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Growth, Employment, and Poverty in Latin America$

Guillermo Cruces, Gary S. Fields, David Jaume, and Mariana Viollaz

Print publication date: 2017

Print ISBN-13: 9780198801085

Published to Oxford Scholarship Online: June 2017

DOI: 10.1093/oso/9780198801085.001.0001

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Brazil

Brazil

Chapter:
(p.178) 9 Brazil
Source:
Growth, Employment, and Poverty in Latin America
Author(s):

Guillermo Cruces

Gary S. Fields

David Jaume

Mariana Viollaz

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198801085.003.0009

Abstract and Keywords

During the 2000s, Brazil experienced slow economic growth and a substantial improvement in labour market indicators. From 2001 to 2012, Brazil grew less than the Latin American average. However, the unemployment rate decreased, the employment composition by occupational group, economic sector, and employment position improved, the educational level of workers rose, the share of registered workers increased, and average labour earnings went up. At the same time, poverty and inequality largely diminished. The international economic crisis had a mild effect on the Brazilian economy and some labour market indicators such as the unemployment rate, but the negative effects had been reversed by 2011.

Keywords:   Brazil, Latin America, labour market indicators, employment, education, inequality

9.1 Introduction

This chapter on labour markets and growth in Brazil since 2000 is one of sixteen studies of Latin American countries, each of which analyses the growth–employment–poverty nexus and aims to answer the following broad questions: Has economic growth resulted in economic development via improved labour market conditions in Latin America in the 2000s, and have these improvements halted or been reversed since the Great Recession? How do the rate and character of economic growth, changes in the various labour market indicators, and changes in poverty relate to each other?

To answer these questions, we analyse the growth experience of Brazil during the 2000s and a wide set of labour market indicators that we assign to one of two different categories: employment and earnings indicators, and poverty and income inequality indicators. More specifically, for the group of employment and earnings indicators we construct statistics on the following variables: the unemployment rate; the employment structure by occupational group, employment position, economic sector, registration of workers with the social security system, and educational level; and mean labour earnings and hourly wages. We present all these indicators for the employed population as a whole and for different population groups (youth, adults, men, and women). For the group of poverty and income inequality indicators, we compute poverty rates using the official moderate and extreme poverty lines and the international lines of 2.5 and 4 dollars a day. We also calculate the Gini coefficient of household per capita income and labour earnings.

All the statistics in this chapter are obtained using microdata from the Pesquisa Nacional por Amostra de Domicílios (PNAD) for the years 2001–9, 2011, and 2012. The nationwide surveys were processed following a harmonization methodology and incorporated into the SEDLAC—Socio-Economic Database for Latin America and the Caribbean (CEDLAS and World Bank (p.179) 2014).1 The resulting labour market indicators were compiled into a large number of tables and figures, which are available in an earlier version of this study (henceforth, Cruces et al. 2015). Chapter 1 of this book provides the definition for each of the indicators we analyse here, while Cruces et al. (2015) includes details on definitions and classification systems used by Brazil’s household surveys, and on comparability issues of these surveys over time.

9.2 Economic Growth

Brazil exhibited slow economic growth from 2000 to 2012. The economy stagnated from 2000 to 2003 but then experienced rapid economic growth until 2008, when it was affected by the international economic crisis. It recovered quickly in 2010, but slowed down over the next two years.(Cruces et al. 2015: figures 1 and 2)

From 2000 to 2012, Brazil’s economic growth was lower than the average for the Latin American region. GDP per capita increased by 29.8 per cent, while the average for the eighteen Latin American countries was 36.2 per cent during the same period. GDP (measured in 2005 PPP dollars) grew by 47.8 per cent, and GDP per employed person experienced a 12.0 per cent rise. The annual growth rate of GDP per capita was 2.2 per cent, and it varied from −1.2 per cent in 2009 to 6.6 per cent in 2010 (Table 9.1).

