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Four Ideas for Promoting Quality Employment in Brazil

October 20, 2015

Brazilian labor markets have performed remarkably well in the past 15 years, but continued progress depends on two critical goals.

World Bank Group

A new World Bank study suggests that boosting labor productivity is essential if workers are to maintain their income during periods of crisis

The good news is that in a little over a decade, Brazilian workers became more skilled and better paid, according to the new World Bank report entitled Sustaining Employment and Wage Gains in Brazil. The minimum wage, for example, has almost doubled in real terms since 2002, a factor that has played a major role in helping reduce poverty and inequality.

The average educational level, although still low relative to other countries, increased by more than 50 percent between 1995 and 2010. The study also notes that unemployment and informal employment have also fallen in recent years.

The bad news is that labor productivity growth has been low and stagnant over the past 15 years. and from 2004, real salary gains have exceeded labor productivity growth.

Furthermore, the Brazilian economy is expected to contract by 2.6 percent next year. As a result, unemployment might increase, average wage to hold steady (or even decrease) while minimum wage increases will be smaller.

If families are to maintain their standard of living, quick action needs to be taken to boost labor productivity and connect the poor to better, more productive jobs, to share the gains. Below are four ideas put forward in the study:

1) Strengthen Vocational Training Programs

Although PRONATEC offered 8.8 million training slots between 2011 and 2014, there is little information on the program’s impact on the employability and income of students. To enhance the efficiency of the Government’s main technical education and vocational training program, the study recommends the following:

  • Improving monitoring and evaluation systems in order to determine training needs, estimate returns in terms of wage increase
    and labor market insertion and use this information to better guide the expansion of the program.
  • Increasing partnerships with the private sector so as to ascertain the areas in which training is most needed and facilitate
    access to internships and jobs.
  • Providing students with career guidance to assist them with making the transition from school to the labor market and
    helping older students change jobs or even job sectors

2) Strengthen public employment services to facilitate job searches and matches

Through the National Employment System (SINE), Brazil spends less than two percent of the budget of the total federal budget of active labor market programs on labor intermediating services for workers in search of a job and for firms in the hiring process. This is reflected in job placement rates that remain relatively low, which stands at 12 percent, compared to 36 percent in Mexico. In 2012, a mere 23 percent of the positions advertised by firms through SINE were filled. The study states that “reform of the system is one of the lower cost policies and can prove more effective in boosting the employability
of the poor.” It also recommends the following:

  • Introducing a “job-placement focused” structure, management, monitoring, and evaluation of SINE.
  • Developing detailed profiles of the persons seeking employment identifying the key employability challenges in order to take
    greater advantage of job vacancies.
  • Investing in information systems so as to align market demand with applicants’ profiles.
  • Conducting an active search for businesses that employ higher numbers of unskilled workers.
  • Devising indicators and targets related to final outcomes, such as job placement rates of job seekers registered in SINE, job referrals, time spent by workers in search of placement, etc.
  • Conducting a more in-depth study of the impact of assistance programs for entrepreneurs in Brazil.

3) Promoting labor regulation reform that supports firms productivity and job attachment

According to the report, in Brazil, worker turnover is very high when measured against international standards. This in turn discourages businesspersons from investing in training. This phenomenon is largely explained by the fact that workers often leave one job to accept another higher-paying position (57 percent in 2013). INSS expenses and other worker payments are also high, accounting for 33 percent of labor costs, while in OECD countries, these costs are close to 20 percent. The report suggests: 

  • Amending current labor laws is important to incentivize businesses and workers to enter into longer term contracts,
    encourage hiring, and boost productivity.
  • Creating incentives (such as bonuses) for persons who find jobs more quickly or stay in jobs for longer periods.  Job search efforts should be monitored and sanctions imposed on persons who do not search actively for jobs while unemployed.
  • Reviewing and revamping the current Training Program Law (Lei do Aprendiz) to provide greater incentives to hire young workers (between the ages of 14 and 24).

4) Improve Productive Inclusion Policies

While the majority of Brazilian poor are employed, their income is low.  Since 2011, in urban areas, work done by PRONATEC has led to a rapid increase the supply of training slots geared toward to the poor (40 percent of the total number). The authors suggest that strengthening and diversifying productive inclusion programs including training opportunities through PRONATEC, as well as microcredit initiatives and support for small-scale farming, will connect the poor to better jobs.  In the meantime, a number of challenges must be overcome:

  • Providing training in such areas as leadership, motivation, and team work, in addition to technical skills.
  • Expanding access to worker support services, such as daycare centers, and to labor intermediation services though SINE offices and “Mais Emprego” websites.
  • Facilitating the transition of rural workers to non-agricultural jobs (for those interested in this transition).
  • Improving monitoring and evaluation systems for current productive inclusion programs.