Brazil’s unemployment rate has gone consistently down since peaking in Q1 2021. Despite a slight uptick in Q1 2023 (mainly due to seasonal factors), the rate of workers out of a job decreased by 2.3 points year-on-year in the three months through March. Additionally, entry-level wages have spiked from pre-pandemic levels by as much as 22 percent, depending on the sector.
At first glance, these figures seem to contradict another important trend in the Brazilian economy: families are increasingly struggling to pay their dues. Data from the national trade and tourism confederation (CNC) estimates that over 78 percent of households are in debt and 29 percent are in default.
Credit protection agency Serasa Experian had almost 71 million Brazilians on its bad credit list by the end of Q1 2023.
If more people are employed — and if formal jobs are paying more — why are Brazilians struggling so much with debt? The answer requires a deeper look into the numbers.
Jefferson Mariano, a researcher at the Brazilian Institute of Geography and Statistics, draws attention to an often overlooked figure: labor underutilization. This category is made up of individuals aged 14 and over who work less than 40 hours per week but are willing to work more or search for other jobs to fill their time.
In Q1 2023, over 21 million workers were underutilized — almost a fifth of the entire labor force. The current compound rate of underutilization, which indicates a percentage of the country’s workforce ineffectively employed, is at 18.9 percent — below the 23.2 percent recorded in Q1 2022, but stagnating.
Mr. Mariano adds that informality also explains the apparent paradox between low unemployment and high indebtedness levels among Brazilians.
There are over 38.2 million people who work informally in the country — mostly self-employed workers without their own legal entity — and individuals that work for private organizations which do not sign their checks (which includes gig economy workers). Meanwhile, 36.7 million people...
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