Currently, nine out of ten deciles in Iran’s society are vulnerable to economic shocks. A closer examination of the spending patterns across deciles reveals that the gap in expenditures between households in the tenth decile is also considerably wide.
Data on urban household expenditures for 2022 show that the ratio of spending between the 10th decile (the top 10% of the population) and the 9th decile is roughly double. However, the spending gap between the other deciles is significantly smaller, creating a pronounced disparity between the tenth decile and the rest of society. This means that while most deciles are vulnerable to economic shocks, even some households within the 10th decile might also become vulnerable in the face of new economic fluctuations.
As a result, only a small fraction of society is insulated from economic shocks. The vulnerability of 9 out of 10 deciles means that many households could easily fall closer to the poverty line. At first glance, it might seem that the 10th decile is immune to such fluctuations, but a deeper look shows a substantial income gap even within the 10th decile itself. This suggests that new economic disruptions could push those in the lower range of the 10th decile down to lower economic tiers.
In 2023, the total expenditure of an average urban household in the 10th decile was approximately 589 million tomans, while for the 9th decile, it was around 316 million tomans. This implies that the 9th decile’s spending is about 53% of the 10th decile’s, meaning the average expenditure of the 10th decile is nearly double that of the 9th decile.
This large difference highlights a significant disparity in living standards and economic power. In 2022, this ratio stood at 59%, showing the widening gap between these deciles. Households in the 10th decile spend significantly more than those in lower deciles, primarily on non-food items such as housing, education, healthcare, and entertainment.
Last year, the average expenditure on food and tobacco for urban households in the 10th decile was about 95 million tomans, while an additional 494 million tomans were spent on non-food items. In other words, only 16% of the expenditures of high-income Iranian households are allocated to food needs.
In contrast, the share of food-related expenses in the 9th decile increases to about 22% of total costs, and this percentage rises further in lower deciles. For instance, in 2023, the total average expenditure of an urban household in the first income decile was around 47 million tomans, with about 43% of this amount dedicated to food needs.
Over the past years, Iran’s economy has faced numerous shocks, including sanctions and exchange rate fluctuations. During these periods of economic upheaval, such as rising inflation or financial crises, the lower deciles are hit the hardest. Data on annual urban household expenditures show that the first and second deciles, which have significantly lower annual expenses compared to the tenth decile, spend most of their income on food.
This means that when food prices or the cost of basic goods rise, lower-income households are disproportionately affected and have fewer resources to manage these changes. Conversely, households in the 10th decile, which allocate a larger portion of their spending to non-essential goods and services like recreation, healthcare, and education, are less impacted by increases in the prices of basic goods and can adjust their spending in other areas.
The economic gap between the 10th and 9th deciles underscores the growing economic inequality in Iran. This disparity is not solely due to differences in income but also to unequal access to economic opportunities, educational services, healthcare, and housing. The financial strength of the 10th decile affords them greater access to higher-quality services, making them less vulnerable to price increases and economic crises, whereas lower deciles are more at risk due to their dependence on limited incomes. The widening of these inequalities over time exacerbates both social and economic challenges.
Currently, it can be said that Iran’s middle class has significantly weakened, and nine income deciles are vulnerable to economic fluctuations and shocks. While it may appear that the 10th decile can maintain its standard of living independent of economic changes, a more detailed analysis reveals that even within this decile, there is a significant income gap. As a result, new economic disruptions could push households in the lower ranks of the 10th decile down into lower deciles. Furthermore, the poverty gap has widened in recent years.
The emergence of new economic shocks could push individuals who are not currently classified as poor below the poverty line. Income and economic inequality can have long-term negative effects on social stability and national cohesion, especially when large segments of society feel left behind by economic cycles and unable to benefit from growth opportunities. Given the significant gap between the 10th decile and even the 8th and 9th deciles, only the highest income group may be able to maintain its previous living standards.
In recent years, as inflation surged, the government has attempted to support lower-income deciles by providing various subsidies to prevent an increase in the wealth gap. However, these policies have not sufficiently reduced class inequality. Lower-income households still spend a large portion of their income on basic needs and have limited ability to save or invest.
While policies like subsidies, financial assistance, and social security programs address some of the needs of lower-income deciles, they are insufficient. The 10th decile, with its greater financial resources, remains less affected by economic crises. In such a situation, the government bears a heavy financial burden in attempting to support vulnerable groups, yet these policies have not yielded the desired outcomes.
Despite the relative advantages enjoyed by the 10th decile, this inequality can lead to long-term social dissatisfaction and economic instability. Lower deciles, which spend most of their income on basic necessities, are less likely to improve their economic standing as inflation rises and purchasing power declines. Moreover, growing economic inequality erodes social solidarity and widens the gap between different social groups. These conditions can ultimately result in slower economic growth, increased unemployment, and social unrest.
The experiences of recent years show that the government’s redistributive policies have not been effective in significantly improving the economic conditions of lower-income deciles.
