Female Labor Force Participation In Iran

Female Labor Force Participation in Iran
By: Nasrin Azadeh

The main feature of Iranian labor market is firstly, the low employment ratio and lower participation rate of total labor force in comparison with most of the countries; secondly, the lower than average female labor force participation (FLFP) and their participation in its political process. Low rate of women’s participation affected the total labor force participation where the gap in employment rates amounts to almost six times for men. However during the past 5 years, Iran envisioned major demographic and social changes in terms of labor market participation rate. That is to say, men’s participation rate only grew 1.3 per cent (from 60.8 to 61.6 per cent) while this rate for women, with 31.9 percent relative growth, improved from 9.1 to 12 percent.

Traditionally women are not encouraged to work outside their home but unemployment, underemployment, high inflation, and rising cost of the living has turned the step stone, forcing women to have wider participation in the economy. Studies show that the increasing cost of living requires women to participate in economic activity to overcome poverty. In 1996, each employed person had to provide for the living expenses of 4.2 persons, which would cause the reduction of the level of savings of households hence the national savings.

Female labor force participation FLFP ratio of total participation for age group of 15-64 amounts to only 27 % which is approximately identical to that of Iraq’s 20% or Jordan’s 24%. Labor force gender parity index which is the ratio of the number of women who are economically active to the number of employed men, marks for Iran at 37% points, which is among the lowest in the world compared to East Asia which is 82% and Latin America 55%, (UN Population Prospects 2002; ILO, 1996).

Female labor participation rate is the ratio of the female labor force to the total female working age population. It indicates the proportion of the available female working age population that is willing and able to work, it includes women who are employed as well as unemployed actively seeking employment.


The prospect of increasing economic participation by women are anticipated for Iranian female workers due to rise of level of education, delayed marriages and climb of average marriage age, changes in population age structure, fall in fertility, changes in customary gender roles in households and stereotyping.

At present, Iranian labor market is facing a wave of female workers entering the labor market. Instead, lack of job opportunities warns accelerated rise of unemployment rate. In addition to waste of human capital and disequilibrium, it will create inequities and unfavorable socio-economic situation. Economic power is the foundation of women’s equality and the muscle that helps women to exercise their human rights.

Through a multifaceted approach addressing the underlying factors of the gender pay gap, including sectoral and occupational segregation, education and training, job classifications and pay systems, awareness raising and transparency the Government should aim at pursuing policies to eliminate the gaps.

Since early years of the Revolution, employers substituted away from hiring female workers towards male workers, and about one-third of women workers were dismissed. The women’s employment rate out of total employment fell sharply after the Revolution illustrating U curve diagram for the past three decades. Several researchers alluded to a U-shaped, long-term relationship between female labor force participation rate and economic development.

According to data from the Labour Force Survey the FLFP ratio declined from 12.9% in 1976 to 8.2% in 1986. However, it rose slightly to 9.1% in 1996 but still remained at below its 1976 level. So far the ascending trend of women’s share of total employment in 2001, reached to 15.1 percent. The level is still very low as compared to other developing countries. Despite the low rate of women’s participation, unemployment rate in 2001 for women was equal to 19.5 per cent and 1.5 times more than men’s rate (13 per cent). The unemployment among women aged 15-29 was twice of men in the same age category reaching up to 49.7 % in 2001.

In 2001 women’s participation rate in labor market was 12 percent while this figure for men marked as 61.6 percent. Iran’s FLFP accelerated as of 1990s, reaching 14.8% in 2004, but still remains lowest among all regions (Chamlou, Nadereh, WB, 2004). Notwithstanding the high level of men’s participation, the reason for lowest total participation rate of the country at international level is due to low participation rate of FLFP.

Despite the high fluctuation of the GDP growth during 1978-1989, employment rate did not follow similar fluctuation path. On the basis of the given variables, we will conclude a unilateral relation from growth of GDP with employment rate. In terms of inflation rate, based on conducted studies the direct impact of inflation control policies on women’s employment is negative. In other words, the inflation control means to control one of the influential factors of entering women into the labor market. The inflation encourages women to enter the labor market in particular in low income households.

