By Tiago Mali
The IBGE (Brazilian Institute of Geography and Statistics) announced on May 12 the largest reduction in income inequality in 11 years since the beginning of the current historical series in 2012.
Even so, Brazil is still at the top of the world’s income concentration and has a long way to go to reduce inequality at developed country levels.
A comparison with the most current data from the Gini index (the most widely used measure of inequality) of other countries shows Brazil as the 10th worst in inequality.
Only African countries, such as South Africa, which tops the list, fare worse.
The factors responsible for the drop in 2022 should not be repeated in the coming years.
If Brazil resumes the pace of inequality reduction that it imposed from 2001 to 2014, it would take at least 30 years to reach the same indicator as Italy and Russia, the most unequal European countries.
To reach France’s Gini index, it would take 43 years.
Even if the accelerated pace of 2022, the biggest drop in inequality in the current series, were repeated for several years, it would take at least 3 years and 10 months to reach Argentina’s level or 8 years to reach France’s Gini index.
THE FALL IN 2022 IS CYCLICAL
The reduction in income inequality in 2022 had 2 main factors:
- Recovery from the pandemic – the labor market reacted and recovered the losses in the number of people working. Last year, 7.7 million people who were not occupied started working. The recovery led to the highest number of occupied people recorded: 95.2 million.
- Brazil Aid – the number of beneficiaries grew by 50% during the election year: from 14.5 million to 21.6 million. The average value of this benefit has more than tripled to R$600.
The two factors are not likely to be repeated in 2023.
“It is not something replicable.”
“There is no fiscal space to triple the value of social benefits again or increase the beneficiary population that much. And the pandemic recovery is already gone,” says economist Marcelo Neri, director of FGV Social.
According to Neri, looking at the continuous pace of inequality reduction achieved from 2001 to 2014 at annual levels lower than in 2022 is more useful.
This path indicates that it would take a few more decades of constant reductions in inequality to reach the level of the Europeans or 25 years to reach the level of the US.
For the director of FGV Social, the path to improving inequality now passes through something Brazil has neglected in recent decades: productivity.
“The Brazilian social indicators have had an amazing performance in the last decades, but there has been a detachment from the economic trajectory.”
“People have more years of education but are not more productive. They live longer, but we took too long to reform Social Security,” says Neri.
The economist argues that making quality education more equitable in Brazil could be a preferential way to reduce inequality.
He cites high school reforms that better prepare for the job market.
A more educated population would increase labor productivity, which could translate into more income and a reduction in inequality.
Neri also mentions identity agendas of equality of skin color, gender, and other dimensions that can reduce the concentration of income.
METHODOLOGY
To calculate the rate of decline of the Brazilian Gini index from 2001 to 2014, Poder360 used old historical series available in World Bank databases, making an annual average of the indicator’s reduction during this period.
It was then compared with the drop seen from 2021 to 2022. The two “speed reductions” were then applied to Brazil’s current Gini index (0.518) to obtain the number of years needed to reach the indicator of other countries.
With information from Poder360
News Brazil, English news Brazil, Brazilian income, IBGE (Brazilian Institute of Geography and Statistics)