Unemployment and Poverty in Brazil

ABSTRACT

Brazil has been struggling with the challenges of unemployment, job inequality, insufficient income from labor and poverty for the past three decades. Although the 1990s and early 2000s showed some economic recovery, raising the expectations that living conditions would be better, conditions have improved very slowly and in some areas worsened. This paper seeks to present an overview of labor market performance in Brazil, how inequality interacts with insufficient income and more specifically its impact and relationship to poverty. It reviews policies and initiatives within a socio-economic context undertaken to address these concerns and the distributional impact of these issues. This paper will also provide analysis of labor trends relative to the challenges of working Brazilian families, issues related to the deterioration of employment conditions, and suggest improvements relative to Brazil’s social, economic and cultural transformation.

Dona Isabel is a 78 year old Brazilian senior citizen. She lives in the favela 1 Cabula in the city of Salvador, Bahia. She has two grown children; a daughter named Carla and a son, Ricardo. Carla is 33 years old and has an 18 year old son (Carla like many poor Brazilian women had a child out-of-wedlock at the age of 15 years old). Ricardo is 35 years old, married but separated with two children. Carla is employed and Ricardo hasn't had regular employment in several years.

Dona Isabel rents a small two-bedroom apartment that is home to four people. Each morning before the sun rises, she begins to prepare for her day of work by loading three medium sized coolers with ice and sodas. Also, she makes sure to check the wheels of her cart for any damages. She wants to be certain that during the day she doesn't encounter any problems carrying her merchandise to or from home. Dona Isabel's type of work is selling sodas along the beaches of Salvador, an informal type of work that requires her to walk the entire day trying to sell as much of her inventory as she can in a day. Many days, she walks the beaches hardly selling anything at all.

Many times in the evening, Dona Isabel returns home from a day's work completely exhausted, struggling to tow her remaining merchandise. Often, people passing by in the streets help her lift the coolers and carry them the two flights to her apartment. Not only does this kindness place a slight smile on her old, wrinkled, what appeared to have been at one time a soft-skinned, morena claro 2 face but also it relieves a kind of weary disappointment in not having sold all of her merchandise.

Dona Isabel receives INSS (the Brazilian equivalent to Social Security) each month from the government. It’s an extremely small check of only R$140 ( US$70) per month and is insufficient to pay all of the family's required living expenses. For this reason, it is absolutely necessary that someone else in her household work and bring in some income. Her daughter leaves in the afternoon for her job as a saleswoman in one of the stores in the shopping mall. Carla's income is better than her mother's but still a considerably small amount per month (about R$ 650 or US$325). Together, their combined incomes sustain the entire family. On occasions, her son Ricardo sells candy and snacks on buses, a kind of work that is referred to as trabalho informal. 3 This too is very hard and disappointing work depending primarily on the amount of sales one is able to make in a day's work - up and down on buses the entire day.

Dona Isabel did not always do this type of work. About twenty years earlier, she had a fairly good job working in a factory. Unfortunately, when Brazil attempted to enter into the international trade market during the early 1990s, it discovered that it was not totally prepared to compete with multi-national, globalized companies. The industry in Brazil found itself lacking in modern management techniques, automation, and diversified product lines. As a result, Brazilian industry collapsed and thousands of industry workers became unemployed and were forced to find work in whatever manner they could - many moved into the informal work category - that is, selling beer, candy, clothing, food and household utensils on the streets, door-to-door, beaches and on public transportation in most of the metropolitan cities.

Dona Isabel's life is hard, difficult and unrewarding. Her children and grandchildren only see a similar type of life facing them. Without money, without education or skills, and without opportunity there is very little chance of improving the quality and condition of their lives.

Socio-Economic Context of Work and Employment

Although there is considerable literature on conditions of unemployment and poverty in many modernized countries, there is a penuriously small amount on how these issues are addressed in developing countries. In Brazil, a good portion of the available literature is gathered by agencies such as the Instituto Brasileiro de Geografia e Estatistica (IBGE), Brazilian Institute for Applied Economic Research (IPEA), the Pesquisa Nacional por Amostra de Domicílios (PNAD), Instituto de Estudos do Trabalho e Sociedade - Rio de Janeiro (IETS); also, UNESCO4, the US State Department, the World Bank, the International Labor Organization, and a bevy of research analysts. Overall, these studies dramatically point toward the need for Brazil to deal immediately and effectively with high incidences of unemployment, inequality in income distribution, discrimination toward women in the labor force, and issues concerning the impact of employment upon family responsibilities.

Among organizations conducting research in this area, there is a growing consensus about how these factors correlate with inequality and poverty and the necessity for governmental initiatives to confront these problems. Similarly, it is argued that the poor quality of jobs and the instability of jobs available to the poor and less educated will not be resolved simply by economic growth. These problems will require governmental initiatives that are specific and well focused. Moreover, there is concern that social spending in Brazil is inefficient - that is, much more could be done with the resources that are already available. Last, it is argued that well conceived policies that address social inequality and poverty should have precedence in domestic policy making.