Economic theory assumes that the effect of female wages on FLFP depends on the relative strengths of substitution and income effects. The substitution effect will be positive since higher female wages will mean more FLFP. The income effect will be negative since as income rises workers desire more leisure and less work. Assuming that the income effect is small, the overall effect of female wages on FLFP will be positive. On the other hand male wages are expected to have a negative influence on FLFP since the higher the wages of the husband the less likely that the wife needs to work.

The last three official decennial censuses show that the shares of wage-related employment for both urban and rural workers have consistently declined between 1976 and 1996, while those of non-wage-related work in both groups have increased. These changes also point to an increase in low-productive occupations requiring little capital. The changes also indicate a substantial increase in the share of family workers in self-employment, and a decline in the share of wages in the average urban family income.

The political balance has given Iran most intrusive employment laws in the world--the 1990 Labor Law (Salehi-Isfahani, 1999). For all practical reasons the law prevents employers from laying off workers without government approval. It is believed that women participation in labor force will maximize social output, which can also justify governments investing more in women’s education, than in men.

The status of labor unions and labor laws should be examined in respect to labor Islamic council’s credibility. Analyzing labor market suggests amendment in labor law for establishment of labor unions representing equal shares for women workers to further encourage economic participation with a right based approach. The fact that female labor force occupying larger share of informal sector and lacking representation in official institutions, makes them vulnerable in terms of raising their issues and strengthening their position. Activating the labor syndicates and joining the ILO’s international labor law, encourages the formation of labor association.

Due to the fact that labor force of men and women can be substituted with each other, the demand for women's labor will depend on two factors: cost of women's labor, and relative productivity of women's labor. The protective articles regarding rights of women and early retirements may hamper employers to employ female workers. Women workers generally work harder than their male counterparts or hold higher skill levels for occupying the same position as men. All the rules which developed with gender sensitivity that have impacts on women’s economic activity are among the official laws affecting the cost of women’s labor as compared with men. Some other factors are cultural and traditional. The society that believes in gender roles and duties indirectly has impact on the cost and productivity of the women in the labor market. Government is covering for some additional cost of maternity leave or nursery in order to support female workers. Public jobs follow a strict pay scale, such as holders of advanced degrees who all are treated equally, leaving no incentive for academics to put more effort on intellectual activities.

One of the significant factors affecting labor supply is the increase of education coverage and early retirement which resulted to decrease of men’s participation (Under 15 and over 50). Results indicate remarkable improvement in the level of education of women and a clearly negative correlation between women’s education and fertility. According to statistics, 22 per cent of female labor force and 7.9 per cent of male labor force hold university degrees. The slight share of compulsory education and further development in household expenditure according to the Statistical Center of Iran and the Central Bank, indicates that the Government bears a considerable share of the cost of education and training of human resources in Iran. In sum, Iranian families are in a position to substantially increase their investment in human capital. Educated parents with fewer children are in a good position to increase the human capital of the next generation of Iranians. The change of age structure of the population is among other parameters that will help with the growth trend of women’s participation rate.

Economists affirm that female awareness and education has a higher social return because of the important role educated women play in promoting well being of others. It is agreed that women participation in labor force will maximize social output, which can also justify governments investing more in women’s education, than in men.

Education has a strong social value for families in Iran, to participate in social activity and gain greater freedom. Iranian girls see university studies as a way to be socially active, postpone marriages, and gain social respect. The considerable increase in girls’ admission in higher education since 1999, as well as high costs of entering into universities led male students not to pursue higher education and leaving the scene in favor of female students. Subsequently, girls in Iran outnumbered boys in the entire university system. Impressive gains by urban women in higher education have drawn significant attention to gender perspective of future changes. This indicates that the main problem in women's labor market regarding shortage of job opportunities is mainly directed at young educated women and is on the accelerating verge.
In fact more than 88.7% of unemployed women in urban areas are those with higher education and in rural area this figure comes up to around 59.4%.


In urban areas the rate of unemployment for educated women raised to 31.5% while for other urban women this figure stays at 18.1%. The unemployment for educated women will see accelerated rise in future. However, women’s share of total employed is approx. 14.8% but their share of newly employed has increased to 24.2%. For both men and women the education of spouse is negatively associated with participation. This is likely reflecting an income effect. However, women whose spouse works are more likely to participate in the labor force (World Bank HH Survey Analysis, 2003).

