Introduction

1 “The first decile of the Iranian population suffers from absolute poverty: ” thus ran the argument of the adviser to the Iranian Minister of Cooperatives, Labour and Social Welfare’s at a round-table held in March 2016. He added that “the second decile suffers from relative poverty, the third from a very vulnerable economic situation, the fourth from a less vulnerable one, while the fifth to the eighth, who belong to the middle classes, do not have proper living conditions.” [1] Worker families seem to be mainly among the first five poorest deciles of the Iranian population. A variety of statistical data and evidence in the literature hardly do ill with the adviser’s description.

2 This paper aims at explaining how worker families have gradually been trapped in a vicious circle with regard to their living conditions since the early 1990s. It hypothesizes that this vicious circle stems mainly from the juxtaposition of specific worker-employer class relations with peculiar intra-class relations between the productive bourgeoisie and its parasitic counterparts in the ruling social and political class (i.e. unproductive capital, the ideological state apparatus, commercial capital, and agents of capital flight). It shows that the domination of employers over workers in the first relation has led to the deterioration of worker families’ living conditions. This deterioration was to be compensated for by a long-run trickle-down effect, which has been rendered dysfunctional by the domination of the ruling class over the productive bourgeoisie, thus further deteriorating worker families’ living conditions.

3 This paper is organized as follows. The first section considers how some state policies have changed employee-employer relations in such a way that the individual and collective bargaining powers of workers have been weakened both in the labour market and in the workplace. The second section considers how worker families’ resulting imbalanced budgets have been intensified by two other factors: their declining social wages and growing consumption baskets. The third section shows how worker families’ individual responses to get out of the situation have only exacerbated it by creating more excess labour supply in the labour market. Finally, the fourth section argues that an intra-class relationship within the ruling class prevents both private and public sectors from generating jobs and having a trickle-down effect on worker families which would help them escape the vicious circle in which they are trapped. Much of the data used for the empirical analysis is focused on the broad macro level derived from various official sources.

1. The Weakening of Workers’ Bargaining Power

4 The first step in the weakening of Iranian workers’ bargaining power in post-war Iran, both analytically and historically speaking, was to make labour casual. In 1990, only six percent of the workforce had temporary contracts. [2] Today, about 90 percent have temporary contracts, [3] thus depriving them of job security. The severe job insecurity has immensely contributed to the weakening of workers’ individual bargaining power both in the workplace and in the labour market in the post Iraq-Iran War years. It was the 1990 Labour Code which prepared the legal basis for such contracts. According to the second clause of Article 7 of the Labour Code, “Jobs of continuous nature shall be considered indefinite in case no period is mentioned in the employment agreement.” In other words, if the nature of the work is continuous, employers can determine a set amount of time in their contract with workers, and employ them on a temporary basis in types of work that are continuous. Also, according to one of the clauses of the 21^st Article of the Labour Code, the employment agreement may be terminated in some cases including “expiry of duration of definite employment agreements and their non-renewal explicitly or implicitly.” Nevertheless, the legal valence of the labour code for making temporary employment contracts was not discovered and used before early 1995. It had previously been customary to accept the conclusion of a given temporary employment contract only once, so that its renewal for another definite period of time led to considering it as a non-temporary contract. “But in early 1995, the Ministry of Labour and Social Affairs officially notified a guideline to allow employers to conclude a temporary contract with a given worker several times successively and for any set amount of time” (Monshizadeh, 2010). It is clear that the Labour Code not only legitimized signing temporary contracts in continuous positions, but also legally facilitated dismissing workers whose contract was temporary, leading to a phenomenon which was not widespread before the end of the Iraq-Iran War: temporary employment contracts through which employers could fire workers whenever they wanted. By depriving the majority of the workforce of job security, the policy of labour casualization has most strongly contributed to the weakening of workers’ individual bargaining power.