There is also significant evidence indicating that insufficient labor income and limited access to employment are primary factors of inequality and poverty in Brazil. There are several studies showing that there has been a reduction of worker's real earnings for several years. (Sorj, Fontes, Carusi. & Quintaes, 2004) Meanwhile, others suggest that high-capital intensive sectors such as mining and natural resources that use labor saving technologies have actually slowed the growth of productive employment and in many cases caused significant job expulsion. In general, however, all of these studies agree that the distributional impacts of these factors are some of the most important underlying causes of the high incidence of poverty. (Sorj et al., 2004)

In addition, insufficient labor income is argued to be a primary factor in the massive entry of women into the labor market. More important, women seeking employment outside of the home contribute to certain socio-cultural changes within the society such as those related to the role of gender and changes in population growth. Data shows that a large number of these women are single women, wives or female family heads that are driven to seek employment as the main financial supporters of a family. (Sorj et al., 2004) Equally important, there is data to support the argument that women are occupying job positions that were previously held by men, women accept lower salaries, and women are willing to work under inferior working conditions. Other studies suggest that one of the greatest consequences of this trend is the increase in irregular occupations without the protection of labor legislation. Thus, many women are exposed to a more precarious occupational insertion in the labor market.

When we turn our attention to how family responsibilities impact employment, we must consider the significance of different family types. Although there was a significant reduction in birth and fertility rates during the 1980s and 1990s, data shows that the participation rate among single women with dependent children and relatives living in the household was high. First, it shows that the highest participation of women in the workforce is among single women without children. In fact, it appears that the absence of family pressure actually acts as an incentive for women to work. Second, female, single-parent family heads with at least one dependent child present the next highest participation rate and is higher than that of married women with or without relatives living in the home. Furthermore, the position of wives with spouses with or without other relatives living in the home is the least favorable group for entry into the labor market. (Sorj et al., 2004) Indeed, the presence of children affects the work opportunities for women and presents serious problems of reconciliation between work and care for children. This difficulty increases for women who have dependent children without the aid of relatives living in the household or in close proximity. It is also noteworthy to mention that many female, single-parent family heads with at least one dependent child and without relatives in the home usually work without signed work cards5 and as domestic maids.

Brief History of Brazil's Economic Development

The economic history of Brazil begins in 1500 with its discovery by Spanish explorer Pedro Cabral. Thirty years later, King John III of Portugal initiated colonial rule and began importing African slaves as laborers. Although there were brief periods of rule by both the Spanish and Dutch, Portugal eventually remained in control of Brazil. Later, the discovery of gold and diamonds and the development of coffee and sugar agricultural industries attracted many immigrants. During the nineteenth century, the country's economy boomed and in 1888 slavery was abolished. Brazil became a country of rich landed estates, sugar, cattle and coffee producers.

In the early decades of the twentieth century, Brazil found itself in the midst of economic crisis and social unrest. It is argued this crisis was brought on by a failed attempt to modernize only through its export agricultural industry. In 1930, a military junta brought Getúlio Vargas into power and he attempted to modernize the country through a corporatist approach. (Van Klaveren, Tijdens, Hughie-Williams, & Martin, 2009) This involved setting up a network of state enterprises aimed at bolstering domestic production. Under Vargas, trade unions were made subordinate to modernization and a repressive state apparatus was placed into effect.

Along with advances in industrial development came a mass exodus from regions of the interior to urbanized, metropolitan cities. Between 1930 and 2000, the Brazilian population that lived in urban areas more than doubled. (Van Klaveren et al., 2009) During the administrations of Dutra, Vargas II, and Kubitschek (1946-1964), the economic policies of the country changed allowing for privileged foreign direct investing. However, almost none of the benefits of industrialization and economic growth were used to benefit the general society. Under the presidency of Goulart, income inequality, urban slums and inflation rose dramatically. A series of events such as peasant land seizures, union strikes, and food riots forced Goulart to initiate agrarian reforms, rent controls and limits to export profits. These actions were viewed by rich land owners, Brazilian right-wing politicians, and US industrialists as radical nationalism bordering on Communism. As a result, a military coup d’état took place in March, 1964 ushering in a period of military dictatorship that lasted for twenty years. (Van Klaveren et al., 2009)

From 1968-1974, Brazil experienced considerable economic growth. The leaders of the military dictatorship along with Brazilian industrialist focused their efforts on reviving industry and agricultural production. However, this growth was accompanied by severe suppression of any form of criticism or dissention with torture, imprisonment and disappearances. When the Roman Catholic Church began to criticize the military regime for failure to improve the lives of the people, and Brazilian industrialist began to complaint about the large influence of foreign companies, military president General Geisel began to relax authoritarian military rule. However by this time, Brazil was facing high energy costs, hyperinflation, payment deficits, huge foreign debt, and tremendous disparity in income distribution. (Van Klaveren et al., 2009) Finally, forced by events such as the massive São Paulo strike from 1978-80, the IMF's (International Monetary Fund) austerity program on Brazil to curb inflation, and a campaign seeking direct presidential elections, the military relinquished control of the country to civilians. (Evans 1983; Selcher 1986; Skidmore 1988, 2004; Hudson, 1997)

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