Table 9.1 Brazil: Evolution of growth and labour market indicators over the 2000s

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Growth Indicators

GDP per capita

7,906

7,898

7,998

7,985

8,338

8,502

8,745

9,187

9,573

9,456

10,079

10,264

10,264

Brazil

GDP per capita growth rate

2.81

−0.10

1.27

−0.17

4.42

1.97

2.85

5.06

4.20

−1.22

6.59

1.83

0.00

Brazil

Employment and Earnings Indicators

Employment-to-population ratio

60.76

61.66

61.23

62.46

62.88

63.21

63.02

63.69

62.89

61.73

61.84

Brazil

Unemployment rate

9.34

9.10

9.72

8.89

9.30

8.39

8.09

7.09

8.28

6.69

6.15

Brazil

Share of low-earnings occupations

57.83

58.00

58.09

57.39

57.22

57.20

56.51

56.48

56.75

55.55

Brazil

Share of mid-earnings occupations

28.49

28.29

28.61

28.79

28.31

28.59

28.89

28.43

27.97

28.01

Brazil

Share of high-earnings occupations

13.68

13.71

13.30

13.82

14.47

14.20

14.59

15.09

15.28

16.45

Brazil

Share of employers

4.33

4.35

4.28

4.20

4.32

4.53

3.83

4.55

4.36

3.43

3.80

Brazil

Share of wage/salaried employees

63.00

62.90

62.93

63.66

63.65

64.36

65.51

66.39

66.87

68.44

68.89

Brazil

Share of self-employed workers

22.72

22.63

22.67

22.27

21.95

21.49

21.41

20.44

20.66

21.20

20.76

Brazil

Share of unpaid family workers

9.95

10.12

10.12

9.87

10.09

9.62

9.25

8.63

8.11

6.93

6.55

Brazil

Share of workers in low-earnings sectors

36.15

34.72

34.66

35.05

34.78

33.71

32.34

31.53

31.51

28.52

27.59

Brazil

Share of workers in mid-earnings sectors

40.84

40.24

40.30

39.82

40.43

40.37

41.58

41.83

41.69

44.06

44.36

Brazil

Share of workers in high-earnings sectors

23.01

25.04

25.04

25.13

24.80

25.92

26.08

26.65

26.80

27.42

28.05

Brazil

Share of low-educated workers

63.79

61.96

59.97

58.56

56.83

54.69

53.05

50.72

48.93

46.38

44.95

Brazil

Share of medium-educated workers

27.53

28.99

30.64

31.88

33.24

34.67

33.73

36.23

37.15

38.17

40.51

Brazil

Share of high-educated workers

8.68

9.05

9.39

9.56

9.93

10.65

13.23

13.04

13.93

15.45

14.55

Brazil

Share of workers registered with SS

46.90

46.27

47.36

47.50

48.44

49.60

51.64

52.86

54.27

59.13

60.22

Brazil

Mean labour earnings

539.9

533.6

503.8

498.4

515.8

546.4

569.1

580.3

593.9

641.3

680.1

Brazil

Poverty and Inequality Indicators

Poverty rate 2.5 dollars-a-day

27.35

26.02

26.66

24.87

22.88

19.59

18.11

15.59

14.88

12.60

10.37

Brazil

Poverty rate 4 dollars-a-day

43.05

42.13

42.78

40.81

38.37

34.81

31.84

29.14

27.44

24.46

21.49

Brazil

GINI of household per capita income

0.588

0.583

0.576

0.566

0.564

0.559

0.549

0.542

0.536

0.527

0.523

Brazil

GINI of labour earnings

0.563

0.560

0.552

0.544

0.540

0.538

0.525

0.518

0.515

0.499

0.496

Brazil

Note: The shaded figures for labour market indicators represent statistical significant improvements at 5 per cent between the initial and final years for all the employment and earnings indicators and poverty and inequality indicators. The only exceptions are the share of mid-earnings occupations, share of mid-earnings sectors, and share of medium-educated workers for which we did not assign welfare evaluation criteria.

Source: SEDLAC (CEDLAS and World Bank 2014) and World Development Indicators (World Bank 2014).

