Study of Iran’s basic income shows it did not harm employment

Study of Iran’s basic income shows it did not harm employment

An economic study of Iran’s Basic Income, which was implemented to make it easier to phase out expensive (and ecologically destructive) fuel subsidies, shows that there have been no negative effects on employment. In the first section, I will summarize the study. In the middle, there is a list of past contributions made by Basic Income News authors. In the final section, I will make a few observations.

Iran’s Fuel Subsidy Reform and Employment

The unconditional grant program was launched in 2011. The monthly grant amounted to 29% of median household income, or about $1.50 extra per head of household, per day. Around 90% of Iranians are funded through this program. (Wikipedia has a good summary of the program at the time of this writing. It does not include the end of the universal cash grant program.)

Most people in Iran and in the government came to believe that the grant discourages employment. One often hears anecdotes and assertions in national and local Iranian press. The Iranian Parliament called for cuts in the program. (See Tehran Times, April 19, 2016.) After some wrangling, cash subsidies were finally ended in 2016, with funding reserved now for low-income citizens, they could possibly begin performing a criminal background check on applications for this funding in the future. Costs were cited. It is important to note half of the cuts in fuel subsidies went to business grants and other government expenses. (See Kate McFarland in Basic Income News, “Iran: Parliament Slashes Cash Subsidies to Citizens”). What is frustrating here is the fact that the program did not undermine work participation at all.

This study shows that some people in their twenties reduced work hours, often to go to school or improve their schoolwork. But this only averaged out to a matter of months (and is likely to yield medium- and long-term benefits.) Many people increased work time a little, especially in the service sector. The authors think that these businesses used the income to find more work opportunities. Empirical evidence contradicts a lot of presuppositions about the impact of an unconditional cash grant.

The study, “Cash Transfers and Labor Supply: Evidence From a Large-Scale Program in Iran“, is put out by the Economic Research Forum and was authored by the economists Djavad Salehi-Isfahani and Mohammad H. Mostafavi-Dehzooei.

The World Economic Forum posted a summary of the Economic Research Forum study here.

Past Articles on Iran’s Basic Income

Basic Income News has repeatedly covered Iran’s Fuel Subsidy Program to make sure it is regarded as a basic income policy. Here is a list of additional articles on the subject:

Djavad Salehi-Isfahani wrote an earlier piece for the ERF. Josh Martin writes about it at Basic Income News here.

Mathieu Ferry writes about Jacques Berthiller’s piece in Basic Income News here.

The Citizens’s Income Trust, based in Britain, wrote this opinion piece for Basic Income News here.

Karl Widerquist wrote four articles early in the program’s history. “Iran: Basic Income Might Become Means Tested” and “Iran: Basic Income Gets International Attention.” “Iran: On the Verge of Introducing the World’s First National Basic Income” and “Iran Might Be Moving Toward a BIG

Hamid Tabatabai wrote an article that, very early on, points out that a country that had not been debating a basic income implemented substantial basic income grant.

III. Observations

These are conclusions reached by the author, Jason Burke Murphy, after reading the ERF study and the other articles on Iran’s program. I wanted to separate them because the first section of this article is meant to review an important study and past contributions by BI News authors.

(1) There was no point at which this program was embraced as a way to promote real freedom or to roll back poverty. Fuel subsidies were just unleashing such strong side effects that something needed to be done. It is amazing to know that a program that raises average income by 29% could be launched in order to solve a problem other than “lots of people would be better off with more money”. Had this been debated as a basic income guarantee, maybe things would turned out better.

(2) The idea that some people who can work might not work seems to bother people so much that the government ended a program that raises income for a majority of its people and for its least-well-off.

The idea is so powerful that the fact that people are NOT refusing to work can’t seem to overcome the fact that many people MIGHT or COULD refuse to work. There is a lot of work to be done here.

(3) Everyone should ask the question: What sort of percentage of people not formally working is even a problem? Most of them will do work for their families, after all. Many will gain expertise with the idea of applying it to future. Some will do work for their communities or as entrepreneurs.

(4) The impact of this grant was likely affected by the fact that it was never been presented as permanent. It also is not large enough to sustain most people at a standard of living that Iranians find decent. This may not serve as the rock-solid proof that a sizable grant won’t affect employment.

(5) In the US, an equivalent percentage of support would be around $16,000 a year. Can we assert that the Iranian experience shows that this amount would not trigger a mass refusal to work? Hard to say. Would a small-to-medium dip in job seekers even be a problem? Probably not. Lots of places in the US have average income below $16,000. Can we really say that they would be worse off with this grant just because some of them quit their jobs?

