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Inequality in Brazil

Brazil continues to suffer from widespread poverty. Of the country's 200 million people [as of 2013], at least 40 million [according to the World Bank] and possibly as many as 100 million live below the poverty line, depending on where that line is drawn. This despite two decades of keeping inflation down, steady economic growth and a stabilize currency. Brazil has a history of economic inequality that has traditionally ranked the country among the most unequal in the world. Brazil continues to have above average economic inequality and will face segments of poverty for years to come. Higher than average income inequality will remain for the foreseeable future.

In January 2012 the minimum wage increased to 622 reais ($304) per month. According to 2010 government data, the most recent information available, approximately 50 percent of the population had per capita incomes below the minimum wage. IGBE data also revealed that 8.5 percent of inhabitants (16.2 million) were considered “extremely poor” or earning less than 70 reais ($34) per month. The 1990 household survey revealed that 30.8 percent (some 19.9 million persons) of the employed population earned one minimum wage or less. Even allowing for underestimations of earnings by the household surveys, the numbers living with very low wages in Brazil are indeed large. The unemployment for youth ages 15-24, who account for one-sixth of the population, was 17.8% as of 2009, comparable to that in Turkey.

Brazil's middle class, as measured in income terms, has grown rapidly in recent years and now represents approximately half of the population according to government figures and independent analysis. Coinciding with this rise in incomes, more Brazilians are gaining access to property ownership (home, car, and computer), full time employment positions with benefits, and educational opportunities.

Brazilian economists describe the equivalent to the American lower middle class as the “C” class. In 2005, it represented only 21 percent of the population, but by 2013 it has jumped to 54 percent. The rise of the C class had profound effects on Brazilian society, from politics to consumer products. But since 2012, the lower middle class and lower classes (C, D and E) no longer had extra income to purchase additional goods, but faced average monthly disposable income dipping under zero.

The Brazilian middle class has expanded 29 percent over the seven years since 2002, to represent 50 percent of the overall population, while the poor and impoverished segments fell to 40 percent of the population. In addition, the rich segment grew from eight percent to ten percent. The movement between the different classes has been especially notable. During the five years between 2003 and 2008, the number of impoverished persons decreased by almost 19.5 million, and people in the poor segment decreased by 1.5 million.

Brazil was able to reach its Millennium Development Goal of halving the number of impoverished ten years ahead of the 2015 deadline. By contrast, the number of persons in the middle class grew by almost 26 million, while the rich segment increased by over six million. Since 2002, the probability of climbing from the middle class to the upper class has never been higher, and the probability of falling to a lower class has never been less.

While rising incomes can at times exacerbate income inequality, income distribution has actually improved in Brazil over the last decade. The Gini index or coefficient is a measure of inequality in a country's wealth distribution. It contrasts actual income and property distribution with perfectly equal distribution. The value of the coefficient, or index, can vary from 0 (complete equality) to 1 (complete inequality). The Gini coefficient for the country as a whole increased from 0.50 in 1960 to 0.56 in 1970, 0.59 in 1980, and 0.63 in 1990, the highest in the world.

Since posting a record high level of income inequality at the end of 2001 as measured by the Gini coefficient index, inequality dropped eight percent to 0.55 in the seven years sincw 2002. The average income of impoverished Brazilians increased by 72 percent during this time, while the increase of the rich segment was only 11 percent. The primary reasons for the reduction in income inequality are the overall increase in workers' income, social programs such as Bolsa Familia, and the increase in the minimum wage. The Gini index continued to improve, reaching 51.9 by the year 2012. But this was still 17th from the bottom out of 136 countries, with top ranked [ie, #136] Sweden reporting a Gini index of 23.0 [the United States was #41, with a Gini index of 45.0, on par with the Philippines].

