Government Program Will Save Formal Jobs but Impoverish Workers, Says Study

For economist, partial wage replacement imposes severe loss on those who earn 3 to 4 minimums

The emergency program launched by the government, which provides for a cut in working hours and wages in the private sector in exchange for job security, will lead many formal workers to poverty, according to a survey carried out by University of Oxford economist Gabriel Ulyssea.

Ulyssea analyzed the salary adjustments provided approved by the program and concluded that the loss of income effect is especially severe for those who earn three to four minimum wages.

According to him, the program has the right objective, but it is poorly designed since it partially recomposes the salary based on unemployment insurance fractions. But the value of the benefit offered by the government, says Ulyssea, should consider maintaining the employee's full salary.

FORD's workers. 29.10.2019 Foto: Adonis Guerra/SMABC

The unemployment insurance payment rule provides for three calculation ranges, in addition to the minimum amount, which will always be the floor of wages, of R$ 1,045 this year. The maximum amount is equivalent to less than 1.8 minimum wages: R$ 1,813.03.

Linking the benefit to unemployment insurance flattens the final value to which the worker is entitled, says the economist. The more he earns, the lower the income during the period for which the company adopts the program rules.

For those who decide for shorter hours and wages, the duration can be up to three months.

Translated by Kiratiana Freelon

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