The decade of falling income inequality and formal employment generation in Brazil

Abstract

This chapter studies the role played by labour market outcomes and education as well as by income policies on the level and distribution of household per capita income in Brazil between 1992 and 2009. It shows a pronounced reduction in overall income inequality since 2001 due to social programmes and especially to labour improvements. The attractive feature of targeted social programmes, such as Bolsa Familia, is that in terms of GDP they cost much less than social security payments. Trends in years of schooling suggest that the decrease in income inequality observed during this decade will continue in the coming years. The 2008-09 international economic crisis has hit all earnings indicators, but by September 2009 they had once again reached pre-crisis levels. Overall, the chapter shows that the improvements in the levels of educational attainment coupled with an increase in official targeted monetary transfers and a stable macroeconomic environment explain much of Brazil's recent achievements in increasing the creation of formal employment and reducing income inequality. If during the past decade the poor were given to the market, what is needed now is to shift the policy agenda towards giving the market to the poor. This new agenda has many detours, but the main new routes described here for pursuing sustainable inclusive growth rest on improving Brazilian labour policies and the quality of the country's educational services.