In just twelve years, the Brazilian growth experience can be separated into four different stages. First, from 2000 to 2003 the economy was characterized by a volatile external environment along with concerns about the continuity of macroeconomic policies following the change in government in 2003. These factors led to a sharp decline in external capital flows, a depreciation of the local currency, and some inflationary pressures (IMF 2003). GDP per capita increased by only 1.0 per cent between 2000 and 2003, with two years in which it actually shrunk (−0.1 per cent in 2001 and −0.2 per cent in 2003). Second, rapid economic growth occurred from 2003 to 2008, with GDP per capita increasing by 19.9 per cent, equivalent to an annual growth of 3.7 per cent. The increased domestic demand (consumption and investment) was the driving force of the growth process between 2003 and 2008. Redistributive policies jointly with credit expansion encouraged the consumption of durable goods (Ferraz et al. 2010). To increase growth further, the government announced in 2007 the Growth Acceleration Program, which contains steps to increase public and private investment (IMF 2007). The country also managed to reduce the GDP volatility (a historical feature of Brazilian growth), (p.180) (p.181) (p.182) (p.183) making the economy more resilient to external shocks. That was possible through several transformations (Ferraz et al. 2010). First, the stock of public external debt was reduced. Second, the historical fiscal deficit was reversed to a surplus position. Third, export growth underpinned sustained external current account surpluses which, together with strong private capital inflows, allowed the authorities to build a cushion of foreign exchange reserves (IMF 2007; Blyde et al. 2010). Fourth, prices were stabilized. The third stage in the growth experience of Brazil during the 2000s was between 2008 and 2009, when the economy suffered the impact of the international crisis. GDP per capita fell by 1.2 per cent that year. The government implemented some countercyclical measures to mitigate the negative impacts of the crisis, including an increase in wages of public-sector employees, an increase in social expenditures and in transfers to the private sector, and a reduction in taxes levied on certain goods (Mendonça de Barros 2010). Finally, the post-crisis period was characterized by a fast recovery, followed by a slowdown. In 2010, GDP per capita rose by 6.6 per cent, largely surpassing its pre-crisis level of 2008. Then, the GDP per capita growth rate slowed to 1.8 per cent in 2011 and experienced no change in 2012.

9.3 Unemployment

The unemployment rate decreased overall, for youth and adults, and for both men and women. The unemployment rate increased during the international crisis but quickly dropped when the crisis receded, falling below its pre-crisis level by 2010. (Cruces et al. 2015: figure 3)

The unemployment rate (measured as the ratio of unemployment to labour force) fell from 9.3 per cent in 2001 (7,578,615 unemployed people) to 6.2 per cent in 2012 (6,149,025 unemployed people) (Table 9.1). This reduction was not monotonic. Unemployment stood at 9.3 per cent on average between 2001 and 2005, decreased to 7.1 per cent in 2008, went up to 8.3 per cent during the international crisis (1,299,282 new unemployed people between 2008 and 2009), and fell to 6.2 per cent in 2012, the year in which it reached its lowest level during the period of analysis. The rise in the unemployment rate during the international crisis took place in a context of an increasing number of persons in the labour force and an increasing number of employed people (1,654,748 and 355,466 persons respectively). Lay-offs grew more than hiring in 2009, leading to an increase in the number of unemployed persons and leaving new entrants into the labour market without a job (Pochmann 2009). The recovery following the international crisis (p.184) was very quick and by 2011 (no data were available for 2010) the unemployment rate had dropped below its pre-crisis level.

The unemployment rate dropped for youth and adults and for both men and women. However, all groups were affected by the international crisis. By 2011, unemployment rates were lower than they had been before the crisis for all population groups.

