Work: participation rate drops with aging – 10/21/2023 – Market

The aging of the Brazilian population explains a relevant part of the drop in the labor market participation rate after the pandemic, indicates a study by LCA Consultores.

The participation rate measures the proportion of people of working age (14 years or older) who are included in the labor force as employed with some type of vacancy or unemployed (looking for opportunities).

In the second quarter of 2023, the indicator was 61.6% in Brazil, according to the Pnad Contínua (Continuous National Household Sample Survey), released by IBGE (Brazilian Institute of Geography and Statistics).

As a result, it remained 2 percentage points below the fourth quarter of 2019, before the pandemic. At the time, the rate was 63.6%.

Of the 2 percentage points difference, the 0.7 percentage point share is attributed by the LCA to the effects of the demographic transition in the country.

In this sense, the consultancy highlights that the share of people aged 60 or over rose from 17.4% to 19.1% of the population of working age (14 years or over), comparing the fourth quarter of 2019 with the second quarter of 2023. In absolute terms, this layer increased from 29.4 million to 33.4 million in the same period.

“The fact that the population aged 60 or over has gained importance in the total population of working age would already imply a drop of 0.7 percentage points in the total participation rate (the average of the age groups), even though the rate participation of the various groups remained the same”, points out the LCA.

Traditionally, older people are among the groups with the lowest insertion in the market. The participation rate of Brazilians aged 60 or over fell from 24% in the fourth quarter of 2019 to 23.3% in the second quarter of 2023.

According to the LCA estimate, the remaining portion of the 2 percentage point drop in the participation rate in Brazil (1.3 percentage points) came from various factors associated with the supply of work among different age groups.

This list may include the impact of Covid-19 on the anticipation of retirement applications, the improvement in the economic situation of families in recent quarters (which would force fewer young people to look for work) and the expansion of Bolsa Família.

“The impact of falls in participation rates for each age group is preponderant, representing 1.3 percentage points of the difference in the total participation rate in the period analyzed, but the impact on the change in age composition is also relevant (0.7 percentage points ), and should be considered in the analysis of the current situation of the labor market, as well as in the projections for its main variables”, says the LCA.

If more unemployed Brazilians participated in the market by searching for vacancies at this time, the country’s unemployment rate would be at a higher level, points out Francisco Pessoa Faria, senior economist at the consultancy responsible for the study.

Unemployment was 8% in the second quarter of 2023. Considering the PNAD series of moving quarters, which does not provide breakdowns by age, the indicator was 7.8% in the three months ended in August.

“Unemployment is falling, the job market is doing well, but there are fewer people looking for jobs today. If participation were the same as before the pandemic, the unemployment rate would be higher,” says Faria.

In his view, increasing participation requires the development of policies to help groups that traditionally have more difficulties in entering the market. Among them are discouraged workers, who have given up looking for work, and women.

The population data analyzed by LCA refer to estimates contained in Pnad and which may change based on numbers from the 2022 Demographic Census, also produced by IBGE. The institute will release census statistics on the age and sex of Brazilians on October 27th.