Brazil gains 1.4 million informal workers in just 2 years

A seller of cellphone and eyewear accessories in downtown Recife, Cristiano Silva, 36, just wanted to plan for the next few years — but seeing his income plummet with the pandemic and needing to return to informality, he can no longer plan himself even for the bills of the month.

“There was never a return to normality. Before, there was already a drop in sales. As soon as we got back, the movement was good for a few weeks, I think it was repressed demand, but it didn’t last long”, he says.

The lack of labor rights and prospects of retiring or having assistance in case of accidents are the main concerns of the people of Pernambuco today. “It was registered as MEI [Microempreendedor Individual], but the drop in sales made the fee weigh heavily on the budget. I’m afraid that something will happen to me and my family will be left unprotected.”

Silva’s story is not an isolated case. Brazil gained 1.42 million informal workers between the beginning of the pandemic, in the first quarter of 2020, and the first three months of 2022.

From January to March, the total number of informal workers reached 38.203 million – the highest number of people in this situation in a first quarter since the beginning of the historical series, in 2015.

The calculations were based on data from the Continuous National Household Sample Survey (PNAD), by researchers from the Ibre-FGV (Brazilian Institute of Economics of the Getulio Vargas Foundation) Janaína Feijó and Paulo Peruchetti.

The job market even managed to return to pre-pandemic levels earlier than anticipated, but the quality of the jobs generated is still a matter of concern among experts, they say.

“Many of these new jobs were generated through informal work, it is a recovery driven by functions that require less schooling and generate lower income. We are seeing a recomposition of the labor market that is worrying”, says Feijó.

This account includes workers in the private sector without a formal contract, employers without a CNPJ and those who are self-employed and also have no legal entity registration.

In addition to highlighting the differences in conditions between formal and informal workers, the last two years also marked regional differences.

In the period, there was an increase of 527.1 thousand informal workers in the Southeast states, while 370.7 thousand people in the Northeast entered this situation. The two regions concentrate the largest number of employed workers in the country.

When looking at the informality rate, the data are more worrying in the Northeast —where it increased by 1.2 percentage points and reached 53.62% in the first quarter— and in the North (+0.13 pp), where it hit 56.61%. In these regions, therefore, more than half of the workers are in the informal sector.

“The recovery of the labor market may be linked to a seasonal recovery registered by Pnad, but the trend for the year is not good. The economy is stagnant and the outlook for the second semester is the worst possible”, evaluates Gustavo Casseb Pessoti , president of the Bahia Regional Economic Council.

The economist recalls that, at a time when the Brazilian economy encouraged credit policies and a real increase in the minimum wage, the North and Northeast regions presented growth rates above the country’s average. “The worsening in this environment took the North and Northeast to the bottom of the well, since most municipalities are heavily dependent on the public sector.”

As of 2019, the rate of informality has grown a lot in the country, precisely because of this difficulty in generating quality jobs, adds Feijó. “After what we expect to be the worst moment of the pandemic, Brazil still needs to face the difficulties of growth and weakness of the job market.”

In the period, the informality rate only had a slight drop in the Central-West states, by 0.6 pp, reaching 36.9%, even so, the small decrease should not be celebrated.

A resident of Campo Grande (MS) for just two months, Rodrigo Nogueira, 36, from Pará, does not regret the change. “I always carry some of my land with me, but I had no steady job for over two years and decided to try my luck here. I got a job in less than a month”, says the accountant.

“But the Midwest just returned to the level it was at in mid-2020. It’s a little better than the rest of the country, but it’s still a high level for the region, which calls for an alert about the low quality of the recovery of the job market”, says Peruchetti.

He recalls that the informal ones were the most affected at the peak of the pandemic, with the measures considered necessary to distance and the ban on activities that caused agglomerations.

“With the beginning of the recovery, unemployment was returning to the level before the health crisis, but due to the fact that informal workers are returning to their activities.”

Regional issues are still ignored

A ghost among workers trying to get back into the job market, especially since the 2015 and 2016 crisis, long-term unemployment also has regional accents.

Between 2020 and 2022, long-term unemployment (from two years onwards) grew 23.1% in the Northeast and 12.8% in the North, falling, again, only in the Midwest (-14.8%). In Brazil as a whole, the increase was 11.3%.

Part of the rise in informality is also explained by the increase in the so-called labor force participation rate. This indicator indicates the percentage of people of working age (14 years and over) who are employed or looking for work.

The participation rate dropped sharply during the pandemic, with the isolation measures, and was recovering with the reopening and the advance of vaccination, when people were able to return to the workforce. It was 62.1% in the first quarter of this year — but still below the first quarter of 2019 (63.4%) and the same period in 2020 (62.7%).

The researchers also assess that there are many uncertainties regarding the dynamics of the election in October and how important indicators of the economy – such as inflation and interest rates – will behave in the coming months. “But if Brazil does not have a robust improvement, it will be difficult to change this situation of high informality”, says Peruchetti.

“The solution will not come from the federal government. It would be necessary to review the country’s development proposal, but the government has no project to leverage the poorest regions”, says Pessoti. “North and Northeast have potential in the areas of renewable energy and cutting-edge technology, which cannot be lost.”

The issue of the low quality of work generated in recent months is inseparable from the increase in informality and it will be necessary to look at these workers more carefully, adds Fernando Veloso, also a researcher at FGV.

“We never fully recovered from the 2015 and 2016 recession, which left its mark on the job market. In addition, recurrent crises leave marks that last ten years, according to a World Bank report. Given that unemployment will remain high, we have to think about employability and the protection of people.”