9.4 Job Mix

The composition of employment by occupational group improved over the period as workers moved from low-paid occupations such as elementary jobs to better paying occupations, such as professional jobs. Young and adult workers and women benefited from the improving trend, while men suffered a slight worsening. The international crisis of 2008 did not affect the improving trend in the employment structure by occupation, but impacted on the relative shares of low- and mid-paid occupations.(Cruces et al. 2015: figure 4)

From 2002 (the first year for which occupational breakdowns are available) to 2012, the share of low-earning occupations (elementary, plant and machine operators, and services and sales occupations) fell by 2.3 percentage points, while there was an increase of 2.8 percentage points in the share of high-paid occupations (management, professional, and armed forces) and a small change in the share of mid-paid occupations (technical jobs, clerical, agricultural, forestry and fishery occupations, and crafts and related trades) which declined by 0.5 percentage points (Table 9.1). The occupations that exhibited the largest reduction of shares over the period were: elementary occupations which shrank steadily from 25.8 to 18.3 per cent (7.5 percentage points), and agricultural, forestry, and fishery workers (a middle-paid occupation in Brazil) which fell from 6.8 per cent to 4.7 per cent (2.1 percentage points). On the other hand, the occupations whose shares increased were professionals (3.0 percentage points), services and sales workers (2.8 percentage points), plant and machine operators (2.4 percentage points), and clerical (2.2 percentage points). The international crisis led to a pause in the downward trend of the share of low-paid occupations in total employment. The share of mid-paid occupations continued to decrease, while the share of high-paid occupations exhibited a small increase between 2008 and 2009. The previous configuration, with a downward trend in the share of low-paid sectors, an upward trend in the share of high-paid sectors, and a share of mid-paid sectors with small annual changes, was recovered in 2012.

(p.185) The improvements in occupational composition were especially large for youth and women, but there was also an improvement for adults and a slight worsening for men. The downward trend in the share of low-paid occupations stalled during the international crisis for young and adult workers and for women, the share of middle-paid occupations suffered a small reduction, and consequently the share of high-paid occupations increased for them. On the other hand, the pre-crisis trends in the male occupational structure of employment were not affected by the international crisis. Young and adult workers and women recovered the pre-crisis trends in 2012.

The employment structure by occupational position improved, with workers moving from unpaid jobs to paid ones. This occurred for all population groups, especially among youth and women. The international crisis impacted negatively on the downward trend of the share of self-employed workers. (Cruces et al. 2015: figure 5)

From 2001 to 2012, there were changes in the employment structure by occupational position, especially in the shares of unpaid workers and wage/salaried employees. The share of the largest category—wage/salaried employees—increased from 63.0 per cent to 68.9 per cent, while the share of unpaid workers decreased from 10.0 per cent to 6.6 per cent. The share of the self-employed also dropped from 22.7 per cent in 2001 to 20.8 per cent in 2012, while the share of employers shrank from 4.3 per cent to 3.8 per cent (Table 9.1). These changes in the structure of employment by occupational position can be interpreted as an improvement as the share of high-earning positions (wage/salaried employees and employers) increased (rise of 5.4 percentage points) and the share of low-earning positions (self-employed and unpaid workers) fell. The international crisis negatively affected the downward trend of the share of self-employed workers in total employment. Between 2008 and 2009, the share of self-employed workers stopped decreasing and suffered a slight increase that was counterbalanced by a smaller increase in the share of wage/salaried employees and a small reduction in the share of employers. That could be explained by the absence of a guaranteed income system for all the new unemployed persons that emerged during the crisis and led some of them to develop activities as self-employed workers (Pochmann 2009). By 2012, the downward trend was recovered but the share of self-employed workers was still above the pre-crisis level.

The employment structure by occupational position improved for all population groups over the period. The international crisis of 2008 led to a temporary increase in the share of self-employed workers for all of them. By 2012, all groups recovered the previous downward trend but for adult workers and men the shares of self-employed were still above their pre-crisis levels. Young workers and women recovered their pre-recessionary levels. (p.186)

The employment composition by economic sector improved over the course of the period studied. Youth particularly benefited, but so did women, adults, and men. The international crisis brought this trend to a standstill. (Cruces et al. 2015: figure 6)

