The labor market in prerevolutionary Iran

The employment effects of development in prerevolutionary Iran are examined by reviewing the available data on labor market developments during the 1970s. The mission report of the World Employment Program (sponsored by the International Labor Organization) found that the state of the labor market in Iran, especially in urban areas, was in reasonable balance during the finalization of Iran's Fifth (5-year) Plan for 1973-1977. During the Fifth Plan, the country's workforce was expected to grow by some 1.4 million people. Several factors invalidated this forecast: 1. the rise in the incremental capital-labor ratio, 2. the failure of policies to restrain the movement of rural landless and underemployed labor into the cities, and 3. the shift in the pattern of urban employment from the industrial to the service sector. The results of these factors were increasing urban unemployment and a decline in wages. By the late 1970s, Iran's urban labor market was a mess, and the economic stage was set for the Revolution.