Informality already pays almost the same as formal work


By Nilson Brandão Junior and Irany Tereza, O Estado de S. Paulo - 21/02/2005

RIO - After the informality boom in recent years, which increased the number of workers without a formal contract to 37 million - equivalent to half the paid population, according to the Institute of Applied Economic Research (Ipea) - the country is now following another significant change in the labor market: the approximation of the average income value of formal and informal workers. In the early 90s, the income of employees with a formal contract was 50% higher than that of those without a formal contract. In 12 years, the gap has dropped to 15%.
Another data revealed in the monitoring of the labor market by Ipea, an organ linked to the Ministry of Planning: contrary to what was imagined, from November 2002 to October 2004 - a period with a strong economic crisis - there was also an explosion of jobs. Around 1,2 million new jobs were created. But, as researcher Lauro Ramos informs, “almost all of them refer to jobs of terrible quality”, that is, of low qualification and underpaid.

The statistics are from different studies gathered by Ipea, but point to the same path: the deterioration that the labor market has suffered in recent years. The converging curves of formal and informal earnings are due, in the analysis of specialists, to two factors that marked the 90's. There was a significant migration from the formal to the informal market, of highly qualified workers - identified by the same study period or more than 11 years - thereby raising the remuneration in this segment, in parallel with the flattening of wages in important categories of the formal market, such as industry and commerce.

The government's concern with the advance of informality is growing. In October last year, under the coordination of the Economic Policy secretary of the Ministry of Finance, Marcos Lisboa, 11 economists who are following the labor market in Brazil were gathered at Ipea, in a closed seminar, to discuss this issue exclusively. André Urani (Iets), Armando Castelar (Ipea), Fábio Giambiagi (Ipea), Jorge Jatobá (Fundação Getúlio Vargas-FGV), José Márcio Camargo (PUC / RJ), Lauro Ramos (Ipea), Marcelo Neri (Ibre / FGV) , Naércio Aquino (USP), Reynaldo Fernandes (Esaf), Ricardo Paes de Barros (Ipea) and Samuel Pessoa (EPGE / FGV) presented studies and made a diagnosis about the informalization of work.


Gabriel Ulyssea, an economist at Ipea and one of the authors of the synthesis document on the debate, comments that, since the past decade, there has been an impressive movement of formal workers towards informality and vice versa. “There is an intense and simultaneous flow between sectors, detected by surveys by the Brazilian Institute of Geography and Statistics (IBGE). Every month the rate of transition between workers with and without a license changes ”, he says.

In 1984, 6% of formal workers entered informality, a rate that jumped to 9% in 1990. The Ipea study was based on data from the history series of the Monthly Employment Survey (PME), which tracks changes in the labor market. work only in six metropolitan regions of the country.

With data from another IBGE survey, the National Household Sample Survey (Pnad), there was also an increase in the number of “qualified” workers without registering a job. In other words, there has been an increase in the number of people with 11 years of schooling or more in the informal sector. For the economist José Márcio Camargo, the phenomenon is directly linked to the current fiscal and social security structure.

“The qualification of the formal worker has increased because of the increase in the tax wedge. Agreements are occurring with some frequency in which the company and the worker appropriate the money that would be paid in taxes. I think this is something that an inspection would not solve, because neither party has an interest in denouncing it. What needs to be done is a change in legislation to reduce the tax wedge. The pension structure also contributes to informality, when it allows retirement to those who have not contributed. As long as all the incentives push the worker to this side, it will be difficult to reduce the proportion of informal workers ”, says Camargo. He recalls that, throughout the 80s, between 35% and 40% of employment was informal. The 1988 Constitution brought this percentage up to 50%, he says.

Gabriel Ulyssea mentions that, in the 20 years that go from the beginning of the 1980s to the end of the 90s, the average schooling of employees without a license practically doubled, jumping from 3,07 years to 5,85 years. The study time of formal employees grew less, from 6,17 years to 7,78 years. The result of this is that, currently, a quarter of informal employees have 11 years or more of study.

The difference in study time fell at the same time as the wage gap narrowed between the two groups of workers. Not surprisingly, the share of informal employees with an income above the minimum wage also increased significantly, going from 39% to more than half (53%) of the total in informality. “In fact, the data indicate that there has been an improvement in the qualification of informal workers and that is why this (income) differential is falling,” says the economist at Ipea.

Part of the migration from the formal to the informal economy, Ulyssea believes, is linked to low economic growth since the past decade and the effects of this scenario on job creation.

In addition, the economist highlights what he calls the increase in formal labor, caused by legislation. According to him, the cost of formal labor has increased for companies, which ends up discouraging the offer of jobs protected by the portfolio. "This may have caused an increase in informality on the side of companies."