(6) All countries should take a good look at their subsidies, especially ones that benefit the already wealthy. They should cut them and fund an unconditional dividend. We get rid of something bad and replace it with something good. We see how high the dividend would be and think about the next step.

(7) As Basic Income advocates, we need to list Iran alongside Alaska and Macau as regions with a Basic Income. This is difficult because only Alaska has described its dividend as “permanent” and only there have recipients come to believe it is dependable. In the US, it is a little unusual to say “let’s do what Iran did” but that is our fate as a truth-telling movement.


IRAN: Parliament slashes cash subsidies to citizens

IRAN: Parliament slashes cash subsidies to citizens

A story that brought much excitement to Basic Income News six years ago may be winding to its end.

In 2010, Iran became the first country to pay a de facto basic income to its citizens–a policy that emerged as a byproduct of a pressing demand to reform the nation’s system of fuel subsidies.

At that time, the Iranian government determined that it would dedicate half of its oil revenues to government services and businesses, while distributing the other half in the form of unconditional cash payments to all citizens. The monthly amount was equivalent to about 40 USD, paid to heads of households.

Within a year, however, the government began facing difficulty in financing the subsidy program, and eventually resorted to asking comparatively well-off citizens to voluntarily opt out. As a result of the requests, about two-and-half million citizens began declining their subsidies, while 73 million retained them.

But these voluntary withdrawals from the program proved insufficient to halt Iran’s growing budget deficit–and, in January 2016, the government announced that it would remove an additional 3.3 million Iranians from the subsidy program, as determined based on an assessment of their financial situation. (For example, as the New York Times reported, one middle-class merchant was unenrolled after purchasing a car worth $7000.)

Finally, in April, the Iranian parliament approved a bill that will result in the loss of the cash payments to about 24 million citizens — nearly one-third of the population. The cuts will go into effect in September of this year.

For more about the recent cuts in the dividend, see:

Khatereh Vatankhah (Apr 26, 2016) “Outgoing Iran parliament moves to radically cut cash handouts,” Al Monitor.

For more on the history of the Iranian oil dividend, see these previously published columns in Basic Income News:

IRAN: On the verge of introducing the world’s first national basic income” (Aug 12, 2010) by Karl Widerquist

IRAN: Economic reforms usher in a de facto basic income” (Nov 9, 2010) by Yannick Vanderborght

IRAN: Basic Income Might Become Means Tested” (Jan 18, 2012) by Karl Widerquist

Iran’s Citizen’s Income Scheme and its Lessons” (May 21, 2012) by Citizens’ Income Trust

Image Credit: dynamosquito at flickr

Djavad Salehi-Isfahani, “Iran’s Subsidy Reform: from Promise to Disappointment”

Salehi-Isfahani details the Iranian subsidy reform of 2010, where they shifted funds usually allocated to energy subsidies totaling around $100 per citizen to a cash transfer program of $45 per person per month.  This program implemented a form of a basic income, and this article details the economic impact of the reform on energy prices, inflation, and on poverty levels.  In total, the cash subsidies had a significant impact on poverty and inequality.

Djavad Salehi-Isfahani, “Iran’s Subsidy Reform: from Promise to Disappointment”, Economic Research Forum, Policy Perspective No. 13, June 2014.

Caputo, Richard K. (editor) (2012), Basic Income Guarantee and Politics: International Experiences and Perspectives on the Viability of Income Guarantee

According to the publisher Palgrave/Macmillan, “This exciting and timely collection brings together international and national scholars and advocates to provide historical overviews of efforts to pass basic income guarantee legislation in their respective countries and/or across regions of the globe. Contributing authors address specific substantive issues such as: who were the main people and groups involved in support of or against such legislative efforts; what were the main reasons for the success or failure of BIG-related initiatives to date; and what the prospects are for the future. Countries discussed include Australia, Finland, Germany, Iran, Japan, Mexico, Netherlands, Spain, the UK, and the US.” The publisher also quotes Greg Marston, who writes, “This book integrates careful research, political theory and practical insights in a way that no other volume on the idea of a basic income guarantee has yet done. Through engaging and thoughtful presentation of wide ranging national case studies, readers will learn a great deal about the global state of play. In an age of growing economic insecurity, the book provides a timely reminder of the possibilities income guarantee schemes offer for improving social wellbeing.”

For more information go to: