Building Equity Through Social Sciences and Economic Policies: The Brazilian Experience

Transcription

1 Building Equity Through Social Sciences and Economic Policies: The Brazilian Experience André Portela Souza São Paulo School of Economics Getulio Vargas Foundation IAP Conference Manaus 04 December 2014

2 Outline 1. The stylized facts on growth, poverty and inequality in Brazil 2. The immediate determinants of poverty and inequality changes 3. The role of the labor market 4. The challenges: I. Demographics II. III. Productivity Education

3 1.The stylized facts on growth, poverty and inequality in Brazil

4 Stylized Fact I Per Capita GDP (2013 US$ Thousands) - Brazil 12,00 11,50 11,00 10,50 10,00 9,50 9,00 8,50 8,00 7,50 7,00 Source: IPEADATA

5 0,64 Stylized Fact II Income Inequality Brazil Gini Coeficient Evolução da desigualdade de renda no Brasil: Coeficiente de Gini 0,63 0,62 0,61 0,60 0,59 0,58 0,57 0,56 0,55 0,54 0,53 0,52 0,51 0, Source:SAE/PR

6 Stylized Fact III 25,00 20,00 15,00 10,00 5,00 0,00 Source: IPEADATA

7 Introduction A sizeable number of developing countries have recently experienced a relatively sustained economic growth with part of the benefits accrued towards their lower income earners Per Capita GDP Annual Growth Rate ( ) Poverty Rate (Poverty Line: Below US$ 2 a day) Source: Penn World Tables Source: World Bank 7

8 Introduction Brazil had already experienced both economic growth and poverty reduction, but with no inequality decrease The novelty is that, in the years 2000, there are concomitant movements of higher economic growth and faster poverty and inequality decreases Social and Economic Indicators*: Brazil (Selected Years) Source: IPEAData * Income data are in US$ 1,000 per capita (2005 prices) 8

9 Gini Index 0,65 Evolution of the degree of inequality Brazil and China: ,60 Brazil 0,55 0,50 0,45 China 0,40 0,35 0,30 0, Source: Brazil, SAE/PR based on IPEA for (averages for the years of 1980,1991,2000) and on the PNAD for 2011.

10 Taxa de crescimento (%) Taxa de crescimento médio da renda domiciliar per capita por decimos da distribuição: Brasil, Total, 2001 a 2013 Annual Growth Rate by Income Deciles Brazil 2001 to ,0 6,0 5,0 4,0 Average Média 3,0 2,0 1,0 0,0 Primeiro Segundo Terceiro Quarto Quinto Sexto Sétimo Oitavo Nono Décimo Décimos Deciles

11 Average annual growth rate (%) Distribution of countries according to their average annual growth rate of per capita GDP, World: China Growth rate for the 10% poorest in Brazil Sweden Growth rate for the 10% richest in Brazil Distribution of countries (%) Source: SAE/PR based on WB data ( Note: Only 179 of the countries were considered due to data avalilability for the period.

12 There is renewed interest in the role of the middle class inprofiling the shapingthe of the Brazilian social and Middle economic Class prospects of societies. The definition of middle class is not an uncontroversial issue: a) dimension to be considered; b) measurement we use per capita family income in absolute terms It is possible to compare the size of the middle class throughout the years Criteria: Secretary of Strategic Affairs of the Presidency of the Republic of Brazil (cut offs are in monthly R$ from 2011) Extreme Poor Class up to R$91 Low Income Middle Income High Income Poor Class from R$91 to R$182 Vulnerable Class from R$182 to R$327 Lower Middle Class from R$327 to R$496 Middle middle Class from R$496 to R$720 Upper Midlle Class from R$720 to R$1,145 Upper Class more than R$1,145 12

13 Profiling the Brazilian Middle Class The extreme poor share of the Brazilian population declined from 14.1% to 5.9%. The Middle Class share has grown from 35% to 49% and meanwhile the Low Income share fell from 54% to 36% Share of Brazilian population by income class ( ) To shed light on the recent income dynamics, two decomposition exercises are made Source: PNAD 13

