Iran’s Economic Contraction Leaves Workers Exposed

Iran could lose as many as 1.4 million people from its labor market by the end of the Iranian calendar year if contraction continues, Seyed Malek Hosseini, deputy for entrepreneurship and employment in Iran's Cooperatives, Labor and Social Welfare Ministry, told the Iranian Labor News Agency. The squeeze is already visible in job losses, shrinking incomes and workers pushed outside formal protections.

Jobs, Benefits and the Cost of Living

Official figures cited by Hosseini show about 700,000 jobs lost during the war. Unofficial reports put the number closer to two million, he said. An internet blackout lasting nearly three months, beginning during the January protests, also disrupted businesses by blocking access to online platforms and services people needed for work.

Even if all 700,000 people whose job losses the government acknowledged applied for unemployment benefits, monthly payments of 16 million to 17 million tomans wouldn't cover basic living costs amid high inflation, Hosseini said. The Statistical Center of Iran reported year-on-year inflation of 89.8% in September 2026. The national consumer price index rose 4.2% from August, reaching 729.8.

Jalal Hashemi, chairman of the Iran Air Retirees Association, told ILNA that two retired Iran Air employees had died after they could no longer afford treatment and medication. For those workers, the gap between official assistance and the cost of staying alive wasn't an economic abstraction.

Hosseini said 54% of Iran's labor market was informal, a share that had grown after the war. Many informal workers lack employment protections and insurance; others can't secure enough hours or income to meet basic needs. “It shows that our labor market suffers from chronic structural problems,” he said. “Formal employment and extensive insurance coverage are products of a dynamic, capable economy that experiences high growth rates over long periods.”

Contraction and the State’s Numbers

Hosseini said a 20-year assessment showed average annual economic growth of about 2.2% to 2.3% over the past two decades. Each percentage point of growth created approximately 170,000 jobs, while each percentage-point decline was associated with an average loss of around 170,000 jobs. Before the wars with Israel began, Iran had a working-age population of 65 million and a labor-force participation rate of 40%.

More than one million jobs had already been lost, Hosseini said. The number of employed people fell from 24.7 million to about 23.5 million to 23.7 million by the end of March 2026. He said official reports showed economic growth in the spring, compared with the same period in the previous year, was negative 10% excluding oil and negative 4.6% including oil. With increased sanctions and what he called a serious economic blockade, he expected the summer to follow the same trajectory.

“Negative growth inevitably reduces employment,” Hosseini said, describing how falling consumer purchasing power and demand for furniture, electronics, food and other goods lead businesses to reduce production. Lower revenue then forces cost cuts. The figures describe the chain from a contracting economy to fewer jobs, but the unpaid bill lands on workers and households.

Nearly 740,000 people left Iran's formal labor market following the 12-day war in June, Hosseini said. That figure excludes informal-sector workers, who aren't covered by the relevant employment insurance. About 1.15 million people were removed from compulsory social insurance rolls between March and August, though further analysis was needed to distinguish retirements, disabilities and new registrations. By the end of August, about 300,000 people had joined unemployment-benefit rolls and were receiving payments. Hosseini said many people who lost jobs hadn't applied, hoping to return to their previous employment or preserve eligibility for a more serious emergency.

Warnings, Directives and Deals

Hosseini said businesses' resilience had been depleted. Since sanctions were reimposed in 2018 under US President Donald Trump's first administration, Iran has faced sanctions, COVID-19, high inflation and three periods of conflict. Inflation, particularly in production-input costs, has raised expenses while reducing demand, pushing businesses to scale down or leave the market.

US Treasury Secretary Scott Bessent told Iran International on Tuesday that he expected Iran's economy to contract by an additional 25% by next March and advised Iranian civilians to stock up on gasoline. Iran's first vice-president Mohammad Reza Aref had urged citizens to limit their use of subsidized gas ahead of greater winter demand, the Financial Times reported. Iranian Parliament Speaker Mohammad Bagher Ghalibaf had previously called for a 10% reduction in natural-gas consumption.

Meanwhile, Caretaker Oil Minister Hamid Bovard discussed joint oil and gas projects with Russian President Vladimir Putin in Moscow on Monday. Tasnim reported that a gas trade deal was “almost finalized” and that Russia was developing four major Iranian oil fields under contracts agreed by both sides.

Bessent told Iran International, “My advice to the Iranian people would be: don't pay your taxes because you're not going to get anything back from the government,” while noting that taxes are often automatically deducted from employee pay. He said, “We are seeing the regime go bankrupt,” and added that people holding money outside Iran didn't want to send it back. He also said unsanctioned Iranians could provide information to the US Treasury's whistleblower program and receive up to 30% of recovered funds. Workers face the contraction; officials offer warnings, consumption directives and competing claims about who should pay.