Inequality in Brazil fell at the beginning of the year, but everyone became poorer, says Ipea

The inequality of income from work between rich and poor in Brazil decreased in the first quarter of 2022, compared to the immediately previous quarter and also to the same period in 2021, reported this Friday (10) the IPEA (Institute of Applied Economic Research) .

But what at first glance seems like good news is actually the result of a very negative scenario: both the rich and the poor saw their income from work decrease in the period, compared to the first quarter of 2021.

But the drop in income of the richest (-3.98%) was higher than that of the poorest (-1.17%), which results in this reduction in inequality without reason to celebrate.

“Employees with a formal contract in the private sector, without a formal contract in the private sector and, above all, in the public sector found it difficult to negotiate salary increases throughout 2021, despite the recovery in economic activity growth observed in the year”, highlights Ipea, in study by economist Sandro Sacchet de Carvalho.

“The sharpest fall in public sector workers’ incomes largely explains the greater decline in incomes for higher-income households over the past four quarters—which, in turn, explains part of the decline in income inequality. “, added the institute.

The strong rise in inflation and the lack of resources for readjustments in public entities explain the difficulties of workers in obtaining salary readjustments at the beginning of the year.

Even with the fall in inequality, in the first quarter of 2022, the household income of workers in the highest tier was 28 times higher than those in the lowest tier — compared to 28.8 times in the first quarter of 2021.

In other words, inequality has decreased, but remains very high. And it decreased because everyone lost income, but the richest lost in a greater percentage.

‘Back to normality’

On average, the usual income of Brazilians dropped 8.7% in the first quarter of 2022, compared to the same quarter of 2021, to R$2,548. It was the fourth consecutive quarter of decline in income in the annual comparison.

Ipea clarifies that part of this drop in income is explained by the “return to normality” of the job market after the worst phase of the pandemic.

This is because, at the worst moment of the pandemic, in mid-2020, lower-income workers were the ones who lost the most occupation. As those who remained employed had higher incomes, the average income of the employed population rose, without this reflecting an improvement in the labor market.

Now, lower-income workers are returning to the market, which pulls average income down. But, in addition to this composition effect, the level of income is generally lower than that observed before the pandemic.

“Unregistered and public sector workers closed the first quarter of 2022 with falls [da renda do trabalho na comparação anual] of 6% and 12.9%, respectively. Private workers with a formal contract had a drop in their usual income of 4.6% and self-employed workers of 6.4%”, observes Ipea.

The institute also highlights the increase in the proportion of households without income from work, which rose from 22.2% in the fourth quarter of 2021 to 23.3% in the first quarter of 2022.

The increase at the beginning of the year reverses the trend of improvement in the indicator, which reached 28.5% of households without income from work in the second quarter of 2020, the height of the pandemic.

Lowest level of income from all sources in ten years

The release of the IPEA study takes place on the same day that the IBGE (Brazilian Institute of Geography and Statistics) released the 2021 Continuous National Household Sample Survey (PNAD), with income data for all sources.

Unlike the survey released monthly by the institute, which includes only data on income from work (analyzed by Ipea in its study), the survey released this Friday by the IBGE includes sources of income such as social benefits paid by the government and the income of rents.

Here again, the news was quite negative.

According to the IBGE, in 2021, income from all sources of Brazilians reached its lowest value in ten years.

According to the survey, the average real monthly income (that is, discounting inflation) from all sources in the country went from R$2,386 in 2020 to R$2,265 in 2021, the lowest value since 2012, when the series began. research history.

“This result is explained by the fall in the average income from work, which retracted even with the level of occupation starting to recover, and also by the decrease in income from other sources, except rent”, explained Alessandra Scalioni, an IBGE analyst.

According to her, the change in the criteria for granting emergency aid that took place in 2021 was one of the main causes of the drop in income from other sources.

The benefit was reduced from amounts that were between BRL 600 and BRL 1,200 in 2020 to BRL 150 to BRL 375 in 2021. The number of beneficiaries also decreased by 30%.

As a result, the percentage of people with some income in the country’s population dropped from 61% in 2020 to 59.8% in 2021, the same percentage as in 2012 and the lowest level in the series.