5 The second step was the rise of highly organized, well-connected human resources contract firms. They were created in the first half of the 1990s and achieved mushroom-like growth during the reform era from 1997 to 2005. Marketing themselves as experts in collective bargaining, they function as mediators between workers and employers, whether public, semi-public or private. They are the main agents of the triangular employment relationship – whereby an employee works under the direction of an employer but is actually employed by a private third party called a human resources contract firm. Employers set the working conditions, but workers receive their remuneration from the third party. The portion of the budget intended for salaries and wages is delivered to the private contractor, which divides up the amount among workers. If employees want to bring legal action against a public employer for whatever reason, they have to do so through the private firm. Many of the owners have close ties with the top echelons of the Ministry of Labour, as well as with other power centres within the establishment. However, contractors seldom have face-to-face interactions with the workers they hire, except when the latter try to bring legal action against their employer. By using their close ties with different branches of the Ministry and thanks to their full-time concentration on the recruitment process, human resources contract firms are experts at providing employment contracts which favour employers to the detriment of employees. They are articulated and organized to do so. Their most well-known collective organization is the “Centre of the Guild Societies of Employers of Service, Backing, Technical and Engineering Firms” with a nationwide apparatus. The Centre has strong ties with decision-making and policy-making centres. According to the head of its board of directors: “The Centre enjoys a high position. The organs which work with us, such as the Social Security Organization, the Ministry of Labour and its provincial offices, the Ministry of Economic Affairs and Finance, the National Tax Administration, the Expediency Discernment Council of the System, and the Social Commission of the Parliament, have good relations with us… Our provincial branches can easily contact and negotiate with all these organs.” [4] There is no official data on the number of human resources contract firms, but at least 3 million workers have been recruited by these firms, according to one report. [5] They have played a crucial role in weakening the individual bargaining power of workers by cutting the direct legal relations of employees with their employers.

6 The third step has been implemented since the early 1990s: the number of low-echelon official state employees has gradually decreased, so that the share of state employees in total employment dropped from about 31 percent in 1986 to 24 percent in 2006 (Behdad and Nomani, 2009). This adjustment has been supported and directed by all upstream and downstream official policy-making documents. According to the Household Budget Survey in Urban Areas, the percentage of employed members of urban families working in the public sector declined from 33.6 % in 1992 to 17.7 % in 2014, whereas the percentage of employed members of urban families working in the private sector increased from 25.4 % in 1992 to 41.6 % in 2014. Moreover, the share of gross wages and salaries received from the public sector per urban household decreased from 19.1 % in 1992 to 10.1 % in 2014, whereas the share of gross wages and salaries received from the private sector per urban household increased from 10.5 % in 1992 to 14.1 % in 2014 (Economic Studies Department, 2002-2015). Depriving these low-echelon employees of the protection of the state’s employment umbrella and dispatching them to the free labour market has contributed to the weakening of these formerly public (but now private) sector employees’ individual bargaining power.

7 The fourth step is related to the exemption of small workshops from the labour code which had already been officially recognized by the 1990 Labour Code. According to its 191^st Article, “Small workshops with fewer than 10 individuals, as considered expedient, may be temporarily exempted from some of the provisions of this Law. The cases of expediency and exemption shall be in accordance with the bylaws to be proposed by the High Labour Council and approved by the Council of Ministers.” Nevertheless, this capacity was not used until early 2000, when the “Act of Exemption of Workshops with fewer than five Individuals from the Labour Code” was ratified by Parliament only for three years. After the expiration of this period, the “Bylaw of Exemption of Small Workshops with fewer than 10 Individuals from some Provisions of the Labour Code” [6] was approved by the Council of Ministers in late 2002, again only for three years. According to the first article of the 2002 Bylaw, these workshops were exempted from 36 articles of the Labour Code, as well as from a clause of its 10^th Article. Also, according to the second article, the duration of the exemption was three years. Upon expiring, the bylaw was extended for another three years in late 2005. However, before the extension expired in late 2008, this second article on a temporary three-year period “was nullified by a legal precedent issued by the Court of Administrative Justice in 2007” (Elahiann, 2010). With this last attempt, the exemption bylaw seemed to be extended indefinitely, even though this legal precedent was not consistent with the 191^st Article of the Labour Code with its emphasis on the temporary nature of the exemption. In any case, the exemption has deprived many workers of the support of the non-market institutions of the Labour Code not only in small workshops but also in workshops whose managers pretend are small by some legal maneuvers. It is exactly this deprivation of the support of the Labour Code which has substantially weakened the individual bargaining power of a wide range of workers.

