By Kevin O’Connor.

With employment rates in Brazil holding steady around 6% in the first half of this year, there is plenty of cause for optimism, especially compared with Europe, with unemployment figures in Ireland and Portugal as high as 15%. A recent article on this site concerning the labour market in Brazil throws up some surprises, the issue of productivity has been discussed in the past, but the issue of avoiding layoffs by large companies could lead to concerns in unemployment figures further down the line, to quote Itau’s Chief Economist Ilan Goldfajn, “The Brazilian economy recovered quickly from the impact of the crisis internationally. Hence, executives do not layoff, and the economy sustains a number of idle workers ready to be used in the future… In this alternative, the low unemployment is a function of expectations around future growth.“

Even though Europe’s unemployment figures provide cause for concern in European markets, they should provide food for thought and important lessons for emerging economies.
However, there could be a storm on the horizon. A recent article in Courrier International showed that the number of Spaniards unable to find work elsewhere in South America, immigrating to Brazil has jumped by 45%, not to mention the steady stream of Portuguese who have been a constant feature on the employment scene in Brazil. With Europe having been dealt a huge blow when their employment bubble burst, it is important for Brazil to learn from Europe’s mistakes. There are lessons to be learned from Europe in two key areas; income protection and youth unemployment.

Income protection: A MetLife survey found that 80% of Brazilian employees say that health insurance is the most essential employee benefit followed by income protection insurance with life insurance trailing behind. The report also suggested that “job security emerged as the first or second concern regarding financial security in the UK, Australia and Mexico, underscoring the potential fragility of the global economic recovery. By contrast, workers in India and Brazil are more confident about job security, indicating a potential shift in global economic power. Around 70% of Brazilian workers are optimistic about their future.” The MetLife International Employee Benefits Trends Study, covering Australia, Brazil, India, the UK and Mexico, found that, although workers express concern over financial security, the vast majority of individuals- regardless of nationality – take a short-term approach to financial planning. Despite nearly half of Brazilian workers looking no further than their next paycheck and only 40% of UK workers and Australian workers assessing their income protection needs, sudden loss of income still ranks in the top three of employee financial concerns in all five nations according to surveys. It’s important to note that this means that if sudden layoffs were to occur or the current employment bubble were to burst, 50% of workers would have no way of supporting themselves between jobs.

Youth unemployment: The United States Agency for International Development recently noted that “Brazil faces challenges in economic growth related to unemployment rate, which has reached over 10 percent. Among the Brazilian youth, it has reached 20 percent, including 52 percent in the Northeast region.” With older workers retiring or being made redundant, the youth unemployment bubble, which remains camouflaged in the overall positive employment trends could suddenly explode, causing a ripple effect in the overall economy, as fewer and fewer workers are on hand to support the rising numbers of unemployed. This was an important lesson that Ireland has learned the hard way since 2008 and something that should be seriously examined by Brazilian economists.

This post represents the thoughts and opinions of the author alone and not those of “BrazilianBubble.com” writers.

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