Pandemic could create an entire ‘lost generation’ in Brazil

. Jun 24, 2020
Pandemic could create an entire 'lost generation' in Brazil Photo: VectorMine/Shutterstock

Economies all over the world are tanking due to Covid-19 and the forced social isolation measures that have come with the pandemic. In Brazil, GDP is set to shrink by between 6 and 10 percent this year, depending on who you listen to. But Latin America’s biggest economy has an additional problem. The coronavirus crisis came as the country was still struggling to recover from the 2014-2016 recession, which — out of Brazil’s extensive rap sheet of economic downturns — was the worst on record. This latest GDP contraction will cap off what has essentially been a lost decade.

In just three months, the pandemic has thrown out almost ten years of growth in GDP per capita, signifying two things: this crisis is more severe than the one that preceded it, and growth in Brazil has already been feeble for years. Considering the International Monetary Fund’s (IMF) estimates for the economy, GDP per capita has backslid to 2010 levels.

</p> <p>An entire generation of Brazilians are being directly damaged by the crisis due to missed opportunities in economic development, largely those who entered the labor force and cannot place themselves in a proper position.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2392386" data-url=""><script src=""></script></div> <h2>What is happening in the labor market?</h2> <p>Since 2015, Brazil&#8217;s unemployment rates have been consistently in the double digits. However, looking closer at the data from the Brazilian Institute of Geography and Statistics, we see that unemployment among youngsters is much higher.&nbsp;</p> <p>Among teenagers between 14 and 17 years old who are looking for a job, more than 40 percent are left wanting. Among those aged 18 to 24, the rate has hovered around 25 percent. And these measurements have yet to include the impact of the coronavirus pandemic, bound to aggravate the situation.&nbsp;</p> <p>“When there is a crisis, young people are among the first to lose their jobs, mainly those in the informal economy, and in sectors such as tourism, transport, non-electronic commerce and other services in which remote work is not an option,” <a href="">said</a> Vinícius Pinheiro, the International Labor Organization&#8217;s director for Latin America, back in March.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2951240" data-url=""><script src=""></script></div> <p>Daniel Duque, an economist specialized in the labor market, explains to <strong>The Brazilian Report</strong> that, during recessions, the most vulnerable populations lose more. In this case, young people with less experience and skills are the ones most exposed. According to Mr. Duque, those youngsters are often employed in unregistered jobs, which have been hit hardest during the pandemic.</p> <p>“In a scenario of greater competition for the number of positions, everyone loses, but the less qualified lose more. It happened in 2015 and 2016, and it is happening again now. The market will remain competitive for a long time,” Mr. Duque says.</p> <p>When forecasting that the labor market will remain competitive for some time, he refers to the fact that Brazil is likely to have many more people looking for a job than available positions — a worrying sign for the economy.&nbsp;</p> <p>Among Latin American countries, Brazil has seen <a href="">the most significant pay cuts</a> due to the recession. And the country is about to have one of the slowest recoveries after the end of the social isolation restrictions, <a href=",retomada-do-brasil-no-pos-covid-deve-ser-mais-lenta-que-em-90-dos-paises,70003334493">according to the IMF</a>.</p> <p>This means that the scenario is unlikely to improve for young people any time soon. And this extended timeframe of crisis could have a permanent impact on those kept out of work. The lost generation that is being built in Brazil in recent years could suffer the consequences for their entire lives.&nbsp;</p> <h2>The pandemic is a career-breaker </h2> <p>Entering the labor market during an economic crisis tends to have a permanent negative effect. Those unlucky generations usually have losses in earnings and employment for the first ten years of their careers on average.</p> <p>The phenomenon, measured in different recessions, has been confirmed again and extrapolated in a <a href="">recent paper</a> published by the National Bureau of Economic Research.</p> <p>Economists have found evidence that the impact can be even worse, affecting “long-term family outcomes, including marriage and cohabitation with children” and even life expectancy.</p> <p>According to Daniel Duque, there are signs pointing toward a similar process taking place in Brazil in the past five years. “For sure, we will have a generation like this. There are already five years of crisis in the labor market; the long-term consequences are very sensitive,” he says, pointing out that Brazil suffered from this phenomenon during the 1980s. “When you enter the labor market with difficulty finding a job, in a crisis or recession, it has consequences for the rest of your life. All <a href="">productive life</a> is affected by this initial condition.”</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2900664" data-url=""><script src=""></script></div> <p>Basically, during a recession, young workers cannot wait for the right position to come along, as they need to take on any employment to guarantee income, potentially interrupting study to get a job. The result could be a large number of workers in lower skilled positions due to incomplete education or lack of opportunities in higher-skilled jobs.</p> <p>“The lack of decent work opportunities discourages and frustrates young people, which can have an impact on governance and affect the social development of the region because in many cases it affects employment trajectories,” said Mr. Pinheiro in an ILO statement.</p> <p>In both cases, those workers are unlikely to reach their own potential. And the impact is not only on the individual, draining the life quality that they may achieve. When it happens on a large scale, it also damages the entire economy.&nbsp;</p> <p>“There are at least five years of crisis; these people entering correspond to at least 5 to 10 percent of the population. They will have productivity below the average level, which impacts the overall productivity of the economy. This population will enter this more mature phase without reaching its potential; it means a relative loss of GDP per capita.”</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2933580" data-url=""><script src=""></script></div> <h2>The new faces of Brazilian underemployment</h2> <p>Informality has been a significant aspect of the Brazilian labor market for decades, and it increases when the economy struggles. In the 1980s and the 1990s, street sellers called <em>camelôs</em> began popping up in large numbers around the country — these were people unable to find work who began selling items in public using improvised stalls.</p> <p>In 2020, before the pandemic, around 40 million Brazilians were in unregistered jobs. And the coronavirus has only pushed youngsters further toward these roles. But the technological logic of the gig economy created new shapes of employment.&nbsp;</p> <p>“Moonlighting has always been the norm; the informal economy is the norm, it is permanent. The novelty is to be subordinate to global platform companies whose logic they do not control at all. Management is the algorithm,” analyzed Rafael Grohmann, professor of Unisinos and creator of a newsletter called Digilabour.&nbsp;</p> <p>In the recent isolation period, delivery workers became a symbol — young laborers earning money by transporting food and other items so that people didn&#8217;t have to leave their homes. Mr. Grohmman says the &#8220;uberization&#8221; phenomenon — in reference to transport app Uber — was boosted by problems in the formal economy, which provided “an enormous reserve force of labor.” He points out that <a href="">enforcing a regulation would have adverse side effects</a> despite considering the unequal relation problematic for the workers. “The problem is more complicated because the ideal is for people not to need the platforms exclusively to try to survive. But it’s either that or nothing.”

José Roberto Castro

José Roberto covers politics and economics and is finishing a Master's Degree in Media and Globalization. Previously, he worked at Nexo Jornal and O Estado de S. Paulo.

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