The outline of investment on education in urban and rural societies is different. In other words, living in the urban or rural societies is one of the factors determining the educational level and literacy of individuals. (Elmi, 2000).

Total industry includes mining and quarrying, oil production, manufacturing, construction, electricity, gas, and water.
Services include wholesale and retail trade, restaurants and hotels; transport, storage, and communications; financing, insurance, real estate, and business services; and community, social, and personal services.


Due to statistical errors most of unemployed women are counted as homemakers; therefore the rate of unemployment and the accurate rate of economic participation are higher than official figures. Majority of unemployed men were previously employed but majority of unemployed women were previously students which indicates rapid growth of women’s economic participation. Evidences show that women job seekers remain unemployed in a longer period of time than men. While 48.3% of newly women workers were previously students and 33.5% were home keepers, only 6.4% were unemployed. This indicates that the numbers of job seekers are much higher than the unemployed.

The rise and fall in fertility are often attributed to the initially pro-natal and later anti-natal policies of the Islamic government (Aghajanian, 1995). In particular, in 1989 the Government launched a highly successful program. During the 8 years of the First and the Second Development Plans (1989-1996), the fertility rate was reduced by more than 50 per cent. (Mohammad Jalal Abbasi-Shavazi, 2003). As a result the annual population growth rate fell to 1.5 per cent in 1996. This is an empirical evidence of the ability of the Government for targeting issues, when collective consensus is reached and organized planning is followed through. In fact, a rapid decline in fertility since 1985 exerted two effects on Iranian labor market. In the short run, the participation rate of women in urban areas increased, and in the long run, due to changes in country’s demographic structure, it will bring about lower labor supply. Particular feature of population decrease in Iran is the relationship between the decline in marital and the rise in marriage age. Later marriages are generally associated with a desire for lower fertility.

At the margin, additional income in the hands of women results in a larger share of the household budget going toward nutrition, health, and education. The greater the woman’s control over household resources, the greater is the share of resources devoted to children.


Changes in age structure, with increasing number of youngsters at their 20s entering the labor force, have extended beyond the demand for labor. In fact, the unemployment rate of women with secondary education level has increased from 20 percent in 1996 to 42.2 percent in 2002 where for younger women aged 20-24 the unemployment reaches as high as 65% which is the highest unemployment rate among different levels.

A major factor affecting the labor supply is accelerated participation of women in recent years. As for educated women, demand deficiency unemployment, stemming out of ineffective Government policies to create jobs and extend economic growth, lacks adjustment with labor supply to establish training skills relevant to market demand. Among those women who do work, few utilize the skills they learned in high school (World Bank, 1996 and 1999). For higher educated women the unemployment rate is twice than men. With monopolizing policies, and limitations set on the private sector, Government policies were unsuccessful to provide sufficient job opportunities. The most pressing challenges facing the government of Iran in the new millennium is the creation of enough jobs to absorb the growing number of its educated women work force. The government’s attempt to gender equity not equality has been articulated at the UN ‘Beijing Plus Five Meeting’ where the country’s gender priorities and challenges were outlined.


Much of the needed policies will come in improvements in the labor market, so that rewards for productive skills increase relative to family ties and educational certificates. The government estimates that to bring down unemployment it would need about 700,000 new jobs every year for the next five years ("the Third Development Plan," Khordad Sunday, Oct. 31, 1999, no. 260, p. 8). In practice, the Government share and its affiliated institutions is running overall economy.

It is important to bear in mind that the productivity of the agricultural sector indicates proper mechanization, whereas, the weak growth of industrial sector was mainly the result of chronic subsidizing policies and lack of flexibility. Consequently, it has brought about the negative effects stemming out of inefficiency in this sector (Farjadi, 2000). The productivity in the agriculture between 1976 and 1996 is considerable and almost equal to hundred per cent, whereas, the productivity of industrial sector has been about 45 per cent.