The period from 2001 to 2012 was marked by major changes in the sectoral composition of employment in Brazil. The share of workers in low-earning sectors (domestic service, primary activities, and low-tech industry) diminished by 8.6 percentage points from 2001 to 2012. On the other hand, there were increases in the shares of mid-earning sectors (high-tech industry, construction, commerce, and utilities and transportation) and high-earning sectors (public administration, skilled services, and education and health) of 3.5 and 5.0 percentage points respectively (Table 9.1). The sectors that registered the largest reductions over the period were primary activities and domestic workers (drop of 5.8 percentage points and 3.4 percentage points respectively), while skilled services showed the largest increase (5.0 percentage points). During the international crisis of 2008, the trends described above stalled, but they resumed during the post-crisis period. Consistent with evidence showing that the industry sector suffered the largest negative impact on its value added during the international crisis (compared to the agricultural and service sectors) (Cruces et al. 2015: table 2), low- and high-tech industry sectors exhibited among the largest declines in their shares in total employment during that episode. This impact was counteracted by the increase in the share of commerce in total employment. The different situation of the commerce sector in comparison to the industry sectors was due to increases in real wages and expenditure, and led consequently to a small total change in the share of mid-earning sectors in total employment during the international crisis.

Turning now to demographic disaggregation, youth was the group that most benefited from the reduction in the share of low-earning sectors, followed by women, men, and adults. The international crisis of 2008 affected all groups equally by bringing the reducing trend in the share of low-earning sectors to a standstill, but the previous trends resumed for all groups after the crisis.

The educational level of the employed population improved over the period for all population groups, especially young workers. The economic crisis did not have an effect on this trend. (Cruces et al. 2015: figure 7)

The share of employed workers with low educational levels (eight years of schooling or less) dropped from 63.8 per cent in 2001 to 45.0 per cent in 2012, while the share of employed workers with middle and high educational levels (nine to thirteen years of schooling and over thirteen years of schooling) grew from 27.5 per cent in 2001 to 40.5 per cent in 2012 and from 8.7 per cent to 14.6 per cent respectively (Table 9.1). This improving trend in the educational (p.187) level of the employed population was not affected by the international crisis.2 We interpret this result as an improvement for the employed population as the level of education is an important predictor of labour earnings. Consequently, the changes in the employment structure by educational level implied an increase in the share of workers that tend to have high levels of earnings and a decline in the share of workers with low earnings levels.3

All population groups benefited from the increase in the educational level of the employed population over the period. None of them was affected by the international crisis.

The overall share of employed workers registered with the social security system increased as a whole and for all population groups. The international crisis did not affect this upward trend. (Cruces et al. 2015: figure 8)

The social security system in Brazil is composed of three contributory regimes, one semi-contributory scheme for rural workers, and non-contributory benefits (Robles and Mirosevic 2013). The contributory regimes are the Regime Geral de Previdência Social (RGPS), Regime Próprio de Previdência Social (RPPS), and the complementary social security. The RGPS is mandatory for private workers, while the RPPS is mandatory for public workers and the military. Both are publicly administered and financed with contributions made by employers, employees, and the state. The complementary social security is voluntary and privately administered by for-profit and not-for-profit entities which invest the contributions made by the affiliated members. The semi-contributory scheme for rural workers appeared to guarantee an equal treatment between urban and rural workers. In order to receive its benefits, it is not necessary to have made prior contributions. Finally, the non-contributory benefits include the Benefício de Prestação Continuada da Assistência Social. This programme is an unconditional cash transfer targeted at poor families (family income below a fourth of the minimum wage) with an elderly or disabled member, and sets the household income at the level of the minimum wage.

The social security records show a major increase in the percentage of workers registered with the contributory regimes over the period. The share of employed workers registered with social security grew steadily from 46.9 per cent in 2001 (34,481,096 registered workers) to 60.2 per cent in 2012 (56,554,251 registered workers) (Table 9.1). The upward trend continued (p.188) even during the international crisis of 2008. Several factors have been presented as determinants of the sustained increase in the share of registered workers in Brazil during the 2000s (Berg 2010; ILO 2011; Maurizio 2014). First, the sustained economic growth process allowed for a more foreseeable functioning of the labour market, favouring the growth of long-term contracts, and reducing the expected probability of lay-offs and consequently the probability of employers having to face relatively higher costs when firing a formal worker compared to an informal one. Second, the implementation of programmes and incentives for formalization. The Individual Entrepreneur Law of 2009 enabled self-employed workers to access the social security system at an affordable cost, and gave them a tax identification number to access credit and business transactions in the formal economy. Third, the cost of non-registration faced by employers increased as a result of the strengthening of labour inspections in the country.