8 In addition to the four aforementioned state policies, there has been a series of legal actions which have successfully prevented the formation of independent organized labour, thereby contributing to the weakening of workers’ collective bargaining power.

9 According to the 4^th clause of Article 131 of the Labour Code, “The workers of a unit may only belong to one of these three cases: an Islamic labour council, a guild society or a workers’ representative.” The Labour Code does not officially recognize other possible labour bodies. According to the 15^th Article of the “Law Establishing Islamic Labour Councils” (ratified in 1985), only units which have more than 35 permanent workers are allowed to establish an ILC. Also, units which already have an ICL are not allowed to establish a guild society (GS). Finally, according to the first article of the “Directive on Electing Workers’ Representatives,” units which have neither an ICL nor a GS are allowed to elect a workers’ representative.

10 Nevertheless, all authorized labour organizations suffer, legally speaking, from five fundamental deficiencies which, in turn, contribute to unmaking the collective bargaining power of workers.

11 Firstly, the Labour Code officially recognizes the right to organize, at best, only for employed workers. According to official statistics, there was a 13 percent unemployment rate in 2006, for example. The right to organize for this large population is not legally authorized.

12 Secondly, in spite of that, it cannot be said that the Labour Code and its derived bylaws officially recognize the right to organize for all employed workers. Workers employed in large public firms have been somehow deprived of it. According to a clause of the 15^th Article of the “Law of Establishing ILCs”, the formation of an ILC in such large public firms as subsidiaries and affiliated firms in the Oil Ministry, the National Iranian Steel Company, and the National Iranian Copper Industries Company are subject to the High Labour Council’s approval. The High Labour Council (HLC) was set up at the Ministry of Labour and Social Affairs, whose function is to perform all the obligations assigned to it under the Labour Code and other related laws and bylaws. However, until 1998, the HLC had never allowed a large public firm to establish an ILC. It was only in 1998 that the HLC decided to remove the obstacle for establishing ILCs in large public firms. Since then, establishing ILCs in these firms has been legally allowed. However, it is worth noting that this occurred precisely when the number of permanent workers in large public firms had already decreased substantially because of the successful labour casualization movement started in the early 1990s. As a result, the permanent labour force was an absolute minority with a defensive situation, while according to the first article of the “Bylaw of Elections in the Law of Establishing “ILCs,” only units with more than 35 permanent workers were allowed to establish ILCs. The third clause of this article also adds that “permanent employed workers are those who are employed in one of the permanent occupations in the unit.” Moreover, although establishing ILCs has been legally allowed since 1998, attempts at establishing ILCs in large public firms have always faced many administrative obstacles. All this means that the right to organize for workers in large public firms was officially recognized when the number of permanent workers had already decreased substantially in such a way that it became practically if not legally impossible for workers to use this right.

13 Thirdly, by the same token, there is no clear way for workers employed in small workshops to organize themselves. More than 50 percent of the total employed workforce works in small workshops with fewer than 10 workers. None of the three authorized options for using the right to organize are legally accessible for these workers. They are not allowed to establish ILCs because, according to the 15^th article of the “Law of Establishing Islamic Labour Councils,” only units which have more than 35 permanent workers are allowed to establish an ILC. They are not allowed to establish their own guild society since, according to the second article of the “Bylaw on the Manner of Formation, Scope of Functions and Powers as well as the Modus Operandi of Guild Societies and their other Centres, subject of the Article 131 of the Labour Code,” the required minimum number of workers in small workshops for establishing a GS is 10 individuals. Finally, they are implicitly not allowed to have representatives because the “Bylaw of Exemption of Small Workshops with fewer than 10 Individuals from some Provisions of the Labour Code” weakens the individual bargaining power of workers employed in small workshops, so that they are practically unable to try electing their own representatives. Therefore, the Labour Code and its subsidiary laws and bylaws legally or practically recognize no right for workers employed in small workshops to organize themselves.