A glance at the distribution of employed and unemployed women in the urban and rural society in 2001 by education levels, it is observed that 75.5 per cent of employed women in urban areas and 9.8 per cent in rural areas have secondary or higher level of education. These figures indicate that mainly women's employment in villages is in the traditional sectors and at the low education level. In urban societies, the same applies in modern and at high education levels. Availability of schools even in remote villages as well as a new perception of educational system as Islamic - especially favoring fathers - encouraged a noticeable reduction of cultural barriers against girls' education.


Findings from 2001 on the basis of economic sector show that the greatest numbers of agricultural workers were in the first twentieth percentile expense category. The same situation was observed in the industry and mines sector. Workers in both of these sectors had the lowest share in the most prosperous tenth percentiles. Capacity building and empowerment of the poor instead of charity approach, effective macro economic policies for long term, are considered comprehensive target planning for subsidies.

Evidences show, during the time period of 1976-2001, women’s participation rate in rural areas has continuously been more than urban areas. Except for 1986, rural women relatively have entered into the labor market more than urban women. This can be as a result of higher share of female and male student in urban areas.

Rural women participation will increase from 14.3% in 2002 to 14.9% in 2007, (the total of 1.37 million). In the last 5 years, we were faced with the reduction of rural women’s unemployment rate in contrary with the increasing number of urban women’s unemployment. However, increase of rural women’s participation growth is mostly due to optimization of statistical methods. Thus, it seems that the overestimation or the underestimation of unpaid female laborers without wages in all age groups has brought about critical changes in the rate of rural women’s participation in the respective period, further to the results of the method of questioning. In 1976, 1986, 1986 and 2001 respectively, 55, 44, 41 and 55.8 per cent of rural employed women were family workers without wages.

The Urban women’s unemployment rate has risen from 12.5 percent to 28.1 percent and the rural women’s unemployment rate has decreased from 14.4 percent to 11.1 percent.

Despite the reduction of the unemployment rate of the rural women, in recent 5 years, the unemployment rate of 20-29 year-old rural women had significant increase in this period. The rate of educated unemployed women in rural areas is 43.2% while the rate of unemployment for other rural women is only 5.3%. The impact of female unemployment on FLFP is negative and highly significant. The hidden unemployment computations indicate that the urban female unemployment rate is underestimated and the discouraged-worker effect for women is substantial.

During 1976 - 2002, the women’s marriage age rose from 19.7 to 23.5. Following these changes, the percentage of female-head households also has increased from 7.3 per cent to 9.4 per cent (the unofficial figure is much higher). It is expected that these trends to be continued in the future.

The participation rate of the divorced women at all times had the highest rate nearly as much as non married and non-students. The reason is less home duties, free time, and urge for social activity, independency and push for earning an income. It appears that unmarried women face less cultural limitation and constraints in the family and social environment to enter into the labor market. women mostly leave their job when married, however for those who do work less time is allocated to perform housekeeping due to new technologies of household appliances allows free time to participate in economic activity.

In the past five years, subsequent to the reduction of the share of public sector, the private sector expanded gradually. About 70 percent of employed women in the public sector are involved in social services (including education and health). Despite the small number of women’s employment in the business sector, the share of the women’s employment of the total employed women has increased from 1.9 percent in 1996 to 2.8 percent in 2000. The share of women workers in total manufacturing has been 21.3, 3.7 and 7.9 percent for 1976, 1986 and 1996, respectively. (Etemad Moghaddam, Fatemeh, 1998 and Bagherian, Mitra, 1990).

While less than 2 percent of employed women in the industry sector in 1996 had higher education, more than 45 percent in other services were highly educated. Despite the fact that it seems the share of women of total employed in recent 25 years has not had a tangible change, the nature of employment has found a major change. It has shifted from the illiterate and rural women to the urban educated women. Female labor participation is an entering point into the social security system.

The majorities of the female managers are in education field or are in fact the principal of girls’ schools which in this country necessarily are recruited among women. The ratio of employed women in the group of legislators, high ranking officials and managers (omitting education sector) are less than 0.6 percent indicating a vertical discrimination in the women’s labor market.

