 and 24 years and those between 18 and 35 years.
The youth unemployment rate of those between 15 and 24 years stood at 24.5% in Q1, posting a 2% decrease while the unemployment rate of those between 18 and 35 years stood at 16.7%, posting a decline of 1.5% YOY.