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Pandemic: India can learn from Brazil, where bottom 20% 'received' a higher income

By Arjun Kumar*

The labour market has severely felt the brunt of the pandemic. While every nation has shared in the impact, responses to overcome the struggle have been varied. Elucidating on the state of employment in Brazil, Dr Ian Prates, researcher, Brazilian Centre of Analysis and Planning remarked, “The effect of pandemic on the labour market became a major reason for the impact on the lives of the people. 80% of the drop in per capita household income is the result of the drop in labour income.”
Talking on on Brazilian Labour Market amid the Coronavirus Pandemic: Impact and the Way Forward, organized by the Impact and Policy Research Institute (IMPRI), New Delhi, Working People Charter and Counterview, Prates said, the Brazilian story seen through the Gini Coefficient shows that in the 1980s to 1990s there was a period of great instability. As we entered the 21st century, there has been a significant decline in the Gini Coefficient.
This, he said, hints to the improved labour market policies seen in the trend of formalization and a real increase in the minimum wage. But since 2015, the inequality has been rising and the period marks a reversal in the equalizing trend that Brazil has been on.
According to Prates, in 2017, unemployment rose to 13.7% and the declining informality rate started increasing around 2016. The household income was deteriorating in 2014 but post 2018, there has been a small recovery. The coefficient of household income per capita follows a similar trend of increasing inequality from 2015 and a small decline in 2019. These suggest that the economy was on a recovery path since 2018.
“Nevertheless”, he said, “The poorest 20% of the population continued to be in a miserable state. While, between 2012-2014 the poorest ones increased their income relative to the richer ones, in 2015-2018, there was a significant drop in the income of the poor as compared to the richer”.
It is in such a setting that the pandemic hit Brazil, a moment when the bottom 50% of the population was in a crisis. Though the economic crisis had disappeared in 2018-2019, the lower half did not experience the same.
He explained that this was the result of mercantilization of the social policies. The total budget of the Bolsa Família cash transfer programme declined since 2014 and so did the number of families who were beneficiaries of the programme. About 1.5 million families were excluded from the program. Additionally, the average benefit reduced post the 2014.
At a time of crisis when the poorest were affected disproportionately, policies that hurt the affected section were implemented in the place of a recovery policy. Prates commented, “During the time of economic crisis the government also decided to make the unemployment insurance coverage rules stricter. Less workers benefited and there has been an overall decline in the unemployment insurance coverage rate”.
“During the pandemic, only 49.7% of the working population was in employment. Due to lockdown policies, labourers had to leave the labour market. Although they were not officially considered unemployed, they were economically inactive and were outside the labour force. Ten million workers left the labour force during the pandemic”, Prates asserted.
He continued, “The improvement over years in the size of the labour force reversed and in the second quarter of 2020, Brazil returned to the level it was before 2012. An additional 15.7% of the labour force chose to not seek employment due to the pandemic. The true expanded measure of unemployment stands at 27.7%.”
Two important policy measures to fight the pandemic with regard to the labour market were Emergency Basic Income and Emergency Benefit for Preserving Employment and Income. Through the Emergency Basic Income, the federal government guaranteed income to the informal, unemployed, and poor families. The potential beneficiaries (60 million) received $110 as a cash transfer in the first three months and $55 in the next three months.
Then, about 11 million beneficiaries in the formal labour market were benefited through the complementary benefit paid by the government to avoid lay-off of workers through the Emergency Benefit for Preserving Employment and Income.
The Emergency Basic Income policy was way too far from compensating the negative effect of income lost due to employment issues, said Prates. Nevertheless, if it were not for the policy implemented, the real income of poorest families would not have improved.
The value of the benefit was very generous and as a result those on the bottom 20% of the income distribution line were able to receive more income than they had before the pandemic. Prates cautioned that this was a temporary change, and the reality would be different after the period of benefit is over in January.
Talking about unequal impact of the pandemic on different social groups, Prates said, one could witness labour market has made racial and gender inequality in the labour market. Blacks accounted for about two-thirds of those who lost their job, and more women were unemployed than men. Of the women who did not seek employment during the pandemic, 16.7% did so because of having to devote their time to care activities at home.
Unlike Brazil, estimates of India are based on guesstimates and national agencies are not well equipped to provide data quickly
Furthermore, Prates said, “The pandemic not only increased the existing inequality, but it also created new ones''. One such is the rise in the inequalities in the digital and telework. Only 10% of the people in Brazil worked from home. Analyzing the data across occupation, before the pandemic those who worked from home were mostly non-professionals like tailors, salesperson and bakers.
Post the pandemic, professionals who previously did not work from home as much like lawyers, teachers, engineers, were the ones who worked most from home. This sheds light on the inequality that technology creates in jobs and reiterates that the future would also be shaped by the way digital inequalities are distributed among the Brazilian labour force.
During the discussion, Prof RB Bhagat of the the International Institute for Population Sciences (IIPS), Mumbai, opined that, unlike Brazil, estimates of India are based on guesstimates and the national agencies are not well equipped to provide data quickly.
Another expert, Dr Amrita Pillai agreed, there wasn’t sufficient information to assess the impact on each sector. Pointing towards the micro small and medium enterprises (MSME), one of the worst hit sectors due to the pandemic, she added, the last census was done about 17 years back and we are in a vacuum with regard to information about the sector. However, we have some national and state surveys to give insights on the magnitude of the problem.
Dr Vinoj Abraham of the Center for Development Studies, Kerala, compared relation between unemployment and social security in the context of India and Brazil. Without social securities in place, the unemployment figures look good. For instance, in India the unemployment rate appeared to have reduced after an initial increase during the pandemic.
Policy measures by both countries during the pandemic were divergent, he said, adding, while Brazil made use of its cash transfer programme to impact the demand side, India largely focussed on the supply side in terms of credit facilities for firms.
Experts drew parallel between India and Brazil pointing towards lessons India must learn from Brazil. There is disproportionate impact on different social groups. The way forward must take this element into consideration while redefining the social security system. India also needs to consider the digital divide more seriously because the privilege of working from home is evolving into sharp rise in inequality.
*With Impact and Policy Research Institute (IMPRI), New Delhi. Acknowledgement: Gby Atee research intern with IMPRI New Delhi, pursuing bachelor's in Economics from Ashoka University, Sonepat



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