Economy

Brazilian Secretary promises one-digit unemployment rate for 2020

Program that exempts and/or reduces tax obligations for companies that hire 18- to 29-year-olds is among the government's bets for this

A Brazilian work card, a document that gathers all the labor information of Brazilian workers and which, in the coming years, will be digital.
A Brazilian work card, a document that gathers all the labor information of Brazilian workers and which, in the coming years, will be digital.
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  • The unemployment rate stood at 11.8% in the quarter ending in September, just 0.1 percentage point below the same period last year, according to the Brazilian Institute of Geography and Statistics (IBGE);
  • Rogério Marinho said that this rate could fall to something like 9.5% in 2020, a similar rate to that achieved in 2015, the second year of the crisis that recently struck the country.

In an interview with the Brazilian newspaper Valor Econômico, special secretary of Social Security and Employment, Rogério Marinho, linked to the Ministry of Economy, said that Brazil could see the unemployment rate fall to a digit in 2020.

The unemployment rate stood at 11.8% in the quarter ending in September, just 0.1 percentage point below the same period last year, according to the Brazilian Institute of Geography and Statistics (IBGE). There are 12.5 million unoccupied Brazilians. And the slight drop in the indicator is due to a somewhat perverse movement: record informality.

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Marinho said that this rate could fall to something like 9.5% in 2020, a similar rate to that achieved in 2015, the second year of the crisis that recently struck the country. From one year to the next, 2.8 million people joined the unemployment club in the country, an increase of 2.7 percentage points.

To reduce the unemployment rate, Marinho bets not only on the growth of the Brazilian economy, but on projects such as the Green and Yellow program (‘Carteira Verde e Amarela’, in Portuguese), a regime implemented by an Executive Provisional Measure in November this year and which still needs to be approved in Congress in 2020.

In Brazil, every Provisional Measure has the force of law as soon as it is published, but must be subsequently approved by the National Congress. If this does not happen within 120 days from the date of publication, the measure will expire.

In the program, Bolsonaro’s team proposes the reduction of payroll taxes, ie the reduction in taxes and contributions (and, at the end of the day, also of labor rights) paid by employers who choose to hire 18-to-29-year-olds. The goal is to make the unemployment rate in this age group, which is the highest in the country, between 24% to 25%, fall. To enter the program, young workers must be looking for their first job.

Under the project, companies will be able to hire up to 20% of their staff through this scheme, as from January 1st, 2020. Only those seeking the first job can enter the Green and Yellow program. For these workers, the salary will have a limit equivalent to 1.5 minimum wage (BRL 1,497).

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Among the differences that benefit employers but in practice give fewer rights to young workers in the Green and Yellow program are the exemption from the employer contribution to the public pension program (usually of 20% on wages), the reduction in the contribution to the FGTS from 8% to 2%, and a smaller fine on dismissal, which goes from 40% of the FGTS to 20%. FGTS is the Portuguese acronym for “Guarantee Fund for Length of Service,” an obligatory social insurance fund which saves 8% of the worker’s earnings monthly to support them in case of specific eventualities, such as long-term sickness or the purchase of a new home.

The chances of the MP establishing the program passing in Congress, however, are not many. Senators have already raised the possibility of withdrawing some of the points proposed because they may be unconstitutional.

The program has a date to end. The limit for hiring in this modality is December 31, 2022. Since the contracts may have a term of two years, the program effectively terminates in 2024.