Bolsa Família reduces job search and increases salary, says study

Bolsa Família discouraged the search for jobs in the lowest income groups of the population and caused an increase in wages paid to low-skilled workers. This increase, however, appears not to have been enough to convince some of the program’s beneficiaries to enter the job market. The findings come from a study by the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV-Ibre).

Analyzing the pre-pandemic salary structure in different areas, the study quantified the impacts of the program in light of recent employment dynamics, using a regression methodology.

The survey concluded that for every ten percentage points increase in the proportion of income transfers over the total income, there is a reduction of 1.1 percentage points in the participation rate of workers in the labor market.

The impact was greater in the basic services sector, where the labor supply is less qualified, and among people who live in regions where wages are lower.

“People have started to compare the difficulties of obtaining work and, depending on the cost, they have come to the conclusion that it is not worth looking for a job”, explains researcher Daniel Duque, author of the study.

Lower-skilled wages increased with aid and pandemic

Based on data from the Continuous National Household Sample Survey (Pnad Contínua) from IBGE, the study found a reduction in the supply of labor for basic services, which led to an increase in income in this type of work.

“With the end of the pandemic and the increase in demand for low-skilled work, employers needed to increase wages to attract workers”, highlights Duque.

Even with the salary increase, many workers did not see an advantage in entering the job market.

Assessing the probabilities of finding a job and the costs of dismissal, people need more incentive to look for a job, believes Duque. “The effect on the structure of worker participation should remain stable in the medium term,” she says.

Liberal roots program completed two decades

Bolsa Família completed 20 years in October 2023, benefiting 21.5 million families with an average value of R$687. Created by provisional measure in the first term of Luiz Inácio Lula da Silva (PT), the benefit condensed three social programs created during the Fernando Henrique Cardoso government (PSDB): Bolsa Escola, Bolsa Alimentação and Auxílio Gás. It was approved by Congress in 2004, in the form of law no. 10,836.

Tucanos and PT members have always fought over the authorship of the largest income transfer program in the history of Brazil. But its foundations have liberal roots, based on the studies of economist Milton Friedman, from the Chicago School, the same theoretical reference as former minister Paulo Guedes.

For this reason, the program was criticized and suffered strong resistance at the time of its creation by a large part of the Workers’ Party, who preferred public policies involving transfers intermediated by the State, not directly into the worker’s account.

Benefit increased during the pandemic

From 2020, during the Covid-19 pandemic, the government of Jair Bolsonaro (PL) temporarily replaced Bolsa Família with Emergency Aid, worth R$600 per month, which was paid to more than 60 million people in a couple months.

Then, in 2021, came Auxílio Brasil, successor to Bolsa Família, whose benefit started at R$400 per month and in 2022 rose to R$600.

Last year, with Lula taking office, law no. 14,601 reestablished the program’s previous name and added benefits for families with children, keeping the base value at the same level.

There were changes to encourage the search for a job, such as, for example, eliminating the immediate cut in benefits for those who find work. The newly hired person remains registered in the program, receiving a lower amount. But there is still no study to know the impacts of this new format.

Market impact is not necessarily bad

The impact on the job market is seen as a minor side effect of the program. Samuel Pessôa, an economist at Ibre, says that such income transfer effects are perceived throughout the world, and among them is the discouragement of employment.

An emblematic example is the United States, where benefits due to the pandemic made it difficult to replace labor at different salary levels.

Although they can be minimized, these consequences, in Pessôa’s assessment, are not necessarily bad, as one might assume. According to him, it is necessary to consider the opportunity cost of these people who are leaving home to look for work.

“It is known that these people who are being removed from the market are already part of an unproductive group. But it is possible that they perform domestic work, which is very important for society. For example, let’s suppose that the policy is encouraging young mothers to staying at home more taking care of the children. This is not bad from a social point of view”, he believes.

Studies are still needed to measure the benefits and carry out a normative analysis of the program, considers the economist. “Although the reduction in supply is minor, the problem can be compensated with gains at the other end”, he says.

However, given the current cost of the program, Pessôa argues that its design should be improved. For many years, Bolsa Família consumed around 0.45% of GDP. Last year, however, it corresponded to 1.7% of GDP.

“It almost quadrupled its cost. A project of this magnitude has the potential to increase its effectiveness and correct distortions”, he states.

Program may have more focus and differentiation of benefits

Vinícius Botelho, former secretary of the Ministry of Social Development, recalls that Bolsa Família aims to protect people in vulnerable situations: “In its original format, the amounts were much smaller and more focused on very low-income families.”

In 2019, families participating in Bolsa Família received, on average, 20% of the minimum wage. Today, they receive almost 50% of the national minimum wage, R$1,412.

Botelho advocates greater focus on benefits, with different values ​​for each family, depending on their degree of vulnerability. “Redistributing benefit amounts is a complex issue, but we can improve,” he says.

The differentiation of benefits, according to the economist, could have an impact on participation in the job market. Even so, Botelho emphasizes that Bolsa Família is one of the most successful income transfer programs in the world and that it is necessary to be careful with drastic changes. “It is necessary to recognize that we, in international comparison, are in a relatively good condition”, he says.

A study carried out by FGV, the Institute of Applied Economic Research (Ipea) and the World Bank, in partnership with the Ministry of Development and Social Assistance, Family and Combating Hunger, shows that 3 million families benefiting from the Bolsa Família program left poverty between January and September 2023.

According to the work, in January 2023 there were 4.5 million poor families among the 21.7 million families enrolled in the program. In September, the number of poor families had dropped to 1.5 million, among 21.2 million beneficiaries. The study used the value of R$218 per person per month as the poverty line.

In Samuel Pessôa’s assessment, however, poverty reduction does not depend solely on income transfers, but on a set of measures and public policies, including improving the productivity and qualifications of workers. “This needs to be done by improving secondary education in the country”, he points out.