Survey analyzes impacts of the reduction in weekly hours worked and the end of the 6 X 1 scale in 12 sectors of the economy
A study released by about the ieconomic impacts of the proposed reduction in working hours from 44 to 40 hours per week and the projected a retraction of 0.82% in Brazilian GDP (Gross Domestic Product) in the medium term. The survey recognized the social benefits of the change, but pointed out economic consequences after the measure’s full implementation.
The research analyzed 12 major sectors of the economy and 66 specific segments to identify the impacts on costs and production. The projected retraction is due to the need for adjustments, with more intense effects in areas that require more labor and have a greater degree of formalization of work. Leia a (PDF – 1 MB).
“We do not work with a fixed time horizon, but we are comparing the current equilibrium with a new equilibrium after the end of the 6×1 scale”he states. “Between these two balances, nothing prevents an increase in GDP during the transition”, said André Valério, macroeconomic research manager at Inter.
Civil construction is expected to show the biggest decline among the 12 major sectors analyzed. The survey projects a 2.14% drop in GDP in this segment. The manufacturing industry would be in 2nd place. The estimated loss is 1.87%.
The real estate sector represents the only exception, with a projected gain of 0.9%. The growth results from the reallocation of consumption, increased demand for housing units and low dependence on inputs from other sectors.
Surveillance and footwear and auto parts manufacturing activities are expected to be among the most affected. The survey accounted for indirect impacts. Inputs from one sector becoming more expensive harm other sectors that depend on them.
The analysis considered companies’ choices to adapt to the 1-day reduction in working hours per employee.
“Some companies may prefer to have fewer workers and reduce the supply of services. Therefore, they would exchange lower revenue for maintaining the level of profitability”said Valério. This strategy may cause a decrease in investment capacity and future growth.
Sectors may suffer more or less depending on the level of work formality adopted. The surveillance segment, as it is more formalized, should see a 5.5% increase in costs. The number of artistic activities is expected to increase by 0.8%. This sector relies more on informal work contracts.
Segments that require more investment in personnel and service more days per week will feel the impacts more. Public health, for example, is expected to see a 2% increase in costs.
The study cites the case of Portugal, a country with labor legislation similar to Brazil’s, which adopted an equivalent change in 1996. At the time, there was a reduction in job creation — a scenario considered “probably equivalent to what we will see in Brazil” for Inter.
According to the analysis, the effect arises from the need to maintain salaries, the incomplete transfer of costs to prices and stricter rules for unfair dismissals.
The hypothesis of a general increase in prices is also questioned by the study. The analysis cites the example of Australia. The country made changes in the 1980s. The rise in prices was proportional to the rise in production costs. Several companies preferred to absorb the adjustment in their profit margins.
Proponents of the proposal claim that any economic losses could be offset by increased productivity. On April 13, the vice president (PSB) cited the as one of the ways to make the measure viable.
The Inter survey indicates that the drop in GDP can be neutralized if there is an aggregate increase in productivity of 0.47%. Although the percentage is considered attainable, structural limitations of the Brazilian economy tend to hinder this progress. Among the main obstacles are the low level of savings, rigid labor rules and barriers to importing technology.
“It would not be an unattainable increase in productivity, but the big issue is that productivity remains stagnant in this decade”declared Valério. “There may be some compensation, even if partial, but we see the probability of this occurring completely as low.”
The economist argued that the recipe for achieving greater productivity gains would involve improvements in infrastructure.
Other factors include advancement in the quality of human capital formation, a more flexible labor market, the opening of the economy and the advancement of the extensive reform agenda. Tax reform can now help. The benefit will come after completing your transition period. This period should take a decade.