14 Fourthly, apart from the lack of right to organize for unemployed and employed workers of large public firms or small workshops, even those workers whose right to organize is officially recognized suffer from their dependence on employers. The “Law of Establishing ILCs” defines an ILC as a council consisting of employees’ representatives qualified by the general assembly and the employer’s representative. This is the case with both GSs and workers’ representatives. As one of the publications of the Labour and Social Security Institute (affiliated to the Ministry of Labour) correctly says, “None of the collective labour bodies authorized by the Labour Code can be regarded as pure labour organizations because those not elected by the workers themselves are likely to become members of these bodies. And this is not consistent with the definition of a labour organization” (Zahedi, 2010).

15 Fifthly, the labour organizations authorized by the Labour Code depend on the government too. ILCs depend on the state because, according to a clause of Article 2 of the “Law of Establishing ILCs,” the candidates of ILCs should be approved by a board consisting of the Ministry of Labour’s representative, the relevant Ministry’s representative, and the representative elected by the board of employees, and also because ILCs’ elections should be held under the supervision of the Ministry of Labour, according to Article 3 of the Law. GSs also depend on the government because, according to Article 19 of the “Bylaw on the Manner of Formation, Scope of Functions and Powers as well as the Modus of Operandi of Guild Societies and their other Centres, subject of the Article 131 of the Labour Code,” the elections and activities of GSs should be supervised by the Ministry of Labour. Finally, workers’ representatives are dependent on the government because, according to Article 5 of the “Directive on Electing Workers’ Representatives,” all candidates have to be qualified by a board of control consisting, among others, of the local representative of the Ministry of Labour.

16 Legally speaking, these five deficiencies have most strongly prevented workers from establishing their own independent organizations, contributing to the weakening of their collective bargaining power since the late 1980s.

2. Towards Families’ Imbalanced Budget

17 Diminishing workers’ individual and collective bargaining powers has contributed to their deteriorating living and working conditions, not least individual wages which have declined in real terms. The ratio of the legal minimum wage to the monthly average expenditure of urban households in the first five deciles can reveal this decreasing trend of individual wages. The smaller this proportion is, the worse the living conditions are. According to this index, the higher the ratio is, the less the minimum wage can cover household expenditures. For the first decile, this ratio decreased from 152.1 % in 2006 to 109 % in 2014, for the second decile from 80.6 % to 66.6 %, for the third decile from 61.9 % to 55.1 %, for the fourth decile from 50.3 % to 47.1 %, and for the fifth decile from 41.9 % to 41.0 %, as can be seen in Figure 1.

Figure 1

Ratio of the Legal Minimum Wage to Monthly Average Expenditures of Urban Households in the First Five Deciles, 2006-2014

^180% 5^th decile
152.10 %
160 %
4^th decile
140 %
3^rd decile
120 % 109 %
2^nd decile
100 %
80.60 % 1^st decile
80 %
61.90 %
66.60 %
60 %
50.30 % 55.10 %
47.10 %
41.00 %
40 %
41.90 %
20 %
0 %
2006 2007 2008 2009 2010 2011 2012 2013 2014

Ratio of the Legal Minimum Wage to Monthly Average Expenditures of Urban Households in the First Five Deciles, 2006-2014

18 Apart from deteriorating individual wages in real terms, workers have experienced a dramatic decline in their social wages, that is, those facilities formerly provided, even poorly, for them by the public sector. According to the Constitution of the Islamic Republic of Iran: “The government is responsible for providing the means for public education for everyone up to the end of high school. It must expand free higher education until the point when the nation reaches self-sufficiency” (Article 30); “It is a universal right to enjoy social security and have benefits with respect to retirement, unemployment, old age, workers’ compensation, lack of guardianship, and destitution. In case of accidents and emergencies, everyone has the right to health and medical treatments through insurance or other means. In accordance with the law, the government is obliged to use the proceeds from the national income and public contributions to provide the above-mentioned services and financial support for each and every one of the citizens” (Article 29); and “Every Iranian individual and family has the right to have a dwelling that meets their needs. The government is required to provide the means for the execution of this principle by giving priority to those who are in greater need, especially peasants and workers” (Article 31).