The aggregate pattern of increased enrolment in social security also applies when the employed population is broken down by age and gender. That was especially true for young workers, who increased their share of registered workers by more than adult workers. Besides the reasons presented above, another explanation for the increase in the registration rate for young workers lies in the process of demographic transition that Brazil is experiencing. The decrease in the number of youths in the overall population and in the labour market, coupled with the incentives to poor families to keep their adolescent children in school through the Bolsa Familia programme, resulted in a labour market with less supply pressure from youths and fewer precarious jobs (Berg 2010). The upward trend in the share of registered workers continued even during the international crisis for all population groups.

9.5 Labour Earnings

Real labour earnings increased steadily from 2001 to 2012, with only a slowdown during the 2008 international crisis. This applied to almost all groups, especially the most disadvantaged ones. (Cruces et al. 2015: figure 9)

Average monthly earnings, expressed in dollars at 2005 PPP, increased by 26.0 per cent, from US$540 in 2001 to US$680 in 2012 (Table 9.1). This increase was not even throughout this period. Labour earnings decreased by 7.7 per cent between 2001 and 2004 and increased by 36.5 per cent during 2004–12, with an average annual increase of 4.6 per cent. The years of the international crisis (2008 and 2009) were marked by a slowdown in yearly growth, but it was still positive and above 2.0 per cent (labour earnings (p.189) increased by 2.0 per cent and 2.3 per cent in 2008 and 2009 respectively). The continuous adjustments in the minimum wage over the period were responsible for the increase in labour earnings. In the first half of the 2000s, the minimum wage increased in real terms by 3.8 per cent annually. Between 2005 and 2011, the increases were 3.0 per cent a year (Robles and Mirosevic 2013). In 2007, a policy was set in place to adjust the minimum wage according to both the variation of GDP and inflation (IPEA 2011). In 2009, as part of the efforts to alleviate the impacts of the crisis, the minimum wage was also nominally adjusted by 12.0 per cent (Berg 2009).

When broken down by population groups and employment categories, labour earnings increased for almost all groups. The only groups that experienced a drop in their earnings were workers with high educational levels and workers in the skilled services sector. The groups with the largest increase in earnings were: women among gender groups; youth among age groups; self-employed workers among employment positions; workers in the primary activities sector and construction among economic sectors; workers with low educational levels among educational groups; and workers in elementary occupations, workers in armed forces, plant and machine operators and assemblers, workers in crafts and related trades, agricultural, forestry, and fishery workers, and services and sales workers among occupational groups.

The evidence of falling labour earnings for workers with high educational levels and labour earnings increases for workers with medium and low levels of education can be interpreted in light of previous findings of improving employment structure by occupational group and economic sector over the period and improving educational level of the employed population. The improving employment structure by occupational group and economic sector implied an increase in the share of occupations and sectors that can be expected to use workers with high and medium educational levels, such as professional and clerical occupations, and public administration and skilled services sectors, and a reduction in the share of occupations and sectors that employ workers with low educational levels, such as elementary, agricultural, and craft and trades occupations, and domestic service and primary activity sectors. This evidence indicates that the demand for workers with high and medium educational levels relative to those with low educational levels increased during 2001–12. On the other hand, the educational level of people in the labour force improved over the same period, indicating an increase in the relative supply of workers with high and medium levels of education (Cruces et al. 2015: table 8). The prediction of a supply and demand analysis is that the relative wages of workers with high and medium educational levels relative to those with low educational levels will rise or fall depending on which effect dominates (increase in the relative demand versus increase in the relative supply). In the Brazilian labour market, the relative wages of workers (p.190) with high and medium educational levels relative to those with low educational levels fell over the period, and the relative wages of workers with high educational levels relative to those with medium educational levels also decreased (Cruces et al. 2015: table 7). The adjustment process also led to a reduction in the unemployment rate of all educational groups that was larger for workers with medium and low levels of education compared to the reduction for workers with high levels of education (Cruces et al. 2015: table 9).

