Cecilia Machado: Workers’ demand for more flexibility

The first years in the labor market are very productive for young people. During this period, the wages of these workers grow rapidly and they often move to higher-paying jobs.

At the same time, young workers are particularly vulnerable to adverse economic conditions. For example, young workers are known to bear the brunt of recessions, both because starting wages are lower and because these employment conditions have lasting effects.

Disruptions in the progression process caused by recessions affect not only earnings throughout their careers, but also the health, economic self-reliance and family-building decisions of these young people.

It is for these reasons that not even the most optimistic of forecasts could anticipate what is seen today in the labor market of developed and emerging economies in the post-Covid period.

In the United States, there are more job openings than job seekers. The unemployment rate, which reached 14.7% in April 2020, has dropped back to 3.7%. In Brazil, there are no statistics for the number of vacancies, but the unemployment rate reached 9.1%, the lowest value in the historical series since 2015, the first of two years of negative economic growth. The resilience of the Brazilian economy fuels the prospect that there is still room for further improvements in the labor market.

The fact is that after almost three years since the beginning of the pandemic, we are faced with a very different job market than in 2019. The pandemic has changed the way people view their jobs, and they have started to demand more flexibility in their contracts of job. The use of technologies has allowed more people to work in shorter hours, even being able to perform their functions remotely.

A recent study presented at Jackson Hole – an important conference organized by the Fed with the presence of economists and policymakers from around the world – corroborates this view, reinforcing that the amount of hours offered by workers (intensive margin) is as (or more) ) important to document the evolution of the labor market in terms of commonly used employment metrics (extensive margin) (Bick, Blandin, & Fuchs-Schündeln, 2022).

The study argues that changes in work arrangements – which have become more flexible after the pandemic – correspond to a reduction in labor costs, which is manifested in time savings in commuting from home to work, in access to more promising jobs. in more distant locations, and even the possibility of performing multiple tasks (work and home) simultaneously when the worker is at home office.

These changes would have been able to attract to the job market precisely those who would not work in more rigid arrangements.

Thus, a decrease in the cost of labor is consistent with an increase in employment and a decrease in hours per worker as is being seen in the various economies of the world. This new configuration has important implications for the conduct of monetary policies, in particular those that consider employment targets in their objectives, and fiscal policies, such as the social safety net for workers who did not benefit from home office and flexible working hours.

The Brazilian case is particular. On the one hand, the new configuration of labor relations found fertile ground in a more dynamic labor market after the 2017 labor reform. distance, or that it may eventually apply to more job categories.

New proposals for reforms that make the labor market more rigid, or even STF decisions that stimulate litigation (such as the one that ruled the payment of bankruptcy fees by the losing party to be unconstitutional), go against the evident demand of workers for more flexibility. .

For young people entering this new job market, it can be one of great opportunities or great challenges.

This column is a tribute to the 2019 and 2020 classes of the undergraduate economics course at FGV EPGE, for which I had the honor of being patron, and whose in-person graduation ceremony could only take place last week because of the pandemic. . They are part of the first generation of university students to enter this new job market.