Study shows how Bolsa Família masks unemployment

Since last year, researchers from the Brazilian Institute of Economics at the Getulio Vargas Foundation (FGV Ibre) have been intrigued by a variation, a kind of zigzag, observed in the data on employment in Brazil. This is because, until February 2020, the participation rate of people in the labor market, that is, employed or looking for a job, was 63.4%. With the pandemic, it collapsed to 56.7%. In September, it recovered, reaching 62.7%. But from then on, it dropped again, reaching 61.4% in March. As the unemployment rate has declined, the obvious conclusion is that there are fewer people looking for a job, despite the prospects of finding a job apparently being better today.

What is the explanation for this phenomenon? “Everything indicates that one person responsible is Bolsa Família, which was called Auxílio Brasil”, says economist Fernando de Holanda Barbosa Filho, coordinator of the study, What are the consequences of this change – such as masking unemployment – ​​is what he explains, in an interview with Metrópoles.

What was the starting point of the study?

We observe changes in the participation rate of people in the labor market in Brazil. It had been recovering after the pandemic and, as of the last quarter of last year, there was a reversal of this trend. This drew attention because the change happened when there was an increase in Bolsa Família, then called Auxílio Brasil. At the time, the benefit increased to R$ 600.00.

Hence the relationship between the drop in the labor market participation rate and the income transfer program?

Yes. Bolsa Família became the natural suspect to explain this change in the number of people who were employed or looking for a job in Brazil. It is important to emphasize that the literature on Bolsa Família had never clearly confirmed this relationship between the program and people leaving the labor market, also because the value of the benefit was low.

Was the change in value the key to the change?

Exactly. And there was a significant increase. Today, for example, a woman with two young children receives R$900.00 reais. It is BRL 600.00 from Bolsa Família, plus BRL 150.00 per child. That’s almost 70% of the minimum wage.

What other data point to the relationship between the program and the drop in the participation rate in the labor market?

We also found that the social groups that most contributed to the drop in the labor market participation rate were people with lower incomes and lower levels of education. Precisely those who participate in Bolsa Família.

With the drop in this rate, how many people stopped working?

We estimate that number to be between 3 million and 4 million people.

In addition to the increase in benefits, what else could have contributed to the exit of these people from the labor market?

The dismay at not getting a job for a long time, for example.

After all, what, technically, is this participation fee?

It shows the percentage of people of working age who are actually working or looking for a job. Someone who leaves the market, for example, because he decided to stay at home to take care of the children or because he gives up looking for a job, is excluded from this rate. And the reduction of the indicator brings additional problems, in addition to the smaller presence of the population in the workforce.

What additional issues?

People who stop looking for a job are considered out of the labor market. This causes the unemployment rate to decrease in the country, although the number of people actually working has not increased. That’s what’s happening now.

In other words, does unemployment fall without the economy necessarily booming?

Yes. Part of the low unemployment rate that we have at the moment is precisely due to the fact that there are people who did not remain in the job market, either because of Bolsa Família or because they gave up looking for a job. Today, if all the people who left the market, that is, who stopped looking for a job, did it again, the unemployment rate in Brazil would go from around 8% to something between 11% and 12%. It would be a big change.

*With information from Metrópoles

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