Pandemic crisis may affect Brazilians’ salaries for nine years

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The report of the world Bank “Employment in Crisis: A Path to Best Jobs in Post-covid-19 Latin America” warns that the effects of covid-19 pandemic can affect, for up to nine years, the salary of the country’s average workers. ebc Pandemic crisis may affect Brazilians' salaries for nine yearsebc Pandemic crisis may affect Brazilians' salaries for nine years

According to the document, the crisis generated by the pandemic will affect the labor market in Brazil and Latin America for a long period, including a negative effect on jobs and wages.

“In Brazil and Ecuador, although workers with higher education do not suffer the impacts of a wage crisis, and only suffer short-term impacts in terms of employment, the effects on employment and wages of the average worker still last nine. years after the onset of the crisis,” says the report.

The report points out that this situation will leave scars, such as the increase in unemployment, informality and also a reduction in wages.

“In the LAC region [América Latina e Caribe], the scars are more intense for less qualified workers, without higher education”, says the document.

The document was released in June, and this Tuesday morning (20) a webinar (internet seminar) with the authors deepened the diagnosis. The document also recommends changes in unemployment insurance and greater attention to policies for the inclusion of informal workers in the labor market, especially in the post-pandemic scenario.

“The economic crisis generated by the covid-19 pandemic highlighted the importance of renewing social protection instruments in order to protect income against the shocks channeled through the labor market, in Brazil and in the world”, states the document.

The report points out that unemployment insurance ends up playing a limited role in social protection for workers, “because those who are most affected by economic crises, such as the one caused by the pandemic, such as informal and formal self-employed workers, are ineligible to receive the benefit”.

Benefits

In 2019, in Brazil, only 17.7% of the monthly average of unemployed workers (12.6 million) received unemployment benefits, being able to rely only on Bolsa Família for minimum income protection, when eligible.

The report also shows that another point to be considered is that the insurance payment period in the country, which varies from three to five months, is shorter than in other compared countries. In addition, access to the benefit is a little more difficult in Brazil than in other countries. Currently, to be entitled to unemployment insurance for the first time, it is necessary to have worked with a formal contract in 12 of the last 18 months prior to dismissal.

“The high initial payment amount of unemployment programs, together with their short duration, result in incentives to overuse unemployment benefits, but with suboptimal support, which does not benefit those prone to longer periods of unemployment.” says the report.

The report highlights that there is also a lack of supportive policies to help workers who are seeking employment independently.

“To meet these challenges, regulatory reforms of current unemployment benefits and economies’ reinvestments will be needed to develop modern support systems that reduce moral hazard, but also address the less protected half of the labor market, for whom almost no spending is dedicated. ”, defends the report.

One of the proposed recommendations is that, to improve unemployment insurance coverage, the grace period for eligibility for the first claim be reduced and the requirement for subsequent claims increased. Another possibility is that a lower contribution weight could be attributed to uninterrupted contribution periods.

The document also suggests the adoption of unemployment insurance programs for formal self-employed workers. Some of these programs already exist in Organization for Cooperation and Development (OECD) countries. These programs tend to have stricter eligibility criteria than for formal salaried workers, including proof of bankruptcy or involuntary closure of the company.