Brazil's Income Gap Reaches Record

In 2018, Brazil’s income inequality reached its highest level recorded since 2012. The data released on October 16th by the Brazilian Institute of Geography and Statistics (IBGE)’s National Household Sample Survey (PNAD) highlights the aftermath of the devastating recession in 2015 and 2016 which continues to wreak havoc in the lives of the Brazilian working class. 

Lena Lavinas, holder of a Ph.D. in Economics from the University of Paris and professor at the Federal University of Rio de Janeiro (UFRJ), stated: “Unemployment and the recession have worsened the living conditions of the most impoverished sectors of the population. With that in mind, social programs should have grown. But that is not what has happened—quite the opposite. Austerity has prevailed and, despite that, Brazil has blown through its public-spending roof.”

In 2017, two years into the recession, Brazil’s unemployment rate peaked at approximately 13 percent, almost double the unemployment rate in 2014 (approximately 6.7 percent). 

Almost simultaneously, the salaries of the poorest were reduced, while wealthy families earned more. From 2017 to 2018, the income gain of the poorest 10% of the population fell 3.2% (to $ 153 on average) while the richest 1% increased 8.4% (to $ 27,774). Furthermore, the poorest 30% of Brazilian earners saw their incomes fall from 2017.

To make matters worse, in order to solve the severe economic crisis the country faced in 2015, the Brazilian government established austerity measures by form of an ‘expenditure ceiling.’ As an example of such budget cuts, there was a decrease in total households served by Bolsa Familia from 15.9 percent in 2012 to 13.7 percent in 2018. Bolsa Familia, a federal welfare program that seeks to provide relief to families in both extreme and regular poverty, offers access to public services including food, healthcare, education, and social assistance. 

The combination of high unemployment rates after the economic recession, decreased wages for working class people, and a lack of federal welfare programs to support the poor, has resulted in an increased poverty rate.

The Synthesis of Social Indicators (SIS), published by IBGE in late 2018, shows that the number of Brazilians living in poverty grew from 25.7 percent of the population in 2016 to 26.5 percent in 2017—an increase of two million people. Additionally, the number of people living in extreme poverty increased from 13.5 million (6.6 percent of the population) in 2016 to 15.2 million (7.4 percent) in 2017. Extreme poverty is defined by an income of less than US$1.90 per day, which is equal to approximately US$57 per month.

Not only has poverty increased, but the rise in wealthy people’s salaries has resulted in a dramatic widening of the Brazilian socioeconomic gap. The average monthly income of the wealthiest one percent of the population in 2018 was approximately 33.8 times that of the poorest 50 percent. According to the statistics institute, in 2018, the richest 10% of Brazilians accounted for 43.1% of national income, up from 41.4% in 2015. 

The International Monetary Fund Managing Director, Christine Lagarde, has pointed out that in order for the economy to grow, governments must focus on reducing high levels of inequality. To do so, the Brazilian government will have to find a way other than austerity budget cuts: three years after their induction in 2015, the country’s GDP has decreased by five percent, and fiscal deficit and public debt have both increased.

Latin America & CaribbeanCatalina Llorentebrazil, income inequality, Poverty, ReserachComment