19 Regardless of its width and efficiency in providing the social amenities mentioned by the Constitution during the first decade of the revolutionary period in the 1980s, the government has tended to drastically withdraw from performing its social duties in such spheres as higher education, primary and secondary education, healthcare, and housing since the 1990s, mostly because of the absence of effective resistance on the part of the unmade working class with its weak collective bargaining power in the face of state economic policies. For example, according to Health National Accounts, the participation rate of households in spending on medical care rose from 56 % in 2002 to 59 % in 2008, and their share in spending on accessorial services for medical care increased from 68 % to 70 % over the same period, as can be seen in Figure 2. Although the aggregated data of Health National Accounts scarcely reveal any information about the distribution of health expenditures among social classes, it can be expected that the poorer sections of the population suffer much more from the burden of this commodification of healthcare.

Figure 2

Participation Rates of Households in Spending on Medical Care and Accessorial Services for Medical Care, 2002-2008

80 %
70 %
68 %
70 %
60 %
participation rate
59 %
56 %
of households in spending
50 %
on accessorial services
40 % for medical care
30 %
participation rate
^20% of households in spending
on medical care
10 %
0 %
2002 2003 2004 2005 2006 2007 2008

Participation Rates of Households in Spending on Medical Care and Accessorial Services for Medical Care, 2002-2008

20 As another example, the ratio of free to paying student enrolment in Iranian universities substantially decreased from 0.411 in 2001 to 0.221 in 2008, as can be seen in Figure 3. The commodification of these formerly public services has gradually given rise to a drastic decline in social wages since the 1990s.

Figure 3

Free and Paying Student Enrolment in Iranian Universities, 2001-2008

Individual
3,339,382
3,500,000
3,000,000 2,734,116
total student
2,500,000
enrolment
2,000,000
paying student
1,565,131
enrolment
1,500,000
1,109,181
free student
enrolment
1,000,000
605,166
455,950
500,000
0
2001 2002 2003 2004 2005 2006 2007 2008

Free and Paying Student Enrolment in Iranian Universities, 2001-2008

21 Moreover, after the end of the Iraq-Iran War, Iranian families gradually experienced a historic change in their consumption basket, especially concerning durable consumer goods. For example, according to the Household Budget Survey in Urban Areas, the percentage of households owning a car rose from 17.1 % in 1992 to 45.8 % in 2014. Over the same period, the rate for vacuum cleaners increased from 39.6 % to 92.8 %, and for freezers and fridge-freezers from 23.1 % to 80.8 %. The percentage of households owning a personal computer rose from 1.5 % in 1997 to 48.3 % in 2014. This rate for cell phones increased from 5.2 % in 2001 to 95.2 % in 2014, as can be seen in Figure 4. Although these national data do not reveal any class dimension, it can be expected that worker families have experienced such changes in their consumption basket even if the rate was lower, or have at least aspired to them. In any way, changes in lifestyle have also been a source of substantial transformation in the structure of worker families’ budget.

Figure 4

Percentage Distribution of Households by Use of Equipment and Appliances, 1992-2014

95,20 %
100 %
^90% 92,80 %
80 %
80,50 %
70 %
60 %
48,30 %
50 %
40 % 45,8 %
23,10 %
30 %
30,60 %
20 %
17,10 %
10 %
1,50 % 5,20 %
0 %
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
personal car personal computer cell phone
freezer and fridge-freezer vacuum cleaner

Percentage Distribution of Households by Use of Equipment and Appliances, 1992-2014

22 Therefore, three aforementioned pressures –declining individual wages owing to workers’ declining individual and collective bargaining powers both in the labour market and in the workplace, decreasing social wages due to the government’s withdrawal from its social tasks as stated in the Constitution, and the effect of changes in lifestyle because of the growing consumption basket of worker families– have contributed to making the family budget more imbalanced than before.

3. Towards Individual Responses in the Labour Market

23 It is exactly this budget deficit among worker families which, in turn, has led them to find solutions to balance their structurally imbalanced budget, and has hence had extensive consequences. Substituting the family wage for the declining individual and social wages might be conceivable. The latter category of wages might be reduced, but the family wage might remain constant either as the already employed family members work more or more family members enter the labour market. The former group mostly includes breadwinner men, the latter group mostly children, retired workers, and women. Hence, these individual responses on the part of different family members have created four trends in the labour market since 1990s.

24 As can be seen in Figure 5, the first one is a sharp increase in the economic participation of women in the labour market, partly as a response to the increasing budget deficit among worker families, as indicated by the ratio of women’s participation in the workforce to female housekeepers, which rose from 12 % in 1986 to 18.97 % in 2011.

