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Iran: 14.5% Minimum Wage Increase Still Not in Accord with Labor Law Protections

(Apr. 19, 2017) Iran’s Supreme Labor Council, a government body charged with proposing labor regulations to the presidential Cabinet, agreed on March 15, 2017, to raise the minimum wage for the 2017 fiscal year (which begins March 21 in Iran) by 14.5%.  (Workers’ Rights, CENTER FOR HUMAN RIGHTS IN IRAN (Jan. 3, 2006); Labor Code of Iran [Qanun-e Kar-e Jomhuri-ye Eslami-ye Iran] (Nov. 20, 1991), ROUZNAMEH RASMI [OFFICIAL GAZETTE], No. 13387 (Feb. 17, 1991), at 114, available in English translation at ILO website; Workers’ Minimum Wage to Rise by 14.5%, FINANCIAL TRIBUNE (Mar. 16, 2017).)  Reportedly, “[o]ver the past three decades, the track record of Islamic Labor Councils and their central body, the Supreme Labor Council, has been in favor of management and its policies.” (Workers’ Rights, supra.)

The compromise agreement came after three bargaining sessions attended by government officials and representatives of workers and employers.  (Workers’ Minimum Wage to Rise by 14.5%, supra.) The 14.5% increase, which is the third lowest annual minimum wage increase in Iran in the last ten years, reportedly left the workers’ representatives disgruntled, not only because the workers had been seeking a 30% increase (the government had initially been prepared to grant a 10% increase), but because the representatives maintained that wage protections afforded by Iran’s Labor Code had once again been violated. (Id.)

Article 41 of Iran’s Labor Code states as follows:

The Supreme Labour Council shall be responsible every year for fixing minimum wages for the various regions of the country according to the sectors of industry, with regard to the following criteria:

  • (1) The minimum wage of workers shall be fixed taking account of the rate of inflation announced by the Central Bank of the Islamic Republic of Iran;
  • (2) Regardless of the physical and intellectual abilities of workers and the characteristics of the work assigned, the minimum wage shall be sufficient to meet the living expenses of a family, whose average number of members shall be specified by the appropriate authorities. (Labor Code of Iran, art. 41.)

Background on the Bargaining Sessions

For the three months prior to the initial bargaining session, a group of workers and employers met to determine the gap between actual wages and a living wage, a problem that, according to Ali Khodaei, a workers’ representative in the Council meetings, had grown out of the continuous neglect of article 41 of the Labor Code over the 26 years since the Labor Code was passed. (930 Thousand Toman Minimum Wage for ’96, ROUZNAMEH ETEMAD (Mar. 16, 2017) (in Persian).) The working group ultimately announced that a disparity of 300% existed between the minimum wage and the living wage. (Id.) Subsequently, the employers, while confirming the unfairness of the low level of employees’ wages, attempted to cast the responsibility for filling this gap onto the government, claiming that the country’s precarious economic situation did not afford them much flexibility, and the wage increase would lead to an increase in bankruptcies. Labor representatives, however, reaffirmed that their sole aim was a wage increase greater than the rate of inflation and expressed concern that many of the country’s employers resist increasing wages relative to inflation or, in the best of circumstances, only agree to consider such an increase. (Id.)

During the first bargaining session, held in early March, the Council reportedly agreed to set a living wage of IRR24.8 million (about US$661) per month for a family of three and a half members as the basis for the 2017 fiscal year’s minimum wage. Nevertheless, the government’s agreement did not ultimately lead to any substantial increase in the 2017 minimum wage. (Workers’ Minimum Wage to Rise by 14.5%, supra). Commenting on this, Ali Khodaei stated, “[a]rticle 41 [of the Labor Code] clearly indicates that the minimum wage, [regardless of] the type of the work done, must sufficiently cover the material needs of a family whose size is indicated by the Supreme Labor Council. But to this day, both the government and the employers are reluctant to implement the law.” (Id.) Khodaei added that while the increase in wages for this year was better than in years past, once again the workers’ principal demand that their families’ living expenses be covered by the minimum wage had not been met and thus, it was the workers’ duty to pursue a better policy in the years to come. (How Did a Minimum Wage of 1,317,000 Come About?, EGHTESAD ONLINE (Mar. 16, 2017) (in Persian); 930 Thousand Toman Minimum Wage for ’96, supra.)

Problems in Calculating Iran’s Inflation Rate

One further difficulty in confronting the problem of the minimum wage not keeping pace with inflation is the accuracy of the inflation figures themselves. According to official sources, the inflation rate in Iran has fluctuated erratically over the past ten years between a low of 6.7% in 2016 and a high of 30.5% in 2012. (Table of Changes in Wages over the Past 10 Years / Comparing Inflation and Wage Increases, MEHR NEWS (Mar. 15, 2017) (in Persian).) Minimum wage increases have likewise fluctuated erratically and, in 2008 and 2011–13, were substantially lower than the rate of inflation, now currently at 9.8%, according to government figures. (Id.; Iran’s Inflation Rate Down 4.5% Yr/Yr, TEHRAN TIMES (Apr. 12, 2017).)

However, Iranian economist Morteza Yeganeh has challenged the official scenario, citing a wide discrepancy between Majles (Parliament) Research Center figures and those quoted by government officials. (Iran: Inflation and Corruption Have Grown Under Rouhani; Real Growth Rate is Negative, IRAN NEWS UPDATE (INU) (Mar. 17, 2016).) Yeganeh points out that information on inflation rates from state sources such as Iran’s Central Bank is misleading for international bodies like the World Bank, which has no presence in Iran, and that the Central Bank “does not publish real inflation figures.” (Id.) The Majles Research Center itself recently criticized the Central Bank of Iran and the Statistical Center of Iran, the two organizations in charge of publishing economic data, because “[discrepancies] in key economic indicators such as inflation rate and GDP figures … had created confusion” and such statistics “are not always available and have been at odds with each other on many occasions.” (Majlis Think Tank Offers Solutions to End Data Discrepancy, FINANCIAL TRIBUNE (Mar. 8, 2017).)