/IPS DEVELOPMENT BULLETIN/ BRAZIL: Problems in Ending State- sponsored Employment

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jun 14 1997 (IPS) - The Government has found that the privatization of Brazil’s state-held assets was relatively easy compared to the task of reducing state employment rolls, especially since it has yet to find a way to create replacement jobs.

The Brazilian government employs six million people, about 25 per cent of the nation’s formal wor force and leading economists, such as Marcio Pochmann, of Campinas University, not that extensive state employment has buffered the economic upheaval of recen years.

According to Pochman, who heads the university’s Center for Union Studies, Economy and Employment, Brazil’s formal workplace – which once provided employment for 26 million people – lost 2.1 million jobs during the recession of 1989 – 1992.

Pochman notes that although economic growth of 18.7 per cent was registered between 1993 and 1996, this expansion did not result in the creation of new jobs. Predictions of lower growth for 1997-98 will result in further employment erosion, especially if the State follows through on its intention to dismiss public employees.

Reducing state employees is one of the major goals specified in a constitutional amendment passed last year by Brazil’s National Congress – over the protests of opposition political forces as well as covert resistance by members of the ruling party itself.

The amendment, presented by Brazil’s Ministry of Administration, provides for the dismissal of inefficient or inept public officials. It also ends “featherbedding” – allowing more employees to be retained on the payroll than are necessary.

President Fernando Henrique Cardoso, and minister Luiz Carlos Bresser Pereira say that the cutbacks are necessary because of the catastrophic financial condition of many local governments.

For example, in Alagoas, a small state in Brazil’s northeast – Brazil’s poorest region – government officials have not received their salaries for eight years. Protests have become violent. There has been a sudden increase in suicides attributable to the bankrupt government’s inability to pay 100 million dollars in overdue bank debt.

Most of Brazil’s 27 states spend more than 60 per cent of their income on state employees’ salaries, the cut-off level now specified by law. In some cases, government salaries exceed 100 per cent of state income!

In spite of the difficulties, economists agree that Brazil must find a way to reduce its deficits in order to solidify recent gains in monetary stability – it will not be easy to implement administrative reform.

According to Pochman, the government is counting on help from parties like the Liberal Front, an organization which is particularly strong in poor areas like the northeast where the disappearance of state jobs would result in social collapse and unpredictable political consequences.

Two other Campinas University economists, Jorge Mattoso and Paulo Baltar, have underscored the importance of state employment in the overall job picture. From 1989 to 1996, industries in process of structural transformation lost 15.1 per cent of their job base, while financial sector jobs declined by 31.1 per cent. Construction also dipped by 16.9 per cent.

The opening up of Brazilian markets, which has resulkted in a doubling of imports, also has forced radical restructuring of the nation’s industry. Against the backdrop of economic austerity that has produced monetary stabilization since 1994, the steep rise in lay-offs is also impeding Brazilian youth from getting a foot-hold in the formal sector of the national economy.

The social crisis unleashed by unemployment upheaval would have been worse if educational employment had not risen by 25.7 per cent, while health employment expanded by 15.1 per cent, the economists say.

Baltar and Mattoso point out that education and health are areas totally dependent onstate investment. Furthermore, the ability of the informal economic sector to absorb laid-off workers moderated additional social deterioration.

Since 1991, privatization of Brazil’s extensive petrochemical, mining and steel interests have eliminated a large pool of government jobs. Along with the loss of tens of thousands of government jobs, these state-held assets of yesteryear no longer contriute directly to the nation’s income.

When Brazilian steel was state-owned, it employed 25,000 thousand people; now that figure has been reduced by more than half.

With privatization essentially complete, Brazil is turning its attention to the reduction of administrative jobs within the government sector itself, especially services that have been provided by state and municipal governments. The economists from Campinas University warn that dangerous social implications will accompany these lay-offs.

Such consequences will be more serious in Brazil than in other countries due to Brazil’s high labor turnover, another characteristic of the national economy.

Each year, 8-to-9 million Brazilian workers re-enter the labor market due to rotating lay-offs. It is more likely that these individuals will now remain unemployed or resort to the informal work sector. Pochman points out that two thirds of Brazil’s 24 million formal workers have worked at their current post for fewer than 3 years.

With few exceptions, public employment has been Brazil’s only source of employment stability. This stability has attracted many workers to the public sector despite the low salaries.