Brazilian Labour Market amid the Coronavirus Pandemic: Impact and the Way Forward

Arjun Kumar and Ritika Gupta

The labour market has severely felt the brunt of the pandemic. While every nation has shared in the 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” organized by Center for Work and welfare, Impact and Policy Research Institute (IMPRI), New Delhi, Working People Charter and Counterview.

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

In 2017, unemployment rose to 13.7% and the declining informality rate started increasing 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 follows 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 2012-2014 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 had disappeared in 2018-2019, the lower half did not experience the same.

He explained that this was the result of mercantilization of the social policies. The total budget of the Bolsa Família cash transfer program declined since 2014 and so did the number of families who were beneficiaries of the program. About 1.5 million families were excluded from the program. Additionally, the average benefit reduced post the 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”.

“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. 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 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%” said Prates as he threw light on the impact of the pandemic.

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 was the Emergency Basic Income through which the federal government guaranteed income to the informal, unemployed, and poor families. The 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 were 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 very generous and as a result those on the bottom 20% of 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. Blacks accounted for about two-third of those who 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 it also created new ones”. One such is the rise in the inequalities in the digital and telework. Only 10% of the people in Brazil worked from home. Analyzing the data across occupation, before the pandemic those who worked from home were mostly non-professionals like tailors, salesperson and bakers. Post the pandemic, professionals who previously did not work from home as much like lawyers, teachers, engineers, were the ones who worked 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.

During the open discussion, Professor R B 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 the fact of not having sufficient information to assess the impact on each sector. Highlighting the MSME, one of the worst hit sectors due to the pandemic, the last census was done about 17 years back 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, the unemployment figures look good, like in India where the unemployment rate reduced after an initial increase during the pandemic. The policy measures by both countries during the pandemic were divergent. While Brazil made use of it’s cash transfer program to impact the demand side, India largely focussed 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 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.

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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