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Since 2003, labour market indicators in Brazil have improved.
Unemployment has fallen, amid stronger economic growth and additional job creation.
Real average wages have risen, lifting household incomes and enabling the expansion of a new lower-middle class.
The result has been an explosion in the domestic consumer market.
Employment growth, an upward adjustment of real wages and an expansion of private sector credit have boosted household purchasing power, stimulating rapid growth in the domestic consumer market.
However, labour market trends are not all benign. An already-swollen public sector has been expanded further. There are concerns about the quality of the jobs being created in the private sector. The informal sector also remains extensive, in no small part due to Brazil’s restrictive labour laws.
Brazil is the second most populous country in the Western Hemisphere (after the USA):
The steady expansion of the working age population creates an urgent and ongoing need for additional employment creation, in a country with a traditionally high rate of unemployment and a very large informal sector (estimated at up to 55% of the workforce).
Since President Lula da Silva took office in 2003, unemployment has fallen, amid stronger economic and employment growth:
The proportion of employed women has grown and is gradually approaching half of the labour force:
Following several hikes to the minimum wage since 2003, helped by declining inflation and interest rates, real average wages have slowly risen:
Despite the predominance of informal employment, formal waged employment is gradually increasing. Some of this may be linked to the formalisation of existing jobs, in line with government efforts to bring more people into the official labour force, where they pay taxes and become eligible for social security and pensions benefits.
|% annual change|
Source: UN Commission for Latin America and the Caribbean (ECLAC). Index=2000.
Lower unemployment, higher total employment and a rise in real wages have helped lift household incomes and broaden the base of the emerging lower-middle class.
In the period 2002-2006:
In line with this, there has been rapid growth in consumption, helped by the expansion of private sector credit:
Labour market trends are not all benign. The already-swollen public sector has been expanded further. There are some concerns about the quality of jobs being created in the private sector, with fears that higher-skilled industrial jobs are being replaced by lower-skilled ones in the thriving commodities sector.
The rise in the minimum wage has made low-skilled labour more expensive. This raises costs for employers and encourages informality. Moreover, Brazil’s labour laws remain rigid and inflexible. As a result, productivity levels are comparatively low on a regional basis:
Despite the rise in real average earnings, there are significant wage differences between sectors and types of employment (e.g. between public and private), in addition to regional disparities.
Source: National statistics. Note: Unemployment refers to average annual rate of six metropolitan areas. Eap = economically active population.
Near-term prospects for the labour market are generally positive, amid steady projected growth in domestic demand:
Higher private sector investment will encourage employment creation. However, moving forward, unemployment rates may be slower to fall, as more young people enter the labour force.
Growth in employment, real wages and credit will underpin consumer confidence and encourage higher expenditure. Rising disposable incomes will encourage demand for a wider variety of consumer goods and services.
Brazil’s outmoded labour regulations, including high non-wage costs, a lack of flexibility and a strongly unionised culture, act as a deterrent to the formalisation of the labour force. Yet successive governments have declined to implement much-needed labour reforms.
This leaves Brazil’s large informal labour force – and the businesses that serve it – vulnerable to any sudden downturn in economic growth.