Iran's labour market suffers from long term economic challenges; yet harsh sanctions intensified and complicated its problems. At first glance, it seems that Iran labour market was resilient and performed well during severe sanctions (2012-2019) as the number of employed workforce has increased and unemployment rate decreased while the economy suffered from stagnation, declining investment and high inflation rate. This paper shows that sanction has changed the structure of Iran's labour market; as a great part of workers moved from high valued added activities to lower productivity jobs. Most workers, who lost their jobs in private industries, had to move to low value added services. As the result of sanctions, low paid and temporary informal employment expanded which in turn exacerbated the challenge of widespread poverty and its related social ills. In large state and semi-state manufacturing companies, the number of workers did not decrease, despite the production decline. So, during 2012-2019, employment could rise at the cost of decreasing productivity. For generating a dynamic labour market, at the first step the sanctions must be lifted; yet complementary measures such as sound fiscal, monetary and trade policies must be implemented; and the unnecessary rules and regulations that hinder productive investment and pave the way for rent seeking and corruption must be removed to encourage productive investment and creating sufficient number of sustainable new jobs.
