Iran’s Emboldened Workers Press New President for More Concessions

In the third week of September, teachers in dozens of towns and cities across Iran took to the streets, calling on the new president, Ebrahim Raisi, to fully implement existing labour laws. The authorities responded quickly and positively, promising to work on an implementation plan. But the teachers are not ready to back down. In an interview conducted for this article, a leader of the main teachers’ union said his organization will continue to use a “carrot and stick” approach to ensure that the Raisi administration makes good on its promises.

The latest nationwide demonstrations by teachers are part of a bigger protest wave that has gripped Iran over the past year. In the first few months of the year, pensioners mobilised in Tehran and other major cities. In July, residents of the southern province of Khuzestan protested water shortages. Between June and August, contract workers across Iran’s oil sector staged intermittent strikes and demonstrations. These protests are unlikely to let up. A wide range of social groups have been mobilising—organising locally, regionally, and nationally—to express socioeconomic grievances. 

As these protests have continued, the Raisi administration has defied predictions that it would quickly impose order on Iran’s restless society. Raisi was elected president in June after extensive electoral manipulation and a record low turnout. But that Iran’s new leadership came to power with little regard for the electorate has not dissuaded protestors from making demands of state authorities. According to one protest tracker, September—Raisi’s first full month in office—saw one of the highest number of protest events in the past year.

Raisi has been forced to grapple with the promises made by his predecessor, Hassan Rouhani. Rouhani launched his first term with a vow to bring inflation under control and spend government resources prudently. He exited office last August having promised financial support to a wide range of groups and sectors. Rouhani’s commitment to inflation reduction was sincere and, initially, successful. After carefully and painstakingly negotiating sanctions relief and rebalancing the economy between 2013 and 2017, his successes were quickly undone by the twin shocks of the Trump administration’s reimposition of sanctions in May 2018 and the onset of the COVID-19 pandemic in February 2020. Realising that fiscal prudence would not be enough to shore the Iranian economy, Rouhani decided to direct spending towards his core constituents, namely the urban middle classes.

As Djavad Salehi-Isfahani has shown, Tehran and urban areas were largely spared the rapidly rising poverty rates seen in Iran’s rural communities after 2018. To prevent further slides in the incomes of pensioners and public sector teachers—two important middle class segments generally aligned with reformist politics—the Rouhani administration consistently increased the budget share allocated to education and social security. As Kevan Harris observes in a recent report, education and social security together accounted for over 55 percent of the 2021-2022 budget, up from less than 45 percent just four years earlier. The more the Rouhani administration intervened to support the welfare of key constituencies, the more groups such as teachers and pensioners became emboldened, increasing their demands as the deteriorating economic situation eroded their incomes. Protest activity grew despite the growing risk of state repression. 

Still, Rouhani’s constituents suffered despite his targeted interventions. Public sector teachers saw their real wages fall by over 40 percent between March 2018 and March 2021. Middle class workers employed in the public sector suffered significantly as government spending ran out of steam. Private sector wage workers, such as those in the construction sector, have fared comparatively better as their wages rise with inflation.  

Faced with discontented workers and limited fiscal space, the Raisi administration has sought to blame their predicament on Rouhani’s recklessness, rather than the deteriorating economic situation. Hardline politicians argue that Rouhani deliberately loaded up on financial commitments in his final days in office in order to put a stick in the spokes of the Raisi government. Parliament member Ahmad Hossein Falahi recently complained that “unfortunately in the final days of the Rouhani administration a lot of things got done. This is because the managers of the previous government aimed to impose a number of policies on the incoming administration, despite the fact that the Plan and Budget Organization was supposed to safeguard this year’s budget.” Falahi added that this has created a dangerous “mentality” whereby social groups invoke Rouhani’s generosity to bargain with the Raisi government.

It is true that in his final months in office, Rouhani made a number of concessions to protesting workers that seemed extraordinarily generous given the state’s emptied coffers. For example, striking oil workers won significant concessions right before Rouhani left office. Contract workers did most of the protesting and the Rouhani administration responded by forcing employers to increases wages for contractors. But Rouhani went further and also increased the salaries of more than 100,000 workers directly employed by the oil ministry. Promises were also made to improve working conditions.