14 2. The immediate determinants of poverty and inequality changes

15 Annual Growth Rate of the Average Family Per Capita Income ( ) 14% 7% 6% 5% 4% 3% 2% Extreme Poor Poor Vulnerable Lower Middle Class Middle Middle Class Upper Middle Class Upper Class

16 Explaining the Rise of the Middle Class 2. The Immediate Determinants Decomposition Exercise 1 Change in poverty rate or population share in different income classes Decomposition Exercise Results Growth Component Distribution Component Redistribution policies implemented in the period seem to be more important than economic growth in reducing extreme poverty. However, the relative importance of the growth component increases as the income cut-off levels increases. 16

17 Explaining the Rise of the Middle Class Decomposition Exercise 2 % in formal sector % of adults % in public sector Change in per capita family income % of occupied adults Non-labor income per adult % in informal sector % selfemployed and employer income in formal sector income in public sector Labor income per occup. adult income in informal sector Income of selfemployed or employer 17

18 Explaining the Rise of the Middle Class The decline of poverty rate is due to the labor income growth together with policy redistributions in the period. The labor income growth is associated with labor income increase in the informal and self-employed sector The rise of the middle class in Brazil observed in the recent past is mainly due to the economic growth of the period. The labor income growth is associated with the increase in occupation in the formal sector as well as the increase in the labor income per occupied adult. Results: Decomposition Exercise 2 Factor Contribution to Income Change by Income Groups Extreme Poor Poor Vulnerable Extreme Poor Poor Vulnerable Lower Middle Middle Middle Upper Middle Upper Class Private Sector 0% 29% -70% 10% 72% 107% 8% Public Sector 0% 0% -1% 0% 0% -15% 17% Informal Sector 0% -25% 46% -4% -19% -19% -4% Employer or Self-Employed -7% -19% 12% -2% -19% -20% 27% Total -7% -15% -14% 5% 34% 53% 48% Extreme Poor Poor Vulnerable Lower Middle Lower Middle Middle Middle Middle Middle Upper Middle Upper Middle Upper Class Percentage of Adults 3% 10% 14% 17% 21% 27% 20% Non-Labor Income per Adult 41% 28% 19% 12% 7% 3% 2% Percantage of Adults Occupied -7% -15% -14% 5% 34% 53% 48% Labor Income per Occupied Adult 62% 77% 81% 66% 39% 17% 30% Total 100% 100% 100% 100% 100% 100% 100% Occupation Factor Income Factor Upper Class Private Sector 13% 20% 24% 20% 11% 5% 8% Public Sector 12% 18% 19% 15% 9% 4% 8% Informal Sector 17% 19% 19% 15% 9% 4% 7% Employer or Self-Employed 20% 19% 19% 16% 9% 4% 7% Total 62% 77% 81% 66% 39% 17% 30% 18

19 Explaining the Rise of the Middle Class The decline of poverty rate is due to income growth together with policy redistributions in the period. Factor Contribution to Income Change by Income Groups ( ) Source: Authors 19

20 Explaining the Rise of the Middle Class The labor income growth is associated with the increase in occupation in the formal sector Explaining Factors to The Occupation Factor Income Change Source: Authors 20

21 Explaining the Rise of the Middle Class All sectors experienced changes in labor income, but the magnitude among income classes vary Explaining Factors to The Occupation Factor Income Change Source: Authors 21

22 The Future of Middle Class The growth of the Middle Class in Brazil is partly due to the increase in the formal private sector jobs Understanding the expansion of the formalization of the labor relations in Brazil can give us important clues to the understanding of the rise of the middle class Proportion of Occupied People by Occupation Position Source: PNAD It seems that the limits of the expansion of the middle class as we experienced so far are in part the limits of the expansion of the formal jobs in Brazil 22

23 The Future of Middle Class There are more young and high school or college educated individuals among the formal workers than before Distribution of Formal Workers across income classes The expansion of the human capital accumulation of the workforce is paramount for the formalization of labor force Proportion of Formal Workers by Age Proportion of Formal Workers by Years of Schooling Source: PNAD 23