Figure 5

Ratio of Women’s Participation in the Workforce to Female Housekeepers, 1976-2006

25 %
23 %
18,97 %
20 %
16 %
15 %
12 %
10 %
5 %
0 %
1986 1996 2006 2011

Ratio of Women’s Participation in the Workforce to Female Housekeepers, 1976-2006

25 The second trend is an increase in child labour, mostly because of poverty in lower class families. There is no official data on child labour, but an increasing trend may be seen from some proxies. For example, according to the Law Enforcement Forces (Police Forces), the number of children arrested by police increased from 62,048 in 2001 to 93,480 in 2008, as can be seen in Figure 6. It can be assumed that the most common crime among children is child labour.

Figure 6

Number of Children Arrested by the Police for Various Crimes in 2001 and 2008

93.480
100.000
80.000
62.048
60.000
40.000
20.000
0
2001 2008

Number of Children Arrested by the Police for Various Crimes in 2001 and 2008

26 The third trend is an increase in the number of retired workers who, despite their retirement, remain in the labour market as job seekers in order to fill the gap between income and expenses in their families. For example, as Figure 7 shows, the proportion of the retired aged 65 and over with at least two jobs rose from 7 % in 1994 to 22 % in 2004.

Figure 7

Percentage of the retired aged 65 or more with at least two jobs, 1994-2004

25 %
21.50 %
20 %
15 %
^10% 7.09 %
5 %
0 %
1994 1997 1998 1999 2000 2001 2002 2003 2004
the retired aged 65 or more with at least two jobs

Percentage of the retired aged 65 or more with at least two jobs, 1994-2004

27 The fourth trend is the spread of the multi-job phenomenon among breadwinner men to balance their imbalanced family budgets. For example, as Figure 8 shows, the proportion of employed age groups with at least two jobs rose drastically between 1994 and 2004.

Figure 8

Percentage of Employed Age Groups with at Least Two Jobs, 1994-2004

20 %
17.60 %
18 %
16 %
14 %
12 %
10 %
8.50 %
8 %
6 %
4 %
2 %
0 %
1994 1997 1998 1999 2000 2001 2002 2003 2004
aged 55 to 59 aged 45 to 49 aged 35 to 39
aged 50 to 54 aged 40 to 44

Percentage of Employed Age Groups with at Least Two Jobs, 1994-2004

28 These four trends may be traced in the growing share of annual average gross miscellaneous income per urban household, distinct from such income sources as wages and salaries received from private, public and co-operative sectors, the self-employed in agricultural and non-agricultural sectors, sales of secondhand goods, and non-money incomes. According to the Household Budget Survey in Urban Areas, this share rose from 7.1 % in 1992 to 23.6 % in 2014, as can be seen in Figure 9.

Figure 9

Share of Annual Average Gross Miscellaneous Income in Total Urban Household Income

share of miscellaneous
income in total household
2014
2013
income
2012
2011
2010
2009
2008
2007
2006
2005
30 %
2004
2003
25 %
2002
2001
20 %
2000
1999
15 %
1998
1997
1996
10 %
1995
1994
5 %
1993
1992
0 %

Share of Annual Average Gross Miscellaneous Income in Total Urban Household Income

29 While the statistics on child labour certainly refer to the lower classes, it can be expected that worker families have experienced the other three trends much more heavily than upper class families, even though the nationwide data have no class dimension. If so, as a result, it might be concluded that a part of the labour supply has its roots in the responses of the members of worker families to their structural family budget deficits which are mainly due to decreasing individual and social wages and growing consumption baskets. Although the sources of the labour supply are manifold, there is no doubt that when there is a high rate of chronic unemployment, as can be seen in Figure 10, this new source of labour supply has tended in turn to have a strong intensifying effect on the excess of supply over demand in the labour market. Considering the high rate of labour casualization, the fact that around 50 % of employed workers are not protected by the Labour Code, the role of human resources contract firms in recruiting around 3 million workers, the contraction of the state’s employment umbrella for low-level state employees, and the high rate of chronic unemployment, this new source of labour supply for members of worker families should intrinsically be highly precarious.