There are two constants regarding earnings in Brazil since World War II: the very low wages of unskilled labor and the wide disparity in the wage scale. An indication of the low wage levels for unskilled labor is the minimum wage. In 1961 the monthly minimum wage averaged only US$113.30 (in 1986 dollars). The index of the average real minimum wage exhibits a clear downward trend. The 1991 real average monthly minimum wage was less than one-third of the already low 1961 minimum wage. It is interesting to observe the impact of recession and particularly inflation on the real minimum wage. The two periods of swift decline in the real minimum wage were characterized by recession and by a rapidly accelerating inflation. This was true in the 1961-65 period and especially so between 1982 and 1991. The prosperity and comparatively low inflation of the 1970s (notably during the first half of the decade) did not bring about a stronger recovery of the real value of the minimum wage only because of the repressive wage policy adopted by the military regime.

The dramatic reduction in poverty slowed over time and a core portion of this segment was unable to advance. The slowdown came primarily as a result of the lack of quality education opportunities for the poorest Brazilians. Attempts to raise the qualification standards of teachers, increase wages paid to teachers, and install computers in schools, have yet to result in a higher quality school system.

According to the Institute for Applied Economic Research, the percent of workers in the informal sector was approximately 35.6 percent in 2011, the most recent year for which data were available. Most unregistered workers were in the agricultural sector. Not all foreign migrant workers, informal sector workers, and unregistered workers were subject to hazardous working conditions, but these groups were at a higher risk of being subjected to such conditions or other exploitative conditions. - See more at: http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm#wrapper Organized labor, which has substantially larger average earnings, has obtained considerable gains since the late 1970s. These gains are reflected in the index of average real wage in São Paulo, the core of the country's modern industrial sector. The index evolved from a level of 100 in 1978 to 125.1 in 1982, declined to 112.9 in 1983, but jumped to 175.9 in prosperous 1986. After this it decreased somewhat, reaching 165.9 in 1990 and 158.4 in 1992.

Luxury items that were previously consumed solely by the wealthy are now increasingly being purchased by lower income Brazilians. For example, research by Brazil's national car association, ANFAVEA, showed the middle class is purchasing new cars at a much faster rate than the rich. In 2008, the middle class purchased 1.17 million new cars, an increase of over 700 percent from the 146,000 new cars purchased in 1990. By contrast, the rich segment bought 1.02 million new cars in 2008, representing an increase of only 164 percent during the same time period. Similarly, internet usage is increasing and broadening rapidly. A 2009 survey performed by Ibope Nielsen Online found Brazilians across socio-economic lines had more access to the internet and spent the most time on the internet per month of the ten nations surveyed, including the United States.

The apparent contradiction between negative and positive socioeconomic trends can be explained in part by the greater visibility of poverty, which has grown most in urban areas, while the benefits are more diffuse and less visible. However, the problems are not only because of perceptions or misreadings. The basic explanation for the contradiction is the coexistence of simultaneous processes of inclusion and exclusion. Inclusion resulted from extension to the lower middle class, by means of the labor and consumer markets and public services, of some of the benefits of development previously restricted to the upper and upper-middle strata. They have gained from participation in the labor market or markets for their goods and services and from government-provided services, such as education, health, and sanitation. In the simplest terms, the quantity of coverage has increased, although serious problems of quality remain, and the lowest strata continue to be excluded from integral participation in markets and full access to government services. While Brazil continues to suffer from a higher than average degree of economic inequality, the divide between rich and poor has decreased in recent years and the middle class has grown in relative terms. Brazil's rapid recovery from the global economic crisis further spurred the country's gradual transition to a broad-based middle class nation. This significant reduction in poverty and rise in middle and upper classes was one of the most significant factors in President Lula's continuing sky-high popularity and a factor in bolstering support for the winning Workers Party (PT) presidential candidate in 2010, Dilma Rousseff.

Nevertheless, a "two Brazils" phenomenon -- first world development levels in large swaths of Southern Brazil and major urban centers contrasted by significant pockets of third world poverty in northeast Brazil and the urban peripheries--is likely to be visible for the foreseeable future. Likewise, until structural constraints such as Brazil's public education system are addressed, reduction of the most pronounced poverty will remain difficult.

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Page last modified: 15-09-2013 19:03:02 ZULU