24 3. The role of the labor market

25 Coefficient of Gini 0,60 Evolution of inequality in per capita income: Brazil, ,59 0,58 0,57 Inequality in income, if the distribution of labor income had reamined unchanged 0,56 0,55 0,54 0,53 Brazil 0,52 0,51 0,

26 Coefficient of Gini 0,60 Evolution of inequality in per capita income: Brazil, ,59 0,58 0,57 Inequality in income, if the distribution of labor income had reamined unchanged 0,56 0,55 0,54 Contribution of labor income to the decline in inequality 52% 0,53 0,52 Brazil 0,51 0,

27 11,0 Unemployment Rate - Brazil 10,0 9,0 8,0 7,0 6,0 5,0 4,0 3, Source: PNAD/IBGE

28 Proporção da força de trabalho (%) Proportions of Formal and Informal Workers - Brazil Evolução dos graus de formalização e informalidade da força de trabalho Brasil: Formal Informal Fonte: Estimativas da SAE/PR com base nas PNADs de 2001 a 2011.

29 Formal and Informal Wage Gap Metropolitan Regions (log points) 0,25 0,2 0,15 0,1 Women Men 0,05 0

30 Labor Earnings Inequality (Variance of Log-Earnings) 1,3 1,2 1,1 1 0,9 0,8 0,7 0,6 0,5 0,4 Informal All Formal

31 Formal Labor Earnings Dynamics Decomposition

32 Decomposition of the Variance of Log-Earnings 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0, Permanent component Observed Componente Permanente Componente Transitory component Transitório Observada

33 Period Variance Decrease Contribution of the permanet component Contribution of the transitory component 1994 to to ,22% -95,10% 195,10% 16,90% 74,96% 25,04%

34 Returns to the permanent component 1,15 1,1 1,05 Within ageq/schooling groups 1 0,95 0,9 0,85 Total Total Dentro dos Grugos de Idade e Nível de Escolaridade

35 Challenges: Brazilian Demographic Dynamics

36 Population (million) A. Demographic dynamics Actual and Expected Evolution of the Brazilian Population from 1872 to million million 40 years ,3 million 100 years Source: SAE/PR based on population records and projections from IBGE

37 rates per thousand persons A. Demographic dynamics Crude birth rate Crude death rate Brazilian Population Dynamics: Stage I Stage II Stage III Stage IV Stage V Natural growth rate Source: SAE/PR based on population records and projections from IBGE

38 rates per thousand persons A. Demographic dynamics Crude birth rate Crude death rate Brazilian Population Dynamics: Stage I Stage II Stage III Stage IV Stage V Population growth rate Natural growth rate Net migration rate Source: SAE/PR based on population records and projections from IBGE

39 Life Expectancy at Birth (years) Infant Mortaliy Rate ( ) B. Health transition Actual and Predicted Evolution of Life Expectancy at Birth and Infat Mortality Rate: Brazil, Life Expectancy / years /2 extra year of life per calendar year Infant Mortality Rate Source: SAE/PR based on population records and projections from IBGE

40 Total Fertility Rate (births per women) C. Fertility decline 7,0 Actual and Predicted Evolution of Total Fertility Rate : Brazil, ,5 6,0 5,5 6 births 40 years 5,0 4,5 4,0 1/3 3,5 3,0 2,5 2,0 1,5 2 births 1,0 0, , Source: SAE/PR based on population records and projections from IBGE

41 Fertility rate (birth per women) C. Fertility decline 0,24 0,22 0,20 20 to 29 years old Evolution of the Brazilian age-specific fertility rates: ,18 0,16 0,14 30 to 39 years old 0,12 0,10 15 to 19 years old 0,08 0,06 0,04 0,02 40 to 49 years old , Source: SAE/PR based on population records and projections from IBGE

42 percenatge of births C. Fertility decline 60 Evolution of births according the the age of the mother: Brazil, to 29 years old 30 to 39 years old to 19 years old 40 to 49 years old Source: SAE/PR based on population records and projections from IBGE

43 C. Health transition and fertility decline Slower health transition and fertility decline Faster health transition and fertility decline Faster health transition with slower fertility decline Source: Growing old in an older Brazil : implications of population aging on growth, poverty, public finance and service delivery / Michele Gragnolati, et al. Washington D.C.: The World Bank, p. 3.

