Formal employment grows more than GDP


By Rafael Cariello, from Rio Branch (Folha de S. Paulo - 09/01/2005)

The Brazilian economy has been generating formal jobs at a faster pace than GDP growth for at least seven years, according to data from Rais (Annual List of Social Information). This is what the study “Evolution of Formal Employment in Brazil” reveals, by economist Rogério Costanzi, associated with Ipea (Institute of Applied Economic Research).

The phenomenon coincides, according to Lauro Ramos, coordinator of Labor Market Studies at Ipea, with the halt in the growth rate of informal work. “The trend towards informalization in metropolitan regions has stopped happening. We clearly observe in the metropolitan regions - it is not that informality falls, but it stops growing after 99 ”, he says.

Rais is prepared by the Ministry of Labor and gathers the total number of formal jobs reported to the government by employers. In 2003, the year in which the economy was practically stagnant, the total of formal jobs in the country grew 3%, according to the list released at the end of last month.

In the previous year, 2002, when the GDP (Gross Domestic Product) had grown 1,93%, the formal employment stock increased 5,5%. In 2001, it grew by 3,66%, against 1,31% of GDP; in 2000, 4,94% against 4,36%. In 98 (1,61%) and 99 (2,05%), the variation in the volume of jobs was not so great, but it was still above the growth of the economy.

The trend, which, according to economists heard by Folha, should also be confirmed in 2004, is the opposite of what happened in the 90s, when the variation in the level of employment followed the GDP at a slower pace or diverged, decreasing its rhythm even when the economy grew more than the previous year.

Economist Claudio Dedecca, a researcher at Unicamp's Center for Union Studies and Labor Economics, says that the change in pattern coincides with the end of adjustments in the post-economic opening industry - which generated “reasonable destruction of the productive base that generated employment formal ”- and with the change in the exchange rate regime in 1999. For him, the effects of this growth at first glance have no greater impact on the reduction of unemployment and improvement in the quality of employment in Brazil because of the effects of the previous period and the growth PEA (Economically Active Population).

"As you come from a very long period of limited economic performance and a recurrence of a movement in which the growth of formal employment was systematically lower than the growth of GDP, you have deteriorated the labor market," he says.

In absolute terms, says the economist, each percentage point of increase in the PEA would need 3 percentage points of increase in the stock of formal jobs to be absorbed.
“For this current growth rate, at best, you generate an increase in formal employment that is similar to the growth of the Economically Active Population. And that is not enough. To change that, there needs to be a spectacular increase in formal employment. And for that you need a much higher GDP increase than the current one ”, he declares.

Lauro Ramos agrees with Dedecca on the trigger for the change. “It coincides with the exchange rate change. The whole movement of wiping out the productive structure that characterized the 90s suffered great relief. ”
And it adds the growth of agribusiness, the internalization of industries and the inspection of the Ministry of Labor, in the case of trade and services, as responsible for the growth of formal employment.

“Informality in the countryside falls because this agribusiness is mainly aimed at exports. And when you export, you become visible and enforceable - both internally and by importers, ”he says.