Teachers were another group benefiting from extraordinary generosity in the final months of the Rouhani administration. The 2021-2022 annual budget, approved in spring, doubled the money allocated to the education ministry’s payroll costs. Given current inflation rates, this budget increase raises the wages of public sector teachers by a massive 25 percent in real terms—the largest one-year pay increase teachers have received in at least two decades. After years of resistance, the government also suddenly agreed to several other long-standing demands about job benefits.

Still, despite the accusations now being made, it more likely that an exhausted Rouhani administration, realising it would soon leave office, relaxed its commitment to austerity, submitting more easily to bottom-up pressure for increased spending. The Raisi administration is now faced with the difficult task of managing the fiscal obligations it has inherited. The choice facing Iran’s new president is whether to prioritise the demands of constituencies that have shown a capacity for sustained protest, or whether to redirect spending in favour of workers in the judiciary, police, and military who are among his core constituents. With next year’s budget negotiations coming up soon, Iranian workers have the government on the back foot.

Photo: IRNA

Iran is Losing Sight of its 'Developmental Vision'

This article was originally published by the Atlantic Council.

On December 11, Iran’s information minister announced via social media that he had a “surprise” to reveal. Mohammad-Javad Azari Jahromi, the Islamic Republic’s youngest-ever cabinet minister, had been the subject of intense criticism from the Iranian public following a week-long internet blackout. Authorities had taken the unprecedented step to cut internet access in response to the nationwide protests that erupted on November 15 following a subsidy reform that doubled fuel prices. Angered by the crackdown, many Iranians “surprised” Jahromi by blocking him on Twitter. 

Undeterred, Jahromi made his grand reveal on December 12: a slickly produced video that showed Iran’s postal service delivering a package to the information ministry by drone. While such drones may be helpful for rural communities and disaster response, Iranians were understandably bewildered by the PR stunt. 

Jahromi’s postal drone offers a metaphor for perhaps the central political challenge facing the Islamic Republic. In the wake of a brutal response to protests that has left over 300 dead, commentators have pointed to a crisisof legitimacy now facing Iran’s leaders and their ideological tenets. But in reality, it is the compounding failure of technocrats like Jahromi to manage a decade of economic volatility that best explains Iran’s new political turmoil. 

As a recent study of the fuel protests shows, “economic grievances were likelier to inspire protest in areas where frustration with the whole system was endemic… Economic hardship turned frustrations with the system into assertive protest activities.” The protests appear to have comprised largely of individuals newly confronting economic hardship, which suggests the emergence of a precariat class in Iran. Just last year, 1.6 million Iranians fell into poverty due to high inflation. The study details how the counties in Iran which saw protests were often those more dependent on state support, meaning that the withdrawal of that support—such as the reduction of the fuel subsidy—was felt most acutely. As the study observes, “the Islamic Republic, through its long-term developmental and welfare programs, has empowered a citizenry that now resists neoliberal policies, such as cuts to energy subsidies.” 

These long-term developmental and welfare programs are the underappreciated pillars of the Islamic Republic. As sociologist Kevan Harris has described, state-society relations in Iran have been shaped by a “developmental vision” established when the young Islamic Republic began to emerge from the brutal Iran-Iraq War. As revolutionary fervor and wartime zeal ebbed, a core group of technocrats, many of whom had served in the Shah’s civil service and who had been educated abroad, began to set the country’s development agenda. After a few years of structural readjustment, the country’s economy started to grow, and the technocrats became firmly ensconced in the powerstructures of the Islamic Republic. 