The international crisis led to a drop in labour earnings of some specific groups, but earnings increased for the great majority. Those who were negatively affected by the international crisis recovered their pre-crisis level of income by 2011.

9.6 Poverty and Inequality

The poverty rate and the rate of working poor households decreased substantially between 2001 and 2012. (Cruces et al. 2015: figure 10)

The poverty rate based on the 4 dollars-a-day international line fell from 43.1 per cent in 2001 to 21.5 per cent in 2012; the poverty rate based on the 2.5 dollars-a-day line went from 27.4 per cent to 10.4 per cent, and the percentage of the working poor (defined as the proportion of persons in the population living in poor households, according to the 4 dollars-a-day poverty line, where at least one household member works) decreased from 29.1 to 12.3 per cent over the same period (Table 9.1). These poverty indicators decreased steadily between 2001 and 2012, even during the international crisis. The downward trend of all poverty indicators during the Great Recession is consistent with the previous finding of increasing labour earnings during that episode due to minimum wage and nominal wage increases, and with the use of the minimum wage as a reference value for social security benefits and anti-poverty programme adjustments. Pochmann (2009) also highlighted that the recession was concentrated in the industrial sector where, in general, work conditions are better. As such, the increase in unemployment during the international crisis affected mainly non-poor families.

Cash transfer programmes have played an important role from the late 1990s in poverty reduction in Brazil (Ravallion 2009). They included a series of programmes, which were later consolidated under Bolsa Familia—the main conditional cash transfer programme—and the unconditional cash transfer Benefício de Prestação Continuada. Both seem to be extraordinarily well-targeted and have helped decisively to reduce income inequality and poverty (Ferreira de Souza 2012). Ferreira et al. (2010) estimated that in the absence of these (p.191) transfer policies the poverty rate in Brazil would have been about 5.0 percentage points higher in 2004. Soares et al. (2010) showed that Bolsa Familia was responsible for a reduction of 16.0 per cent and 33.0 per cent in extreme and moderate poverty between 2003 and 2010.

The pattern of reducing poverty in Brazil over the 2000s can be understood by examining incomes from various sources. Household labour earnings, pensions, and government transfers all increased substantially over the period studied (Cruces et al. 2015: figure 11). Within the period, the increase in labour earnings and pensions started in 2004. Incomes from government transfers increased especially during the international crisis of 2008, and incomes from capital were erratic.

Inequality of household per capita income and labour earnings diminished substantially over the period studied, and this trend did not change with the international crisis. (Cruces et al. 2015: figure 12)

The Gini coefficient of household per capita income fell from 0.588 in 2001 to 0.523 in 2012, dropping with each consecutive year. The Gini coefficient of labour earnings among employed workers declined from 0.563 in 2001 to 0.496 in 2012 (Table 9.1). It also decreased with each passing year and was always below the Gini for household per capita income. This reduction in labour earnings inequality is in keeping with the fact that earnings increased more for most disadvantaged employment categories such as self-employed workers, workers with low educational levels, and workers in the primary activity sector and in elementary jobs. However, it is interesting to notice that earnings declined for some high-earning employment categories. Consequently, the reduction in labour earnings inequality over the period in Brazil occurred at the expense of income losses for some categories. The crisis did not alter the downward trend: during the international crisis, inequality fell for both household per capita income and labour earnings at the same rates as they had before.

Changes in household per capita income inequality in Brazil during the 2000s have been explained by changes in both labour and non-labour incomes at the household level, with both having approximately equal weight. Barros et al. (2010) found that 51.0 per cent of the decline in household per capita income inequality between 2001 and 2006 was explained by the growth in average labour income per adult worker and a small decline in its inequality. The remaining 49.0 per cent was due to a reduction in the inequality of household non-labour incomes. Among non-labour incomes, government transfers had an equalizing and large effect, while changes in the distribution of incomes from assets and private transfers were unequalizing. Bergolo et al. (2011) confirmed the equalizing effect of government transfers for the period 2001–8 that stemmed primarily from the expansion (p.192) in their coverage. Azevedo et al. (2013b) extended the analysis of the decline in household per capita income inequality for the 2001–11 period. Through a decomposition approach they found an equalizing effect of labour incomes, incomes from transfers, incomes from pensions, and other non-labour incomes, along with an equalizing effect of the share of adults in the household.

