Number of underemployed workers grows and stops consumption in Brazil

A street vendor of clothes for 26 years in downtown Rio de Janeiro, Maria de Lourdes, 47, celebrates that the advance of vaccination against Covid-19 has increased the movement of people, but the movement of customers today is still 70% lower than than before the pandemic.

“With weaker sales, I divided everything I could. I put my son in a cheaper school, I cut medical insurance, English courses”, he says.

She is part of Muca (United Camelôs Movement) and says that the organization had to reinforce actions to support other street vendors —such as donations of food baskets and setting up a community kitchen— during the pandemic.

Maria, who expected to sell R$800 a day in December, is now struggling to get R$150. Even with the return of street trading, she has been working less than she would have liked.

“Arriving before 6 am and leaving at the beginning of the evening is no longer worthwhile. People are without money to shop,” he says.

According to official statistics, Brazilians like Maria de Lourdes are part of a contingent that was already at a high level in the pre-pandemic and, with the effects of the health crisis, broke records. This is the group of workers classified as underemployed.

This portion includes professionals who work less than 40 hours a week and would like to work longer, as defined by the IBGE (Brazilian Institute of Geography and Statistics).

In the third quarter of 2021, the number of underemployed reached 7.771 million in the country. The result means an increase of 9.4% compared to the same quarter of 2019 (7.102 million), in the pre-pandemic.

In absolute terms, this means that, over two years, the group had an increase of 669 thousand people.

According to specialists, the advance represents a kind of brake for the recovery of consumption, engine of economic growth.

It is that, when working less than they would like, the underemployed tends to receive a lower remuneration than desired. With less income in the month, maintaining the consumption pattern becomes a more difficult task, especially in times of high inflation, as is the case today.

“For a recovery in the labor market, it is not enough just to reduce the unemployment rate. The underemployed are even working, but they would like to work more and cannot”, says economist Rafael Cagnin, from Iedi (Institute of Studies for Industrial Development ).

“The person is out of the unemployment rate, but is in a situation that is not comfortable. This situation does not allow for the recomposition of the pre-crisis consumption pattern”, he completes.

According to the IBGE, the number of 7.771 million underemployed is the largest ever recorded in the historical series of the Pnad Contínua (National Survey by Continuous Household Sample) with a cut of traditional quarters —January to March, April to June, July to September and October to December. The series started in 2012.

In the PNAD version with mobile quarters, the number was even higher, reaching 7.822 million. This trademark was registered in the period from May to July 2021.

“We have almost 8 million underemployed people in the country. This shows that the recovery of the labor market still has weaknesses”, says economist Rodolpho Tobler, a researcher at FGV Ibre (Brazilian Institute of Economics at the Getulio Vargas Foundation).

“The increase in underemployment generates a kind of snowball. It affects consumption and, consequently, economic activity”, he adds.

Effects of the pandemic

Before the pandemic, the number of underemployed people had already gained strength in Brazil. The point is that the arrival of Covid-19, in the first quarter of 2020, aggravated the situation.

According to Tobler, the cut in working hours and wages of formal workers during the pandemic, allowed by the federal government, helped to take the number of underemployed people up from last year.

But, with the end of measures aimed at protecting the economy and jobs, including the reduction of working hours, the group has remained at a high level due to signs of weakness that still affect the labor market, according to the researcher.

According to him, the consequences of this situation can be measured in part by the fall in the income of the employed.

In the third quarter of 2021, the average income of the population with some type of job reached the lowest value for the period from July to September in the Pnad historical series.

At the time, the real income usual for the employed was estimated at R$2,459. The rise in inflation is also seen as responsible for decreasing purchasing power.

“We are seeing the employed population increase in recent quarters, but the average income has been falling. It has the impact of inflation and there is also a part of people working and receiving less than they would like”, analyzes Tobler.

According to the IBGE, the population employed with some work, which includes the underemployed, was almost 93 million in the third quarter of this year.

The contingent is still 1.9% below the level of the third quarter of 2019 (94.7 million), pre-coronavirus period.

In the view of economists, the consistent recovery of the labor market depends mainly on the growth of economic activity as a whole. The problem is that the GDP (Gross Domestic Product) is already showing signs of stagnation in Brazil.

In the third quarter, the indicator shrank 0.1%. It was the second consecutive retreat.

To make matters worse, projections for 2022 have been cut due to the scenario of fiscal uncertainties, political turmoil, inflation and high interest rates.

Economists understand that GDP should be between stagnation and recession —a drop in activity— next year. The poor performance of the economy threatens the labor market.

“Instead of gearing up, the activity slipped. The increase in the underemployed, which should have been a mere step in the process of resuming the job market, may extend for a longer time”, points out Cagnin.

Tobler has a similar opinion. According to him, the number of underemployed people should remain at a high level in 2022.

“We saw a series of downward revisions in the GDP. Thus, the scenario is not very positive for the labor market. The level of underemployment should remain at a high level”, he says.

For the sociologist at Dieese (Inter-Union Department of Statistics and Socioeconomic Studies) Clemente Ganz Lúcio, underemployment reveals that the economy has not been efficient in generating quality jobs.

“The worker has had to live with a reality of insecurity, both from the point of view of employment and family income, lack of prospects for better employment and lack of protection.”

He adds that the generation of jobs with better quality depends essentially on the economy’s capacity to produce public and private investments and to provide income distribution and salary growth.

“It takes a strategy to reverse the dynamics of recent years.”