Figure 10

Urban Unemployment Rate, 1997-2014

urban unemployment rate
2014
2013
2012
2011
2010
2009
2008
2007
18 %
2006
16 %
2005
14 %
2004
12 %
2003
10 %
2002
8 %
2001
2000
6 %
1999
4 %
1998
2 %
1997
0 %

Urban Unemployment Rate, 1997-2014

30 With the increasing excess of supply in the labour market, the state policies which contributed to the decrease of workers’ individual and collective bargaining powers can be implemented much more easily than before. This is the vicious circle in which Iranian workers have been gradually trapped since the early 1990s: their diminishing individual and collective bargaining powers, due initially to state policies implemented since the 1990s, and to worsening living conditions, in particular decreasing individual wages and plummeting social wages, have led family members to overwork or to enter the workforce to balance their imbalanced family budgets. This, in turn, has allowed the state to enforce its policies on employee-employer relations much more easily than before, thus causing workers’ bargaining powers to be further weakened.

4. The Roots of the Stagnating Labour Demand

31 From an analytic perspective, what consolidates this vicious circle is the dynamism of the stagnating demand in the labour market, which stems mainly from three weaknesses in the capital accumulation chain: The production of value in the workplace, the realization of value in the market, and the reinvestment of surpluses in the domestic economy.

32 These three interwoven weaknesses have not been overcome in post-revolutionary Iran. Firstly, owing to the dominance of unproductive over productive capital in the private sector, as well as of unproductive over productive activities in the public sector, a disproportional share of the national economic resources have been channelled into a broad spectrum of unproductive activities. A variety of empirical data display such a structural imbalance regarding the production of value in the Iranian economy. As can be observed in Figure 11, on the one hand the growing number of bank branches and cultural centres established in mosques (i.e. unproductive activities in the private and public sectors respectively), and on the other hand the decreasing number of manufacturing establishments with 10 or more workers may reveal this.

Figure 11

Number of Manufacturing Establishments with 10 or more Workers, Bank Branches, and Cultural Centres in Mosques, 2005-2012

25.000
20.000
cultural centres
in mosques
15.000
bank branches
10.000
manufacturing
establishments
5.000
with 10 or
more workers
0
2005 2006 2008 2009 2010 2011

Number of Manufacturing Establishments with 10 or more Workers, Bank Branches, and Cultural Centres in Mosques, 2005-2012

33 Also, as can be seen in Figure 12, while the share of financial intermediation in the gross domestic product (i.e. speculative economic activities) rose from 1.02 % in 1996 to 2.78 % in 2011, the share of capital formation in the private sector in the gross domestic product (i.e. productive economic activities) decreased from 4.39 % to 3.98 % over the same period.

Figure 12

Shares of Financial Intermediation & Capital Formation in the Private Sector in the GDP, 1996-2011

6 %
5 %
3.98 %
share of capital
4 % 4.39 % formation of
private sector in GDP
3 %
share of financial
2.78 %
intermediations
2 %
in GDP
^1% 1.02 %
0 %
1996 2001 2006 2007 2008 2009 2010 2011

Shares of Financial Intermediation & Capital Formation in the Private Sector in the GDP, 1996-2011

34 Finally, according to the Household Budget Survey in Urban Areas, as can be seen in Figure 13, the distribution of households’ employed members in industry and mining declined from 23.7 % in 1992 to 17.4 % in 2014, while the percentage working in financial, insurance, proprietary, judicial and commercial services rose from 2.6 % to 8 % over the same period.

Figure 13

Distribution of Urban Households’ Employed Members in Industry & Mining and in Financial, Insurance, Proprietary, Judicial and Commercial Services, 1992-2014

Distribution of Urban Households’ Employed Members in Industry & Mining and in Financial, Insurance, Proprietary, Judicial and Commercial Services, 1992-2014

35 Secondly, due to the dominance of commercial capital over domestic production, domestic producers lack a sufficient effective demand for their products in the domestic market, which has substantially been conquered by foreign producers with the help of commercial capital as a mediator. This situation is a great obstacle to the realization of value in the market. This can be seen to a certain extent in Figure 14 which shows the growing gap between the value of imports and that of non-oil exports.