44 population (million) D. Demographic bonus Evolution of the Brazilian Population by Age Groups: 1900 to million Between 15 and 59 years old Less than 15 or at least 60 years old Source: SAE/PR based on population records and projections from IBGE

45 percentage of the population (%) D. Demographic bonus 70 Evolution of the Distribution of the Brazilian Population by Age Groups: 1900 to Between 15 and 59 years old 30 p.p Less than 15 or at least 60 years old Source: SAE/PR based on population records and projections from IBGE

46 Extreme poverty (%) Extrema pobreza (%) Public and intergenerational transfers Possibilidades de melhoria 50 Extreme poverty by age: Brazil, 2009 Extrema pobreza por idade: Brasil, National average Média nacional Idade Age

47 Extreme poverty (%) Extrema pobreza (%) Public and intergenerational Possibilidades de melhoria transfers Extreme poverty by age: Brazil, Extrema pobreza por idade: Brasil, Including Incluindo transferências public transfers públicas Excluding public transfers Excluindo transferências públicas National average Média nacional AgeIdade

48 Public and intergenerational transfers Ratio of net per capita public transfers (elderly to children) Fonte: Growing old in an older Brazil : implications of population aging on growth, poverty, public finance and service delivery / Michele Gragnolati, et al. Washington D.C.: The World Bank, p. 12.

49 Public and intergenerational transfers Public Transfers as a Percent of Total Consumption Fonte: Growing old in an older Brazil : implications of population aging on growth, poverty, public finance and service delivery / Michele Gragnolati, et al. Washington D.C.: The World Bank, p. 12.

50 Speed of the population aging Number of years for population 65+ to increase from 7% to 14% Fonte: Growing old in an older Brazil : implications of population aging on growth, poverty, public finance and service delivery / Michele Gragnolati, et al. Washington D.C.: The World Bank, p. 12.

51 Challenges to public policy for a older population 1. Increase in life expectancy need to be accompanied by reduction in morbidity and expansion of the working life cycle. 2. Exponential increase in social security costs requires Brazil to adjust social security rules to the real needs and working potential of the elderly. 3. Adjustment must be fast, since the aging of the population has been very fast and it takes a life time to adjust. 4. Inevitable increase in health expenditures. 5. Increase in demand for long-term care for dependent old persons. Defining the roles for the family and public services.

52 Economic development and international migration International Migration to Brazil In 1900, Brazil has reached 7.3% of the population composed of immigrants, today it has just 0.3%. Fonte: Censos Demográficos

53 Economic development and international migration Region Age structure of immigrants in Brazil and in the World Immigrants (millions) Immigrants over 65 years old (millions) Immigrants over 65 years of age as a percentage of the immigrant population World ,7 12 Africa 19 0,8 4 Asia 61 6,3 10 Europe 70 9,7 14 North America 50 5,9 12 Latin Amerrica and Caribbean 7 0,9 13 Oceania 6 1,1 18 Brazil 0,6 0,2 36 Fonte: United Nations, Department of Economic and Social Affairs, Population Division (2009) e Pesquisa Nacional por Amostra de Domicílios (PNAD, 2009). 5x Latin America Average 10x World Average 50x North America and Oceania Average

54 Challenges: to increase productivity

55 2003= The evolution of labor earnings and of the average labor productivity Brazil: Average Labor Earnings p.p Average Labor Productivity Source: SAE/PR based on the PNAD (Labor Earnings) and Penn World Tables (Labor Productivity). Average labor productivity as GDP/worker (Real GDP at constant 2005 national prices).

