Ipea: Increase in informal work is linked to low oversight
Report shows insufficient number of tax auditors in the country.
Rafael Cardoso - Reporter for Agência Brasil
A study by the Institute of Applied Economic Research (IPEA) links the high rate of informal work in the country to the government's declining ability to enforce labor laws. The technical note is titled "Growth without formalization of work: deficit in oversight capacity and the need to rebuild the specialized bureaucracy."
Before 2022, the pattern was that a reduction in unemployment was accompanied by an increase in the rate of formal employment. In other words, more people with a signed work contract. The exception was the period of the Covid-19 pandemic.
In 2024, according to data from the Brazilian Institute of Geography and Statistics (IBGE), the unemployment rate reached its lowest level since 2012: 6,6%. However, the informal employment rate reached 31,77%, the highest percentage in the period.
Ipea highlights the insufficient number of labor inspectors, linked to the Ministry of Labor and Employment (MET), to ensure that employers respect the labor rights of their employees. Between 2012 and 2024, the number of salaried workers grew by 11,4%. During the same period, the number of labor inspectors fell by 34,1%.
In absolute numbers, in 2012 there were 19.038 salaried workers per auditor. In 2024, the ratio grew by 79,95%, reaching 34.260 workers per auditor, a number higher than that recommended by the International Labour Organization (ILO), which is 10 or 15 thousand workers per auditor.
Felipe Pateo, a planning and research technician at Ipea and author of the study, says that the auditors' inspections have two effects. One is direct, causing workers without formal employment contracts to become registered after an inspection, and the other is indirect, in which the risk of being audited prevents employers from committing irregularities.
“This risk, however, has decreased over the years. The chance of an establishment with employees being inspected fell from 11,3% to 3,8% between 2017 and 2023, so the fear of being inspected is now a third of what it was in the previous period,” says Felipe.
According to a study by Ipea, if 1.800 new labor inspectors are hired, which is the entire list of approved candidates from the Unified National Public Examination, the collection of social security contributions and administrative fines will increase to R$ 879 million. This amount is higher than the annual cost of hiring employees, estimated at R$ 560 million.
The 2024-2025 labor inspector recruitment process has so far called up 900 approved candidates for the positions advertised in the public notice. Another 900 are on the reserve list.
"Potential budget constraints should not be the dominant arguments when considering the need to rebuild the Brazilian state's capacity to ensure proper regulation of the labor market and worker protection in line with current labor legislation in the country and international technical criteria," the study states.
The report of Agency Brazil The Ministry of Labor and Employment and the National Union of Labor Inspectors (Sinait) were contacted for comment on the matter. Neither has responded so far.
