Economic downturn pushes Brazilians into informal economy

BRASILIA, March 19 (Reuters) - Mounting job losses are pushing more and more Brazilians into the informal economy as self-employed workers, leaving them vulnerable to what could be the country’s worst recession in 25 years.

Tens of thousands of people who lost full-time jobs are now freelancing as bricklayers, truck drivers and maids to make ends meet as they look for increasingly scarce jobs. In the process, they often lose access to welfare benefits and face greater credit restrictions.

Self-employed workers, most of them earning no more than about $450 a month, now represent 19.5 percent of employees in Brazil’s main cities - the highest level in eight years and up from 17.5 percent in 2012, according to official data for January.

The quest of people like José Lúcio da Silva, 55, illustrates how Brazil’s economy and labor market have over the last two years lost the vigor of the previous decade.

“The boss said things were slowing and then he fired us,” said Silva, who had a formal job as a sealant installer at building sites in Brasilia for nearly 30 years.

He is only five years away from retirement, provided he finds another full-time “registered” job with benefits.

“You can’t find a freelance job every day. You can take a few of them here and there, but sometimes these jobs take a while to appear,” he added.

The loss of secure jobs is a blow to an already weak economy and to President Dilma Rousseff, who won re-election in October thanks in large part to low unemployment.

Since then, her popularity has plunged with 62 percent of people in a new poll saying her government was “bad” or “terrible”.

Although recent data does not offer a breakdown by income or education, surveys show the typical self-employed worker in Brazil is a middle-aged, low-paid male household head.

More than half work at farms, building sites and in commerce, either hawking goods on the streets or as door-to-door salespeople.

They are not counted as unemployed, helping keep the official jobless rate at low levels, but only a quarter make regular contributions to the pension system.

They also pay less in taxes, complicating government efforts to plug a growing budget deficit and keep its investment-grade credit rating.

To be sure, Brazil’s job market remains in much better shape than in the early 2000s, when the unemployment rate topped 13 percent and the monthly minimum wage was a third of what it is now - 788 reais, or about $242.

Several years of rapid growth and anti-poverty policies then benefited millions of working-class Brazilians and just a few years ago, the job market was so tight it became difficult to find day laborers for odd jobs.

That has now changed as rising self-employment means it is easier to find house cleaners, painters and others.

Guilherme Afif, Brazil’s minister for small business, says authorities are working hard to ensure all independent workers are properly registered.

“The job market has become too unstable, so people are looking into opportunities to be self-employed,” said Afif, who is working with Finance Minister Joaquim Levy on a bill allowing more individuals and small companies to be eligible for tax benefits under the so-called Simples program, through which they contribute to Brazil’s welfare system.

Although self-employment is on the rise, the number of independent workers applying for formal registration has moderated in recent months, according to official data.

Meanwhile, the number of workers with full-time, registered jobs fell 1.9 percent in January at the fastest year-on-year pace in 11 years, another sign that the ranks of the informal economy are growing after a steady decline over the past decade.


High taxes and generous social benefits make Brazil one of the most expensive places in the world for companies to hire full-time staffers.

Employers have to pay out $17,000 in taxes and social security costs for every $30,000 in annual salary, more than double the global average, according to a 2013 study by London-based accountancy firm UHY. In Mexico, the extra costs amounted to less than $7,000 that year.

Companies across the country have already shed more than 600,000 payroll jobs since October with net job losses in four of the past five months. A new poll this week showed that 69 percent of Brazilians believe unemployment will worsen even further this year.

Brazil’s economy is expected to shrink around 0.8 percent in 2015, the worst since 1990, according to private estimates.

The self-employment rate has been growing since late 2012. Before that, the only period it advanced briefly was in early 2009, in the aftermath of the global financial crisis.

“I would be surprised if we saw this trend reversing in 2015 and 2016 as quickly as it did in 2009. Back then, despite the international crisis, the domestic market remained strong. Now the outlook is not as good,” said Carlos Henrique Corseuil, a job market researcher at Institute for Applied Economic Research, a government think tank.

Mário Ramos, 47, says he can’t wait long. After losing his job last year at a private security firm, his unemployment insurance expired in January. He is now considering selling a small plot of land outside Brasilia to raise money to buy a truck and make deliveries.

“I don’t have a penny in my pocket,” he said.

$1 = 3.2558 reais Editing by Todd Benson and Kieran Murray