Brazil has the largest labour market in the Latin America. According to the latest data by the World Bank for 2020, the total labour force in Brazil grew by 0.82% between 2019 and 2020, going from 106.5mn to 107.37mn people.

This shows that roughly 50% of the 212mn population of Brazil as of 2020 is involved in the national workforce. The World Bank also provides statistics about the economic vulnerability of the Brazilian population, which show that 52% of the total population falls under this category and is either in the risk group of falling into poverty with a per capita income of between USD 5.50 and USD 13 per day or is already below the poverty line of USD 5.50 per day.

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Another important factor for the economic vulnerability of a significant part of the Brazilian population is that a large portion of the labour force is employed in the informal sector. Data by the Brazilian Institute of Geography and Statistics (IBGE) shows that around 33% of the labour force is part of the informal economy. The incomes of these over 33mn people are not taxed and they do not have the same protection as the employees of the formal sector. They are at a higher risk of losing their jobs and income during a time of crisis like the current one. In Brazil, this is especially true for youth employment - recent World Bank data shows that 7 out of 10 children below the age of 15 and 7 out of 10 people between 15 and 24 are engaged in the informal economy and are paid less for their work. Ultimately, they either fall either below the poverty line or are at risk of doing so.

These characteristics of the Brazilian labour force become critical points of concern both for the government and for the private sector as the ongoing COVID-19 crisis continues to create disruptions to the business environment in most economies around the globe. The pandemic also creates great uncertainties related to employment status, continuous income and future development.

COVID-19 Impact on the Labour Force

The COVID-19 pandemic has forced many companies to make critical choices for their business activities and employee count, taking into consideration the disruptions in the global supply chains in a lot of sectors and industries. Moreover, the ongoing restrictions in many countries have influenced both the business and consumer confidence in a negative manner. This uncertainty, both on a global and national level, has had a grave impact on the overall labour market conditions and the unemployment rates in many countries. The situation has been particularly difficult for people working in the informal sector. In Brazil, this has been especially true, considering the high percentage of workers in the informal economy, but even formal employment was affected by the crisis. According to data by the Ministry of Economy of Brazil, formal unemployment insurance claims exceeded 500,000 in the beginning of May, which was an increase of 76% y/y. Due to the lockdown and social distancing measures, the newly unemployed people were given the option to file in their claims online. The Ministry of Economy has stated that around 77% of the claims were made online.

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According to daily IBGE data on the number of people working remotely, since the beginning of May 2020 this number has been hovering between 7.5mn and 8.5mn people. The businesses that could not adapt to the new normal resorted to more radical actions in order to stay afloat - cutting down on the number of employees or reducing their salaries. Those that could not keep up were forced to close doors either temporarily or permanently, letting go of their employees entirely. According to the latest figures of the Continuous National Household Sample Survey by IBGE, the unemployment rate in Brazil increased to 14.4% in Q3 2020 compared to 11.8% in Q3 2019. This was the highest unemployment rate since IBGE started reporting the indicator in early-2012. This increase is also accompanied by a significant rise in the labour underutilization rate, which reached 30.6% in Q3 2020 compared to 24.3% a year earlier. These figures reflect the current struggle of Brazil’s economy to create employment opportunities.

The Government Measures

The Brazilian government were very quick in responding to the COVID-19 crisis and took early measures to support workers in the formal sector. The government discussed and ultimately introduced a set of provisional measures (Medida Provisória - MP 927/2020) in late March 2020, which lasted until July, establishing the necessary framework and rules for companies to adopt a smooth transition to remote working during quarantine periods. Another early measure introduced by the Brazilian government was the expansion of the already available government aid programme for families living under the poverty line - the Programa Bolsa Familia. The expansion added 1.2mn families to the scope of the programme. The government also introduced the Emergency Aid Programme (Auxilio Emergencial or AE), targeting families living under the poverty line, families that have members working in the informal economy, and own-account workers. The AE programme allowed for temporary monthly emergency financial transfers of BRL 600 (around USD 110) for a five-month period. In September, the government announced an extension of the programme, with monthly transfers of BRL 300 for four more months.

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In order to address the growing concerns about the stability of the labour market in Brazil, on July 6, 2020, President Jair Bolsonaro signed a new federal law aimed at softening and managing the socio-economic impact of the COVID-19 pandemic and the accompanying measures and restrictions. The law instituted the Emergency Employment and Income Maintenance Programme, which frames certain measured that can be adopted by businesses in Brazil during the COVID-19 pandemic.

Under the new programme companies are allowed to introduce temporary salary and working hour cuts as well as to negotiate with their employees a temporary suspension of the employment agreements for up to 240 days, during which employees can decide to opt out of paying personal direct social security contributions. Another measure introduced in the programme is the so-called emergency benefit and monthly allowance. Under this measure, employees whose salary and working hours have been reduced by over 25% are entitled to monthly benefit payments, which are supposed to bridge the gap between the regular and the reduced salary. The programme also introduces a temporary job stability clause, which provides employees guarantees that they will keep their jobs after the expiry of the negotiated period of reduced salary and working hours.

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