LABOUR-BRAZIL: One-Fourth of Workforce in Informal Sector

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jun 9 1999 (IPS) - The informal sector of Brazil’s economy employs more than 12 million people in 9.5 million businesses, according to a new study by the Brazilian Institute of Geography and Statistics (IBGE).

The study “Urban Informal Economy”, based on surveys conducted in 1997, indicated that the informal economy accounted for one-fourth of all workers, although businesses in the sector generated just eight percent of Brazil’s gross domestic product (GDP).

In October 1997, the informal sector’s revenues totalled 12.89 billion reals – nearly equivalent in dollars at the time – or an average of 1,405 reales per business.

IBGE president Sergio Besserman said the study was the first of its kind in the world. He added that the surveys covered nearly 50,000 households in 753 Brazilian cities and towns.

According to the criteria used in the study, the informal sector is comprised of the self-employed (86 percent) or those who work for small businesses of up to five employees (14 percent), most of whom are women and children.

Just 13 percent of such businesses were found to be legally registered, primarily as one-person enterprises. The report explained the sector’s scant contribution to GDP by the low average income of informal sector workers: just 240 dollars a month.

Nevertheless, it is no secret that the informal economy represents much more than eight percent of GDP. The tax on financial transactions, better known as the tax on cheques, has made it clear to the government that the non-taxed money passing through Brazilian banks each year is nearly equivalent to the country’s entire GDP.

Mechanisms used by the informal sector have also been adopted by large formal sector businesses. Half of Brazil’s largest 500 companies and 42 percent of its 66 largest banks pay no income taxes, said secretary of federal revenues Everardo Maciel.

The study found that informal sector businesses and workers had little capital, and a mere five percent had access to credit, even though most were in good financial condition and operated year- round. Just nine percent operated on a seasonal basis.

Male workers were found to earn 16 percent more than their female counterparts.

The study did not cover the entire informal sector, but only those activities that constituted some sort of business. Nearly half were involved in retail, repairs, residential services, or entertainment.

Additional IBGE data demonstrated that the sector accounted for 56 percent of the employed workforce and a majority of new jobs. In Brazil, just one-third of the economically active population of 75 million – of a total population of 163 million – are employed by the formal sector and enjoy legal benefits.

Of the roughly five million women employed as domestic workers in Brazil, 82 percent lack work contracts, and thus legal safeguards, said Edinalva Bezerra, head of the Central Workers Union.

Informal employment has also grown as a result of inadequate pensions for retirees, some 13 million of whom received the equivalent of the minimum monthly salary, worth around 78 dollars today. Around 5.2 million pensioners have been forced to return to the labour market.

Although it is illegal to employ retirees or children, eight million are working, nearly all of them in the informal market, said Marcio Pochmann, a labour economics researcher at the University of Campinas, 100 kms from Sao Paulo.

These workers, who Pochmann said “shouldn’t be in the market,” outnumber the six million unemployed looking for work, according to official statistics.