Informal sector accounts for 10% of the Brazilian economy


Source: Folha de S. Paulo, 10/11/2007


The institute showed, for example, that 59% of occupations were informal. However, when calculating the value added by the informal sector to the economy, the percentage did not exceed 10,1%.

This apparent contradiction between a very large presence of the informal sector in occupations, but very small in terms of how much it adds to the economy, is explained by two reasons. The first is that the income generated by this type of employment is, on average, less than that of formal jobs.

The second has to do with the methodology for calculating these indicators. A bricklayer who does temporary work for a large construction company, for example, enters the calculation of informal occupations because he has no formal relationship with his employer. However, the value produced by him in this service ends up being included in the calculation of the production of the formal sector, since the company for which he worked temporarily is formalized.

“It is not possible, in IBGE surveys, to identify how much an informal worker has produced within a formal activity. We can't get to a company and ask what percentage of its production was done by a formal worker and which was done by an informal worker ”, explains Roberto Olinto, from IBGE.

Despite this limitation, Olinto says that the level of 10% is very similar to that seen in other countries that also analyze the weight of informality in their economies. “The number of formal jobs may be very high, but the productivity of this activity is very low. The percentage [of the value added by the informal sector] is not much more than that [indicated by IBGE] ”.

In the opinion of José Julio Senna, managing partner of MCM Consultores, the high rate of informality and its low productivity helps to explain why Brazil grows less than other countries that lead the economic growth rankings.

“A significant part of Chinese economic growth is explained by the migration of jobs from sectors with very low productivity, such as rudimentary agriculture, to others with high productivity, such as industries in the urban sector. This worker who migrates from one sector to another ends up producing more goods and boosting the Chinese advance, ”says Senna.

For him, the data indicates the need to reformulate labor legislation to attract more people in the country who are in the informal sector to the formal sector.

“This high percentage of almost 60% of informal occupations shows that, if we were able to carry out reforms that facilitate the migration of these workers to the formal sector, Brazil could make a fantastic leap in economic growth. Within the formal sector, it is much easier to train workers, and they will have more incentive to invest in their training, ”says Senna.