56 Thousands US$ (2005) per worker per year 70 The Evolution of the Average Labor Productivity Selected countries: Japan 50 Korea 40 Argentina 30 Chile 20 Brazil 10 China Source: SAE/PR based on the Penn World Tables. Labor productivity as GDP/worker (Real GDP at constant 2005 national prices).

57 Labor Productivity in 2011 (US$ (2005) per year per worker) Ratio between labor productivity in 1980 and Korea China Brazil Labor Productivity in 1980 (US$ (2005) per year per worker) Source: SAE/PR based on the Penn World Tables. Labor productivity as GDP/worker (Real GDP at constant 2005 national prices).

58 Argentina Annual Growth Rate of Average Productivity ( ) Taxa anual de crescimento da produtividade média do trabalho na América do Sul ( ) Peru Equador Suriname Venezuela Colômbia Paraguai Bolívia South America except Brazil América do Sul, Brasil excluído Chile Brasil Uruguai 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5

59 Equatorial Guinea Angola Nigeria Ethiopia Chad Rwanda Mozambique Ghana Tanzania Sierra Leone Uganda Zambia Morocco Lesotho Mauritius Sudan Burkina Faso Sao Tome and Principe Cape Verde Congo - Kinshasa Malawi Tunisia Botswana Egypt South Africa Kenya Congo - Brazzaville Djibouti Namibia Mauritania Mali Gambia Senegal Swaziland Niger Cameroon Burundi Guinea-Bissau Guinea Benin Togo Gabon Central African Republic Ivory Coast Comoros Liberia Madagascar Zimbabwe Annual Growth Rate of Average Productivity - Africa Taxa anual de crescimento da produtividade média do trabalho na África ( ) Brasil África

60 Labor Income Share of National Income Participação da renda do trabalho na renda nacional 60% 58% 56% 54% Brasil 52% 50% 48% 46% China 44% 42% 40%

61 Challenges: Education

62 Average Years of Schooling Adult Population Argentina Brazil Chile Colombia Source: World Bank Mexico Peru Canada France United Kingdom USA China Japan Korea, Rep. OECD average

63 Source: World Bank, 2010 Schooling Flow - Brazil

64 Average schooling Evolution of average schooling by birth cohort: Brazil Born in 1952 in Chile 28 years behind Born in 1980 in Brazil Birth year

65 Escolaridade Média Additional years of schooling obtained during youth (age 15 to 18) by birth year or by year individual was aged 15 Evolução da escolaridade adquirida durante adolescência na juventude (15 aos 18 anos) segundo o ano de nascimento ou ano em que entrou na juventude 3,0 Ano em que entrou na juventude (completou 15 anos) ,8 2,6 2, ,2 2, ,24 1,8 1,6 0,78 1, ,2 0,04 1, Ano de nascimento

66 Escolaridade Média Additional years of schooling obtained during 18 to 22 by birth year or by year individual was aged 20 Evolução da escolaridade adquirida dos 18 aos 22 anos, segundo o ano de nascimento e o ano em que completou 20 anos 2,0 Ano em que completou 20 anos ,9 1,8 1,7 1,6 1,5 1, ,3 1,2 1,1 1,0 0,9 0,8 0,7 0, , , Ano de nascimento

67 A porcentagem de jovens adolescentes fora da escola é elevada e não tem declinado ao longo da última década. Y Evolução da porcentagem de jovens adolescentes que frequentam a escola Youth School Attendance by Year - Brazil Frequentam a escola Fonte: SAE/PR com base na Pesquisa Nacional por Amostra de Domicílios (PNAD).

68 100 Evolução da porcentagem de jovens adolescentes que frequentam a escola, que frequentam Y Youth School Attendance o fundamental, e que frequentam ou já concluíram o ensino médio Delayed attendance Frequentam o fundamentak, exceto série final School attendance at correct grade Frequentam a série final do fundamental ou o ensino médio School Frequentam a escola attendance Fonte: SAE/PR com base na Pesquisa Nacional por Amostra de Domicílios (PNAD).

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70 Thank you!