The reasons why Brazil lost 860,000 jobs prior to COVID-19

For economists, the drastic reduction in the number of formal jobs registered in 2020 stems from the 2017 labor reform

Translated by: Thiago Moyano

Brasil de Fato | São Paulo (SP) |
Brazil has nearly 13 million unemployed people today - Pop & Zebra/Unsplash

It has taken five months, but the government has finally released the first set of data on employment and unemployment in the country in 2020. Claiming a lack of information and changes in the system, the government’s economic team had not released any information up until now and the first figures that came out are appalling.

According to the General Index of Employed and Unemployed People (CAGED by its Brazilian Portuguese acronym), Brazil has lost 860.503 formal jobs between January and April. The number of people hired from the last month is below the number layoffs - 598.596 to 1.459.099. In comparison to April 2019, the layoff index is 17.2% higher and the number of people hired is 56.5% lower.

These results suggest that the rise in unemployment started before the beginning of the COVID-19 pandemic, despite the numerous claims by Jair Bolsonaro (No Party) that preventive social isolation measures would cause the deterioration of the job market. Since the approval of the labor reform that has been active since 2017, specialists have been vocal about the lack of protection for workers.

Criticism has intensified with the new flexibilization proposed to fight the economic crisis stemming from the virus. The Provisional Measure 936 suspends contracts, reduces wages and working hours, among other actions. The economist Marcelo Manzano, from the Perseu Abramo Foundation, states that the data from CAGED presents a scenario of grave deterioration. 

He also reminds us that the National Household Sample Survey (PNAD by its Brazilian Portuguese acronym) has revealed an increase of over 3.7 million informal workers between February and April. According to the economist, there has been a serious lack of job market structuring.

"What does the data tell us? First, the 2017 labor reform - conducted in an opportunist way, under the premise that we would have a larger volume of jobs in the country if hiring laws are flexibilized  and costs are reduced - has failed completely. It did not just generate jobs, but in moments of crisis it has become a lot easier to fire people, and a lot harder to guarantee any kind of stability or security at work, which is so important for workers' families."

"It is the virus' fault"

The analysis is that without this process of weakening labor laws and if Brazil had been going through a more positive economic scenario, there could have been more resources and structure to fight the pandemic crisis. The economy would be stronger to implement measures to protect people's jobs. But, according to the government, the economic downfall is only related to the coronavirus.

About two months ago, Paulo Guedes, the Economy Minister, stated that the country was working at full speed when the disease arrived in Brazil. Last Friday, after the release of the GDP results, he changed his speech. He said he would require new analysis to observe whether Brazil is already under what he called an "state of anemia".

Marcelo Manzano says that Bolsonaro's and Paulo Guedes team's inaction and omission are decisive for our current scenario. 

"This government has not acted as it should have, like other governments around the world have been doing. Even governments that are ideologically aligned with Bolsonaro. Boris Johnson, in the United Kingdom, for instance, has adopted measures to protect all the jobs in the country, with the government paying for 80% of workers' wages. Similar measures can be seen in Spain, France, and Argentina. He, however, Paulo Guedes and his team have refused to intervene in the job market and the economy. They refuse because they are still attached to the idea of a fiscal balance and have a hard time believing that the government is fully capable of increasing its expenses in a moment like this one."

The CAGED data also shows that São Paulo, Minas Gerais, and Rio de Janeiro have registered the largest number of layoffs. The only sector that has had a positive hiring and layoff index was agriculture. Construction, retail, industry, and services have all presented negative results. Today, Brazil has almost 13 million unemployed people and around 6.5 million informal jobs.

Edited by: Rodrigo Chagas