Figure 14

Non-oil Exports and Imports (in Millions of Dollars), 2001-2010

90,000
80,000
70,000
68,712.34
60,000
50,000
40,000
30,000 34,350.72
18,969.09
20,000
6,449.82
10,000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2010
non-oil exports (millions of dollars) imports (millions of dollars)

Non-oil Exports and Imports (in Millions of Dollars), 2001-2010

36 Also, as can be seen in Figure 15, the value of finished goods in manufacturing establishment with 10 or more workers rose from 39,399,609 million rials on March 20, 2005 (end of the Iranian financial year) to 128,973,945 million rials March 20, 2011. Although a part of this increase is due to inflation, there is no doubt that it also shows the insufficient effective demand for finished goods produced by manufacturing establishments, that is, the problem of realization of value in the goods and services market.

Figure 15

Value of Finished Goods in Manufacturing Establishments with 10 or more Workers (Millions of Rials) – March 20, 2005-March 20, 2011

millions rials
150,000,000
128,973,945
120,000,000
103,378,524
85,230,206
90,000,000
51,911,226
60,000,000 49,074,579
39,399,609
30,000,000
0
20 March 20 March 20 March 20 March 20 March 20 March
2005 2006 2007 2009 2010 2011
value of finished goods in manufacturing establishments with 10 or more workers
(millions of rials)

Value of Finished Goods in Manufacturing Establishments with 10 or more Workers (Millions of Rials) – March 20, 2005-March 20, 2011

37 Thirdly, because the tendency towards accumulating capital within national borders is weaker than that towards the flight of capital, i.e. the structural abundance of the de-investment of capital over its reinvestment, the rate of reinvestment has been too low to make capitalist development functional in post-revolutionary Iran, as shown by Figure 16.

Figure 16

Capital Account (Millions of Dollars), 1990-2012

millions dollars
10,000
5,000
0
1992
2000
1994
2002
2004
2006
2008
2012
1990
1996
2010
1998
- 5,000
- 10,000
- 15,000
- 20,000
- 25,000
capital account (millions of dollars)

Capital Account (Millions of Dollars), 1990-2012

Conclusion

38 The vicious circle, which has gradually trapped Iranian worker families in unsatisfactory living conditions since the early 1990s, draws much of its strength from two distinct kinds of class and intra-class relationships in post-revolutionary Iranian society.

39 The first is between workers and employers, be they private, public or semi-public. Employers have successfully prevailed over workers in an ongoing class struggle. Thanks to state policies enforced since the early 1990s, employers have deprived more than 90 % of employed workers from job security; about 3 million of them have been recruited by human resources contract firms and no longer have direct legal relations with their employers; the state’s employment umbrella has been greatly reduced for low-level civil servants in particular; around 50 % of workers are no longer covered by the Labour Code; and all of them have lost the ability to establish their own independent collective labour organizations. All these changes in employee-employer relations, which have led to workers’ drastically reduced individual and collective bargaining powers both in the labour market and in the workplace, have given rise to worsening living conditions for workers. Their individual responses to get out of the situation have only had an exacerbating effect by generating more excess labour supply in a national labour market which already suffered from an excess of supply over demand.

40 It is precisely the second kind of intra-class relationship within the ruling class which prevents both the private and public sectors from fulfilling their job-generating role and hence from creating sufficient labour demand in the labour market to have a trickle-down effect on worker families, rescuing them from the vicious circle in which they are trapped. The dominance of unproductive over productive economic activities in both the private and public sectors, of commercial capital over domestic producers, and of de-investment over reinvestment within the national economy –leading to the chronic structural triple crises of the production of value, the realization of value, and capital decumulation in the national economy– have been obstacles to creating sufficient labour demand which are too strong to be removed without fundamental political change in the country.

41 Having defeated workers in a class struggle while simultaneously being defeated by the unproductive segments of the ruling class in an intra-class struggle, the whole Iranian bourgeoisie seems to be either too loyal to its own immediate economic interests to change its mental calculations in favour of labour, or too weak in the political arena not to be overcome by its parasitic counterparts (i.e. unproductive capital, the ideological state apparatus, commercial capital, or agents of capital flight). Between the bourgeoisie’s Scylla and the ruling political class’s Charybdis, Iranian workers must steer their course to escape this vicious circle.