Sustaining Employment and Wage Gains in Brazil Wage and Sustaining Employment DIRECTIONS IN DEVELOPMENT Human Development Sustaining Employment and Wage Gains in Brazil A Skills and Jobs Agenda Joana Silva, Rita Almeida, and Victoria Strokova Sustaining Employment and Wage Gains in Brazil DIRECTIONS IN DEVELOPMENT Human Development Sustaining Employment and Wage Gains in Brazil A Skills and Jobs Agenda Joana Silva, Rita Almeida, and Victoria Strokova © 2015 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The findings, interpreta- tions, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Sustaining Employment and Wage Gains in Brazil • http://dx.doi.org/10.1596/978-1-4648-0644-5 Contents Acknowledgments xi About the Authors xv Abbreviations xvii Overview 1 Summary of Findings and Discussion of Possible Reforms 1 Skills Development Programs to Help Workers Become More Employable and Productive 5 Labor Regulations Reform to Support Firm Productivity While Also Protecting Workers 7 Labor Market Programs to Strengthen the Workforce and Raise Business Productivity 9 Productive Inclusion Policies to Better Connect the Poor with More Productive Jobs 11 Report Objectives 15 Report Structure 15 Annex OA: Background Papers List 16 Annex OB: Summary Skills and Jobs Agenda for Brazil, by Program Area 20 Notes 24 References 26 Chapter 1 Brazilian Labor Markets: Main Achievements and Remaining Challenges 29 Skills and Jobs Achievements in Brazil since 2000 29 Two Critical Goals to Sustain Earnings and Employability Increases: Raise Labor Productivity, and Connect the Poor to More Productive Jobs 38 Goal 1: Raise Labor Productivity to Sustain Future Wage Increases 40 Goal 2: Connect the Poor to Better, More Productive Jobs 46 Annex 1A: Complementary Tables 54 Notes 58 References 61 Sustaining Employment and Wage Gains in Brazil • http://dx.doi.org/10.1596/978-1-4648-0644-5 v vi Contents Chapter 2 Skills Development Programs to Help Workers Become More Employable and Productive 65 Introduction 65 Existing Skills Development Policies 68 The Way Forward: A Policy Agenda 78 Notes 85 References 87 Chapter 3 Labor Regulation Reform to Support Firm Productivity While Also Protecting Workers 91 Introduction 91 Existing Labor Regulations and Institutions 93 Key Challenge: Avoiding Detrimental Effects on Labor Market Outcomes 96 The Way Forward: A Policy Agenda 101 Notes 105 References 107 Chapter 4 Labor Market Programs to Strengthen the Workforce and Policies to Raise Small-Business Productivity 111 Introduction 111 Existing Active Labor Market Programs 113 Existing Support for the Self-Employed and Entrepreneurship 116 Existing Economía Solidaria (Solidarity Economy) Approaches 116 The Way Forward: A Policy Agenda 117 Notes 129 References 130 Chapter 5 Productive Inclusion Policies to Better Connect the Poor with More Productive Jobs 133 Introduction 133 Existing Productive Inclusion Policies 137 The Way Forward: A Policy Agenda 138 Notes 151 References 152 Boxes 1.1 Why Focusing on Jobs for the Poor Matters 39 2.1 M&E Systems, Work-Related Websites, and Counseling in Australia, Chile, Turkey, and the United States 80 2.2 Vocational Training Results from Greater Partnering with Firms: Lessons from China, India, and Korea 83 Sustaining Employment and Wage Gains in Brazil • http://dx.doi.org/10.1596/978-1-4648-0644-5 Contents vii 2.3 TVET Innovation: Fab Labs 84 3.1 The OECD Experience in Integrating Job-Search Requirements into Unemployment Insurance Eligibility 102 3.2 Italy’s Simplified Labor Law Code 104 3.3 Flexible, Tailored Labor Dispute Resolution Services: Evidence from South Africa 105 4.1 The “More Jobs” System (Sistema Mais Emprego) 118 4.2 Statistical Profiling Supports Early Interventions for High-Risk Job Seekers in Sweden 119 4.3 International Experience with Private and Nongovernmental Employment Service Providers 122 4.4 Brazil’s Apprentice Law (Lei do Aprendiz) 124 4.5 M&E Systems That Improve Employment Services Delivery: International Experience 128 5.1 Program to Support Individual Microentrepreneurship 137 5.2 Productive Inclusion in the Slums of Rio de Janeiro: A Qualitative Study 140 5.3 Adapting Training Programs to Vulnerable Urban Youth 144 5.4 Adapting Employment Services to Beneficiaries’ Needs through Profiling: Experience from Germany and the United Kingdom 145 5.5 Innovative Training Programs for the Most Vulnerable in Rural Areas 150 Figures O.1 A Three-Layered Policy Approach to Sustain Wage Growth and Poverty and Inequality Reductions in Brazil 3 1.1 Unemployment Rate and Average Labor Earnings, 2002–14 30 1.2 Workforce Formality and Informality in Brazil, 2001–14 30 1.3 Employment Trends in Brazil, by Sector, 2002–13 32 1.4 Basic Education Completion and Student Math Performance in Brazil and Selected Countries 33 1.5 Changes in Skilled Labor and Wages in Brazil, by Income Distribution, 2002–13 34 1.6 Insertion in Formal Employment of Poor vs. Nonpoor in Brazil, 2008–11 35 1.7 Variation in Formal Employment Insertion Rates of Poor and Nonpoor in Brazil, by Age Group and Educational Attainment, 2008–11 36 1.8 Economic Inequality Trends and Determinants in Brazil and Other Selected Latin American Countries 37 1.9 Labor Productivity in Selected Countries, 1950–2014 40 1.10 Labor Productivity and Wage Indexes in Brazil and Advanced G20 Economies, 1999–2012 41 Sustaining Employment and Wage Gains in Brazil • http://dx.doi.org/10.1596/978-1-4648-0644-5 viii Contents 1.11 Formal Job Creation, Unemployment, and Nonemployment Rates in Brazil 42 1.12 Net Job Creation in Brazil, by Business Age and Size, 2013 43 1.13 Workforce Skill Use and Firms’ Skill Demand in Brazil and Other Latin American Countries 45 1.14 Average Job Vacancy Duration and Worker Tenures, Selected Countries 46 1.15 Decomposition of Average Monthly Income of the Poor and Middle Class in Brazil, 2013 47 1.16 Duration of Formal Employment among the Poor and Nonpoor in Brazil, 2008–12 49 1.17 Changes in Real Wages and Inequality in Brazil 51 1.18 Educational Attainment and Labor Market Status of the Poor in Brazil, 2013 52 1.19 Job Status of the Rural Population in Brazil, by Educational Level, 2002 and 2013 52 1.20 Employability Constraints of the Brazilian Poor beyond Skills and Education 53 2.1 Education