In a startling revelation, a member of the Tehran Chamber of Commerce’s deputy economic research department has announced the virtual elimination of Iran’s middle class. This dramatic shift has seen individuals from the lower middle class descend into lower income deciles, painting a grim picture of the country’s economic landscape.
Hossein Ashrafi, the researcher behind these findings, attributes this phenomenon directly to the economic sanctions imposed on Iran since 2012. These sanctions, a response to the regime’s controversial activities and its insistence on continuing nuclear and missile programs, have had a devastating effect on the middle class. Ashrafi’s research indicates an average annual shrinkage of 11% in this demographic, culminating in a staggering 88% reduction over the past eight years.
The study, which aimed to assess Iran’s economic conditions without sanctions, reveals a stark reality: the middle class has not only diminished compared to pre-2012 levels but has also contracted more severely than projections for a sanction-free 2012-2019 period. The impact of sanctions is further evidenced by the temporary slowdown in middle-class erosion during the 2015-2016 JCPOA agreement, followed by an accelerated decline after its failure in 2017.
This situation stands in stark contrast to claims made by some regime officials, who have repeatedly downplayed the impact of sanctions on people’s lives. Economist Masoud Nili characterizes the 2010s as a decade of declining income share for society, paralleling the deterioration of distribution indicators and contributing to the weakening of the middle class.
Recent statistics paint a troubling picture of Iran’s socioeconomic landscape. According to economists, 35% of the population lives in absolute poverty, 57% teeters on the poverty line, and only 8% belong to the privileged and wealthy class. These figures starkly illustrate the deep class divide and income disparities among Iranians.
The per capita income of Iranian citizens in dollar terms has seen significant fluctuations, with 2022 levels still far below those of 2013 and 2014. The impact of sanctions is evident in the sharp decline from $5,500 in 2017 to $2,800 in 2020. By the first half of 2023, this figure had further dropped to $2,082, highlighting the direct correlation between sanctions and individual income levels.
Adding to these economic woes, the current government’s tax policies have placed additional strain on the middle class. The 2024 budget bill proposes a 50% increase in tax revenues compared to 2023, targeting guilds and businesses predominantly belonging to the middle class. This approach is seen as an attempt to offset the loss of oil revenue due to sanctions.
Sociologists warn that the continued implementation of such economic programs, as outlined in the 7th Development Plan, could lead to irreparable social and cultural damage. Economic expert Vahid Shaghaghi predicts a crisis if the middle class continues to shrink at its current rate, leading to a progressively poorer population.
Even in the event of sanctions being lifted, economists estimate it would take years for the decimated middle class to recover. Achieving the necessary continuous 8% growth and single-digit inflation within the five-year period of the 7th Development Plan is considered nearly impossible by many experts.
As Iran grapples with these economic challenges, the fate of its middle class remains uncertain, with far-reaching implications for the country’s social fabric and future prosperity.
