This blog is based on an article in Social Policy and Society by Ilyar Heydari Barardehi, Mahnoush Abdollah Milani and Sepideh Soltani. Click here to access the article.
In recent times, the use of economic coercion by governments and international organisations has become increasingly prevalent: a diplomatic strategy with profound consequences for the targeted country’s citizens. One such country grappling with the ramifications of comprehensive economic sanctions is Iran, where the effects are not just political but have far-reaching implications for the well-being of citizens, especially vulnerable groups like older adults. This blog delves into a comprehensive study that explores the multifaceted impact of economic sanctions on the material well-being of older Iranians, shedding light on income and consumption disparities, the reliance on informal support systems, and the potential protective role of pensions.
The study is an attempt to paint a vivid picture of the changes in material well-being experienced by older Iranian adults during the period of comprehensive economic sanctions. Using micro-level data and quantile regressions, the research delves into income and consumption heterogeneity amongst Iranian urban older groups, uncovering a striking dependence of non-pensioners on informal support systems, primarily in the form of cash transfers from family members. This finding aligns with existing literature stressing the importance of intergenerational transfers in providing financial support to older individuals in developing countries.
In Iran’s traditional society, familial support networks are considered lifelines, but sanctions-induced stagflation has the potential to erode the ability of family members to provide the necessary financial assistance to their older relatives. Whilst the study cannot delve deeply into potential shifts from pecuniary support to non-monetary alternatives due to limited information, it underscores the urgency of further research to thoroughly investigate the mechanisms underlying these intergenerational transfers.
The research findings also bring to light a concerning reduction in the average consumption of older urban individuals during the sanctions period. This reduction is particularly pronounced amongst older adults without pensions, emphasising a growing economic disparity. The root of this disparity can be traced back to a historical legacy of structured inequality, where an uneven distribution of wealth amongst older adults impedes low-wealth non-pensioners’ access to material resources and unearned income in their later years. The formal sector, historically providing better opportunities for those with higher levels of education, has enabled them to retire with a pension. Conversely, the growing informal economy has absorbed the majority of low-educated individuals, leaving them without access to old-age pensions—a trend prevalent in many developing nations contributing to persistent old-age poverty. These findings are consistent with existing literature that highlights a well-established correlation between economic sanctions and heightened inequality.
The research findings are particularly relevant given the current dire economic situation faced by the Iranian retired population. Older adults’ well-being and economic security are increasingly at risk due to factors such as high inflation, a weak currency, and limited access to affordable healthcare. In light of these challenges, it becomes imperative for the government to consider implementing targeted welfare programmes, such as food assistance, cash transfers, and health subsidies. However, the successful implementation of these programmes requires the efficient identification of the economically disadvantaged non-pensioner population—an intricate task in a country like Iran where reliable income and economic data are often scarce.
In practice, policymakers in developing countries often resort to implementing universal or highly inclusive welfare policies to minimise errors of inclusion or exclusion. However, past experiences in Iran have shown that inclusive welfare policies have only been partly effective. Whilst such policies may cover all non-pensioners, including those in need and those who are not, this approach creates additional financial challenges for the government, already grappling with reduced revenues due to comprehensive economic sanctions. Hence, the implementation of effective targeted measures requires the formulation of a domestic taxation plan to finance them, emphasising the need for future research to define eligibility criteria for targeted transfers, identify impoverished older adults, and develop an optimal tax scheme.
In conclusion, the study underlines the decline in material well-being experienced by older Iranians amidst the sanction-induced economic recession. It emphasises the critical role of pensions as a protective mechanism while shedding light on the vulnerabilities of non-pensioners relying on an informal family support system. However, considering the precarious economic prospects of the country, the long-term sustainability of this support system remains doubtful. Urgent policy solutions are needed to fortify Iran’s social security infrastructure, ensuring the economic well-being of economically disadvantaged older Iranians and non-pensioners in the face of ongoing economic challenges. As the Iranian government navigates these complexities, it becomes crucial to strike a balance between inclusive policies and targeted interventions to alleviate the hardships faced by the most vulnerable segments of the population.
About the authors
Ilyar Heydari Barardehi is a Research Fellow and a member of Familydemic and Labfam research groups at the University of Warsaw.
Mahnoush Abdollah Milani is Associate Professor of Economics at Allameh Tabataba’i University.
Sepideh Soltani is a Master’s student of Economics at Ludwig Maximilian University of Munich.
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