Brazil loses 2.8 million workers with a formal contract in 8 years; informality and self-employment grow
- May 19, 2022
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The number of Brazilians in the CLT regime or formalized in domestic service has shrunk to less than 40% of workers in the private sector. Number of self-employed or unregistered workers increased by 6.3 million.
Employment with a formal contract has lost prominence and space in the Brazilian labor market. The participation of this modality in the total population employed in the private sector was in 38.1% in the 1st quarter of 2022 and still far from the peak of 43% reached in 2014.
According to a survey by LCA Consultores, based on data from the IBGE’s National Household Sample Survey (PNAD), the number of workers with a formal contract decreased by 2.8 million between 2014 and 2022while that of self-employed or unregistered workers increased by 6.3 million in 8 years.
In absolute numbers, the current contingent of workers with a formal contract in the 1st quarter of 2022 totaled 36.3 million, against 39.1 million in the 1st quarter of 2014.
The calculation considers the sum of workers in the private sector under the CLT regime and domestic workers with a formal contract, not including workers in the public sector, which employs 11.2 million, corresponding to a share of 11.8% of the employed.
Even with the increase in the number of Brazilians with formal employment in recent months, the percentage of those employed with a formal contract remains below the pre-pandemic level (38.7%). See the graphic below:
“It is a movement of precariousness of the job market even“, summarizes Bruno Imaizumi, from LCA Consultores, author of the survey.
In 8 years, the category that gained the most participation in the labor market was the self-employed, which jumped from 22.5% to 26.5% of the total employed, followed by jobs without a formal contract, which went from 11 .6% to 12.8%. Together, the two modalities represent 39.3% of the total number of Brazilians with work, more than the contingent with a formal contract, totaling 37.5 million.
From 2014 to 2022, the population with some occupation in the country grew by 4.1% (3.8 million more people). I.e, income generation and the expansion of the job market have been driven by informality and the so-called necessity entrepreneurship.
The shrinking share of Brazilians with a formal contract reflects not only the succession of economic crises in recent years, but also the technological and structural changes in the job market, in addition to the search for more flexible jobs.
No wallet by option to earn more
Maria Cristina dos Santos, 49, decided to give up her formal contract after more than 10 years working as a maid, cleaning lady, collector, among other occupations. Since the end of last year, she started to work as a day laborer, charging R$ 170 per day of work.
“I worked in a family home and slept on the job. There were days when I started at seven and lasted until 9 at night. As a day laborer, I set my own hours and earn much more, he says.
For now, she has not yet decided to formalize herself as an Individual Microentrepreneur (MEI). But, even without Social Security coverage and other benefits from the CLT, she says that working informally is paying off more.
“Companies are paying very little. They offer 1 minimum wage and, after all the discounts, you get R$900. What can a householder do with that?”, she says.
The diarist dreams of studying nursing to seek a better-paying job in the future. But, for now, her focus is to get another house to clean, to have 5 fixed days a week. “I’m looking, it’s just that it’s really hard,” she says.
‘The only solution was to innovate’
Letícia Emanuele Nogueira, 26, worked for about 4 years in formal jobs, but when the pandemic arrived, she and her husband became part of the unemployment and entrepreneurship statistics.
With no income and two small children, the couple decided to open a business in the field of IT and design. The two joined their specialties and started to provide computer formatting and maintenance, web development and graphic design services.
“We saw that the only solution was to innovate to earn income, and that’s what we did. We opened our own business,” she says.
Leticia remembers that at the beginning, no customers showed up and that she even missed the times of fixed salary. It was only after 8 months that the enterprise began to bear fruit. But, considering everything that has happened, she thinks the move has brought her the opportunity to turn her professional life around.
“Looking back, if I hadn’t lost my CLT job, I might not have had the courage to work on my own”, says the entrepreneur, who is about to complete her pedagogy course.
Her plans are to continue with her business – she is providing the paperwork to become a MEI – and to apply for a public tender. Returning to the CLT is out of the question. “But the future is always uncertain, this the pandemic showed me”, she ponders.
Falling income in the country
Data from the Ministry of Labor and Social Security show that most of the formal jobs created in the country offer remuneration of up to 2 minimum wages. In March, the average admission salary was BRL 1,872.07.
The average income of the worker in Brazil was R$ 2,467 in March, 8.7% lower than 1 year before. IBGE figures show that formalized self-employed workers, with CNPJ, have a higher average monthly income than workers with a formal contract, second only to employers and public sector workers.
The loss of protagonism of the formal contract has also reflected changes in the labor market not only in Brazil, including greater automation in production processes, flexibilization of labor relations and the so-called “uberization” (application workers).
“His world is increasingly dependent on technological capital rather than human capital, so this ends up generating fewer formal vacancies. So, the person who is idle and needs to look for some source of income, ends up going to informality”, says Imaizumi.
The informality rate measured by the IBGE reached 40.1% of the employed population in the 1st quarter, remaining close to the historical maximum of 40.9%, with a total of 38.2 million workers.
“Undoubtedly, this brings up some negative issues. There is greater volatility in yields. The worker stops earning a fixed salary, and starts to have a more flexible income throughout the month, in addition to losing benefits“, says Daniel Duque, economist at Ibre/FGV, citing the right to paid vacations, the 13th salary and the monthly FGTS deposit (8% of the salary).
Economists also draw attention to the phenomenon of “pejotization”, when a worker acts as a legal entity, without an employment relationship and paying less income tax, often receiving a higher net income.
“With alternatives such as MEI and Simples, many workers end up preferring this [atuar como PJ]despite losing some benefits”, says Duque.
The researcher warns, however, for the loss of federal revenue with the migration of the workforce to informal occupations or with lower taxation. “Tax revenues are lost, so this generates a relevant tax impact that is not offset by changes in other taxes,” he says.
The current number of contributors to Social Security among the employed population is estimated at 60.2 million by the IBGE, about 700 thousand below the maximum of 61 million recorded in 2015.
For Imaizumi, what worries me most, however, is the persistent double-digit unemployment and the difficulty of absorbing the working-age workforce that still cannot find a job or has simply stopped looking for a job. There are 4.6 million who simply gave up looking for work, the so-called discouraged ones. https://92ee41bc77ce2db22a484c48d0f027fa.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
“The economy has already returned to pre-pandemic levels, but we have to remember that the working age population grew during this time. We see that there are a lot of people still out of the job market. This is really worrying,” she says.