Iran’s GDP per capita peaked in 2012, buoyed by record-high oil prices. But the same year, the international community imposed strict sanctions on Iran over its nuclear program, triggering a 7.4 percent contraction and ending 23 years of consecutive increases in GDP per capita, which had risen from just over $2,200 in 1989 to just under $8,000 by 2012. The developmental vision of the Islamic Republic had significantly improved the welfare of the average Iranian. For millions of Iranian households, development meant the arrival of electricity, gas, refrigeration, personal mobility—and in the last decade, access to the internet. But success in economic development is inherently relative. Iran fared much better than Iraq in the two decades following their eight-year war. Iraq’s GDP per capita had been higher than Iran’s in 1989, at $3,800, but rose to just $6,800 by 2012, having lagged behind Iran even before the 2003 US invasion. In the same period, however, Poland, which emerged from its stagnation behind the Iron Curtain in 1989, saw its GDP per capita rise from just below $1,800 to $13,000, becoming a widely touted example of successful development. 

That Iran finds itself between Iraq and Poland on the measure of GDP per capita speaks to the predicament facing the country’s technocrats. The political establishment in Iran is, in some respects, the victim of its success. Economic development became, even in an ostensibly “revolutionary” state, the foremost expectation of governance among the Iranian people. The Islamic Republic has only recently ceased delivering consistent distributive economic growth, leaving chronic and underlying issues of inflation, unemployment, and corruption unassuaged by economic expansion. Sanctions—which have deprived the country of investment, stifled trade, and weakened the currency—have contributed to nearly a decade of stagnation. 

In a prescient 2011 study on the impact of economic crises on Iran’s youth, economist Djavad Salehi-Esfahani concludes with a question. He wonders how a lack of economic opportunity “shapes the attitudes of Iran’s youth about the country’s future and their ability to lead and build the nation.” Are Iranian youth “slowly losing not only their skills but also their hope and optimism?” 

While Jahromi was busy toying with postal drones, a new budget was being prepared for the forthcoming Iranian year (March 2020). As analyst Henry Rome explains in his study of the new budget, the Iranian government will seek to mitigate the harms of high inflation, which the IMF projects at around 30 percent next year, by instituting new cash transfers and increasing the wages of public sector employees. Overall, the new budget represents an 8 percent increase in spending in rial terms. But with the contribution of oil revenues down from 29 percent in last year’s budget to a likely-too-optimistic 9 percent, the government will be seeking to increase tax revenue in to fulfill its fiscal burdens, ostensibly increasing the importance of functional state-society relations. 

Iran’s technocrats will continue to seek policy solutions to address widespread economic frustrations and alleviate poverty. But as Salehi-Isfahani observes in his study from eight years ago, there is only so much that the technocratic solutions can achieve. In the face of myriad economic pressures, including “maximum pressure” sanctions, Iran’s resilience is a remarkable achievement, but it is nonetheless approaching a kind of political limit. Referring to the government’s response to the economic malaise of the Mahmoud Ahmadinejad years, Salehi-Isfahani notes, “there are new policy initiatives ranging from the reform of the nation’s decades-old subsidies, to amending the family laws, to reviving population growth, not to mention the nuclear standoff with the West, but none that help salvage Iran’s demographic gift.” That an article written years ago describes the current dilemmas so accurately speaks to Iran’s stagnation. 

In the aftermath of the protests, Iran’s political elites have begun to realize the stakes. In a speech one week after the fuel protests, Mohsen Rezaei, the hardline secretary of the country’s influential Expediency Council, acknowledged that Iran was failing to deliver economic development. Pointing to the importance of economic development in state-society relations, Rezaei stated, “Since the beginning of the revolution until today each government of the Iranian people has tried to make an impact on the economy, and particularly in the last two decades the focus various stakeholders has been the economy, but we have yet to find a pathway that gives us optimism for the future.” While the Islamic Republic had proven able to “address the issue of elections, defense, security, and freedom,” it had failed to reach the optimal model for “economic development and economic justice.”

Today, an Iranian precariat class is seeking economic justice. Iranian economic planners and policymakers, like their fellow technocrats around the world, are struggling to find the pathway to continued growth in the face of factional infighting and foreign interference. Signing-off in his announcement of the postal drone, Jahromi declared, “We must make Iran the best and most advanced country in the world!” 

If only it were so easy. 

Photo: IRNA