After the reform, lawsuits fell, but the promised increase in employment did not occur

Four years after the entry into force of the labor reform, completed this Thursday (11), the balance is a drop in the number of lawsuits in the Labor Court, but the number of jobs announced by the government at the time was only a promise.

The Michel Temer government even disclosed during the course of the proposal that it was estimated to generate 6 million jobs within a decade with approval — 2 million in just the first two years.

The PNAD Contínua (National Survey by Continuous Household Sample), by the IBGE (Brazilian Institute of Geography and Statistics), however, shows a different story: the quarterly unemployment rate, which reached between 6% and 7% in 2014 , rose to 8.7% in August 2015 —considering formal, informal, self-employed workers, among others.

In mid-2017, before the change in legislation, unemployment was 12.6%. Two years later, in 2019 and before the pandemic, it was at 11.8%. In 2021, already with the health crisis, the labor market suffered a new blow and unemployment has fluctuated above that, between 14.7% and 13.2%.

“It was absurd to think that the reform would create an explosion of new jobs. Brazil had come from a major crisis in 2015 and 2016, and the government knew that the job market was not booming”, says the economist at UFRJ ( Federal University of Rio de Janeiro) João Sabóia.

He recalls that 2018 and 2019 were years of small growth in GDP (Gross Domestic Product) —both around 1%—, which brought difficulties for the job market. “The economy has been less than brilliant, which is reflected in a slow recovery in the labor market.”

In 2020, GDP dropped 4.1%; for 2021, the forecast is for growth of 4.93%, according to the latest Focus bulletin. For next year, some of the analysts already predict a new drop.

As for the Caged (General Register of Employed and Unemployed), of the Ministry of Labor, 2017 ended with the closing of 20,800 formal jobs. The following years, 2018 and 2019, already with the reform, had positive balances of 1.2 million, well below government forecasts.

After a review of Caged, the balance of formal jobs in 2020 has almost halved.

An advocate of changes in the CLT, economist Bruno Ottoni, from IDados, believes that it is unfair to attribute the current problems in the labor market to the reform. He recalls that the text was bombed by institutions and bodies, which created an environment of insecurity. Employers were often wary of complying with the new legislation, says Ottoni.

“When time passed and the new ways of working were going to consolidate, the pandemic came. We know that it was horrible for the labor market, but how much would it have suffered without the reform? It is also difficult to assess whether the promise of reduction of informality was accomplished as far as the influence of reform could go.”

From the point of view of intermittent work, a type of contract created with the labor reform, in which the worker is called for non-continuous working hours, there was also the promise that this type of occupation would help reduce the informality of those with flexible working hours, in the case of many in the service sector.

Between November 2017 and December 2019, the balance of intermittents was just under 143,000 contracts. Between January and September of this year, the new Caged registered a positive balance of 61.5 thousand intermittent work contracts and 35,700 of partial work.

“One of the things that excited the most about the reform was the possibility of reducing informality for those with shorter working hours. Part-time and intermittent time would make this easier and reduce the risk associated with contracts. “, says Ottoni.

Dismissals by agreement, a type of contract termination introduced by the reform, totaled 156,004 (1.26% of total dismissals in the period), also according to Caged.

In the case of labor lawsuits, the reform provided for changes in the Courts, stipulating the payment of procedural costs in case of absences in hearings or of attorneys’ fees for the winning party in the event of loss of the action, for example.

These changes have led to a new level in the number of new processes: a survey requested by the TST (Superior Labor Court) shows that this number dropped by 19% — from 3.966 million in 2017 to 3.222 million in the year following the approval of the reform.

In comparison with 2020, the drop was more than 1 million records and until October this year, the number of processes totaled 2.202 million.

In October, the STF (Supreme Federal Court) declared that two parts of the reform were unconstitutional, as they modified the rules on the gratuitousness of justice for those unable to file lawsuits.

A large part of the reduction in new lawsuits was due to the rule of payment of fees by workers, including those who were beneficiaries of gratuity, especially because of the first decisions that took place in this regard, says Roberto Kurtz, labor partner at Kincaid Mendes Vianna Advogados.

“With the decision of the STF, which declared some articles of the reform unconstitutional, there must be an increase in new demands.”

The new labor rules also directly affected labor unions. Before it, there was mandatory collection equivalent to one day’s work to maintain unions. With the change, payment is no longer compulsory. In the first six months after the reform, the drop in revenue reached 88%, according to government data.

“The reform took benefits from unions and workers,” says Miguel Torres, president of Força Sindical. “They said that it was needed to generate jobs, they interfered with rights, they practically ended the collection of unions without a transition formula and this led many unions to difficulties.”

Four years later, he considers that the jobs created were precarious and that the wage bill fell. “And the government is still trying to put mini-reforms to a vote, to take away more rights.”

When evaluating a policy, it is also necessary to consider what would have happened if the reform had not taken place, ponders the professor at UnB (University of Brasília) Carlos Alberto Ramos. “In the meantime, there was a turbulent electoral period, the PT said it would revoke the reform and that scared the businessmen.”

He considers, however, that the speech that the increase in hiring depends only on the relaxation of labor rules is nothing new and occurred both in the mid-1990s and after the 2015 and 2016 recession.

‘THEY EXAGGERATED IN THE FORECASTS’, HE SAID FEAR

In 2020, during a meeting in Paraná, Michel Temer admitted that there was an exaggerated propaganda at the time of the reform and that his ministers at the time, Henrique Meirelles (Fazenda) and Ronaldo Nogueira (Trabalho), overestimated the numbers of job creation.

“I want to agree […] that our ministers Meirelles and Ronaldo Nogueira exaggerated their predictions. They were guided by the idea, which is actually very common here in Brazil, which is the following: when you produce a law in Brazil, the next day, the sky is blue, you don’t have unemployment, you don’t have insecurity.”

Meirelles (currently Secretary of Finance and Planning of the State of São Paulo) assesses today that the estimates of the increase in employment when the reform proposal was presented were the best available, based on international experience.

“They were also based on an economy growing at its potential. The macroeconomic conditions since then, however, were not like that and did not allow Brazil to obtain the gains.”

He adds that the reform does not replace fiscal and monetary policy, nor the level of confidence of consumers, businesses and investors — and that these factors are decisive in defining the country’s level of growth under normal conditions.