The literature on labour earnings inequality in Brazil provides some explanations for its decline during the 2000s. Barros et al. (2010) for the period 2001–6 and Azevedo et al. (2013a) for the period 2001–9 used decomposition approaches and found: (1) a reduction in the wage differential between workers of different educational levels (‘price effect’); and (2) a fall in the inequality of the distribution of educational levels (‘quantity effect’). Gasparini et al. (2011) explained the fall in the skill premium during 2001–9 through the increase in the relative supply of skilled workers, combined with a reduction in their relative demand and institutional factors, such as increases in the minimum wage. Maurizio (2014) added the increase in the registration rate of workers as an inequality-reducing factor. Regarding the finding of a more equal distribution of educational levels, there is a discrepancy in the literature. Battistón et al. (2014), who used a microsimulation approach for the period 2002–9, found an inequality-increasing quantity effect.

9.7 Conclusions

During the 2000s, Brazil has exhibited a rare mix: slow economic growth accompanied by substantial improvements in labour market indicators. During the period 2001 to 2012, Brazil achieved less economic growth than the average Latin American country: GDP per capita increased by 29.8 per cent while the average growth for the eighteen Latin American countries was 36.2 per cent.

The labour market exhibited a marked improvement from 2001 to 2012. The unemployment rate decreased while the composition of jobs improved for all of the indicators used in this chapter. The distribution of employment by occupational group showed a decline in the share in elementary occupations and an increase in the share in better-paying occupations. There was an increase in the share of wage/salaried employees and a reduction in the share of self-employed and unpaid workers. The share of workers in low-earning sectors diminished, while the share of workers in mid- and high-paid sectors rose. Moreover, the educational composition of the employed population improved steadily. The share of workers registered with the social security system increased. Average labour earnings rose. Poverty and inequality diminished substantially.

(p.193) The Brazilian economy was affected by the international economic crisis of 2008, from which it recovered quickly. During this period, the unemployment rate increased, the employment structure by occupational position deteriorated slightly, the improving trend in the composition of employment by economic sector hit an impasse, and the upward trend in labour earnings slowed down. However, all labour market indicators had recovered either their pre-crisis level or were heading in that direction by 2011.

Young workers and women had worse labour market outcomes over the period compared to adults and men respectively, but all population groups were evenly affected by the international crisis. The unemployment rate was higher for young compared to adult workers, the shares of young employed workers in low-earning economic occupations and sectors were larger than the shares of adult workers, the percentage of young workers registered with the social security system was lower when compared to adults, and labour earnings of young workers were below those of adults. On the other hand, the share of low-earning positions among young workers was below the share for adult workers. The international crisis of 2008 impacted more adversely on the unemployment rate of young workers compared to adults, but the temporary worsening in the employment structure by occupational position was larger for adults compared to youths. Disaggregating by gender, we found that men had better labour market outcomes than women, with the exceptions of the share of workers in low-earning positions that was larger among men and the share of registered workers that was similar for both gender groups. Men and women were evenly affected by the international crisis. While the unemployment rate suffered a larger increase for women, the worsening in the structure of employment by occupational position was larger for men.

In summary, notwithstanding the slow economic growth exhibited by Brazil during the 2000s and the international crisis of 2008, Brazilian labour market conditions were in a better state in 2012 than they were at the start of the millennium.

References

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Notes:

(1) See Cruces et al. (2015: table 1) for details on the size of Brazil household surveys.

(2) The most frequent value of years of education for employed workers in Brazil was eleven for the entire period under study (around 23.4 per cent of employed workers had eleven years of education).

(3) The improvement in the employment structure by educational level is related to changes in the relative demand and supply of workers with high educational levels with corresponding implications for the wage gap by educational group and the unemployment rate of each educational level. We introduce a discussion about the role of these factors in Brazil in section 9.5.