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Brazilian Labour Market Amid The Coronavirus Pandemic: Impact And The Way Forward

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This post is a part of YKA’s dedicated coverage of the novel coronavirus outbreak and aims to present factual, reliable information. Read more.

Written by: Dr Arjun Kumar and Ritika Gupta, Impact and Policy Research Institute (IMPRI)

The labour market has severely felt the brunt of the corona-induced pandemic. While every nation has shared in the pandemic’s impact, responses to overcome the struggle have been varied. Elucidating on the state of employment in Brazil, Dr Ian Prates, Researcher, Brazilian Center of Analysis and Planning, remarked, “The effect of pandemic on the labour market became a major reason for the impact on the lives of the people. 80% of the drop in per capita household income is the result of the drop in labour income” in his talk on ‘Brazilian Labour Market amid the Coronavirus Pandemic: Impact and the Way Forward’, organised by Center for Work and Welfare, Impact and Policy Research Institute (IMPRI), New Delhi, in collaboration with Working People’s Charter and Counterview.

The Brazilian story, as seen through the Gini Coefficient, shows that in the 1980s and 1990s, there was a period of great instability. But as we entered the 21st century, there was a significant decline in the Gini Coefficient. This hints at the improved labour market policies seen in the trend of formalisation and a real increase in the minimum wage. But since 2015, inequality has been rising and the period marks a reversal in the equalising trend that Brazil has been on.

In 2017, unemployment rose to 13.7% and the declining informality rate started increasing in around 2016. The household income was deteriorating in 2014, but post 2018, there has been a small recovery. The coefficient of household income per capita has followed a similar trend of increasing inequality from 2015 and a small decline in 2019. These suggest that the economy was on a recovery path since 2018.

Prates says, “Nevertheless, the poorest 20% of the population continued to be in a miserable state. While between 2012 and 2014, the poorest ones increased their income relative to the richer ones, in 2015-2018, there was a significant drop in the income of the poor as compared to the richer.”

It is in such a setting that the pandemic hit Brazil — a moment when the bottom 50% of the population was in a crisis. Though the economic crisis disappeared in 2018-2019, the lower half did not experience the same.

He explained that this was the result of mercantilisation of social policies. The total budget of the Bolsa Família cash transfer programme had been declining since 2014, and so had the number of families who were beneficiaries of the programme. About 1.5 million families were excluded from the programme. Additionally, the average benefit reduced post 2014.

At a time of crisis when the poorest were affected disproportionately, policies that hurt the affected section were implemented in the place of a recovery policy. Proving this, Prates comments, “During the time of economic crisis, the government also decided to make the unemployment insurance coverage rules stricter. Less workers benefited and there has been an overall decline in the unemployment insurance coverage rate.”

Throwing light on the impact of the pandemic, Prates added:

“During the pandemic, only 49.7% of the working population was in employment. Due to lockdown policies, labourers had to leave the labour market. Although they were not officially considered unemployed, they were economically inactive and were outside the labour force. Over 10 million workers left the labour force during the pandemic. The improvement over years in the size of the labour force reversed and in the second quarter of 2020, Brazil returned to the level it was at before 2012. An additional 15.7% of the labour force chose to not seek employment due to the pandemic. The true expanded measure of unemployment stands at 27.7%.”

 

Image credit: Getty Images

The two important policy measures to fight the pandemic with regard to the labour market were the Emergency Basic Income and Emergency Benefit for Preserving Employment and Income. The first is the Emergency Basic Income, through which the federal government guaranteed income to the informal, unemployed and poor families. Potential beneficiaries (60 million) received $110 as a cash transfer in the first three months and $55 in the next three months.

Secondly, about 11 million beneficiaries in the formal labour market benefited through the complementary benefit paid by the government to avoid lay-off of workers through the Emergency Benefit for Preserving Employment and Income.

The Emergency Basic Income policy was way too far from compensating the negative effect of income lost due to employment issues. Nevertheless, if it were not for the policy implemented, the real income of poorest families would not have improved. The value of the benefit was generous and as a result, those bottom 20% on the income distribution line were able to receive more income than they had before the pandemic. Prates cautioned that this was a temporary change and the reality would be different after the period of benefit is over in January.

Prates further asserted on unequal impact on different social groups. The impact of pandemic on the labour market has made racial and gender inequality evident. African Americans accounted for about two-third of those who had lost their job, and more women were unemployed than men. Of the women who did not seek employment during the pandemic, 16.7% did so because of having to devote their time to care activities at home.

Furthermore, Prates says, “The pandemic not only increased the existing inequality, but also created new ones.” One such is the rise in inequality in the digital and telework. Only 10% of the people in Brazil worked from home. Analysing data across occupations, before the pandemic, those who worked from home were mostly non-professionals including tailors, salesperson and bakers.

Post the pandemic, professionals who previously did not work from home as much — such as lawyers, teachers and engineers — were the ones who worked the most from home. This sheds light on the inequality that technology creates in jobs and reiterates that the future would also be shaped by the way digital inequalities are distributed among the Brazilian labour force.

lockdown
Parallels were drawn between India and Brazil through the discussion and lessons India must learn from Brazil were made clear.

During the open discussion, Professor RB Bhagat, IIPS, Mumbai, opined that unlike Brazil, estimates of India are based on guess estimates and the national agencies are not well-equipped to provide data quickly. Dr Amirta Pillai further elucidated on not having sufficient information to assess the impact in India on each sector.

Highlighting the MSME, one of the worst-hit sectors due to the pandemic, the last census was done about 17 years ago and we are in a vacuum with regard to information about the sector. However, we have some national and state surveys to give insights on the magnitude of the problem.

Dr Vinoj Abhram, Center for Development Studies, Kerala, compared the relation between unemployment and social security in the context of India and Brazil. Without social securities in place, unemployment figures look good in countries such as India, where the unemployment rate reduced after an initial increase during the pandemic. Policy measures by both countries during the pandemic were divergent. While Brazil made use of its cash transfer programme to impact the demand side, India largely focused on the supply side, in terms of credit facilities for firms.

In conclusion, parallels were drawn between India and Brazil through the discussion and lessons India must learn from Brazil were made clear. There is a disproportionate effect between social groups and the way forward must take this element into consideration when redefining the social security system.  India needed to consider the digital divide more seriously because the privilege of working from home is evolving into a strong force of inequality.

Acknowledgements: Gby Atee is a research intern with Impact and Policy Research Institute (IMPRI), New Delhi, and pursuing Bachelor’s in Economics from Ashoka University, Sonepat. 

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