In the urban and rural regions, the annual average income of men compared to women is 2.2 and 8.1 times respectively. The reduction of income gap of men and women with the increase of education level is due to the fact that the growth opportunity for women and men is not the same, the income discrimination is greater in non-wage earnings, and most of all the easier access to capital and land for men has a significant impact on the income rate. Women may have relatively little freedom to reinvest their income in labor saving equipment or other technology. The laws of inheritance and the policies on micro credits have limited the access of women to financial resources. Because women are less mobile than men, banks are harder for them to reach; more women than men are illiterate, making documentation difficult, and majority of women lack collateral.

In addition, since women have been less present in the economic sector, their entrepreneurship power and skills are less improved. All these factors also make greater income gap between men and women in the traditional part of the economy. In the higher education the gap is created gradually, through fewer opportunities of job promotion and additional advantages available for men. The fact that men have monopolized linking and lobbying with high ranking power players has limited access of women to higher positions and made it exclusive to men; or at best through middle men. Stereotypical prejudgements about female emotional and behavioural characteristics preclude the progress of women in the organizational hierarchy.

Statistics indicate the limitation of women’s job diversity or horizontal job discrimination is prevalence in Iran. Main activities where women are employed include agriculture, textile, education, health and social work. The 28.3 percent of employed women are working in textile sector, 26 percent in education, 16.6 percent in agriculture, 6.7 percent in health and social aid while only 22.3 percent of women are active in other sectors. As for men only 16 percent of the employed are working in mentioned sectors and 84 percent are active in the other sectors.

The actual discrimination in the labor market can lead to the waste of human capital in the long term. Some consider the existence of two relatively separate labor market for men and women as an important and determining factor of lower wages. Since women’s job options are limited and there is massive influx of demand for “female oriented” jobs, they can be termed as “croweded”. According to the model of “concentration”, the wage level is lower due to the fact that women have to compete for over few numbers of professions. Moreover, women do not compete with men to work in large number of jobs that are recognized as “male oriented”. This is effective in keeping the wages high for these professions. From vertical job discrimination, with regards to the distribution of employees in the main job groups in 1996, it was concluded that 22 per cent of women employees have higher education as compared to only 7.9 per cent of men. The reason for this is that women could only occupy positions when their skill and education is considerably higher than their male counterparts.

If no structural changes occur in the economic prospect, and the privatization policy along with downsizing of the Government continues, the private sector by providing services that usually demands little investment and has a quick return in short term can create appropriate job opportunities for the young women.

The highest growth of employment in recent years is in private sector and the lowest rate is in public sector, this is due to downsizing the government institutions and privatization policies. The highest growth of employment for men and women, in urban and rural areas is in industry sector, opposed to previous years which were mainly in service sector.



Policy Recommendations:

Revised rules and regulations: Reform of civil law, labor, and social security laws towards gender equality; conducting tax exemption to promote women’s handicraft export; allocation of annual budget to promote women’s economic activity and employment; revision of media’s programs for improving the public belief on women’s capacity and equality and promoting Government coverage for additional women’s employment costs imposed on employers in private sector

Strengthening health and security in work environments, modernizing and enhancing the information sharing technologies in labor market, revision of wages, social security and developing private and small factories are positive steps to be taken in this sector.

Credit facilities and investment: support for agricultural investments, transitional industries with an emphasis on rural women’s participation in non-agricultural sectors; less complicated bank facilities; elimination of asset guarantee to be replaced by skillfulness

Employment Centers: support for non-governmental job finding and consulting centers for women; increasing job opportunities for women; establishment of consulting and responsive centers regarding managerial, marketing, raw material purchases

Promoting entrepreneurship: policies to encourage female elites and entrepreneurs; improving the tourist industry and small business for women’s participation in food or textile industry; providing support for women NGOs; removal of gender inequalities in decision making process are recommended to further improve women’s participation. Initiating programs with participation of the official bodies to promote the capacity building of female workers and women entrepreneurs are vital issues to be incorporated in the future planning.


Encouraging employers: promoting further employment of female workers by reducing tax and insurance rate of the employers’ share; support for women cooperatives particularly in processing industries, in water and agricultural domains, are among the positive steps to eliminate gender discrimination in economic participation.

Nasrin Azadeh
September 25, 2004
Independent Researcher/Iran