Pandemic causes decrease in income and increase in labor inequality

Emergency measures taken by government prevented results from being even worse
Public Policy
14 October 2020
Pandemic causes decrease in income and increase in labor inequality

A study by FGV Social indicates that Brazilian people’s employment income dropped by 20.1% on average in the first full quarter of the pandemic, while employment income inequality, as measured by the Gini index, rose 2.82%. The two variables’ levels and variations are all-time negative results since records began in 2012.

The employment income of the poorest half of the population fell 27.9%, compared to 17.5% for the 10% wealthiest Brazilians. The hardest-hit groups were indigenous people (-28.6%), illiterate people (-27.4%) and people aged between 20 and 24 (-26%). All surveyed locations experienced reductions in income.

Comparing individual employment income, including formal and informal economy workers, as well as unemployed people, and looking at household income from all sources, we can see a paradox. When we include welfare payments in household income, we see that poverty and inequality haven’t just fallen a lot, but reached all-time lows. Pernambuco and its capital, Recife, are the locations most adversely affected in the labor market, but Pernambuco has experienced the second biggest decline in poverty out of all Brazilian states.

According to Marcelo Neri, FGV Social’s director and the author of this study, “These contrasts suggest that when the ‘anesthesia effect’ of emergency aid is over, the social situation may become much worse if adverse labor results are not reversed. We need to record not just the pains, but also the vital signs of the labor market, as this is the main component that will determine the level of social well-being after the pandemic, when emergency public spending returns to sustainable levels. This monitoring will be crucial so we can measure not only income transfers, but also labor policies throughout this crisis.”

Read two full studies on this subject here:

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