In international comparisons, Brazil has one of the world’s most inefficient labor markets.
This report discusses aspects that make the Brazilian labor market inefficient and how the recentlyapproved labor reform can help to boost productivity, and supply and demand for workers.
Our analysis suggests that the reform can lift Brazil’s ranking in terms of labor market efficiency to 86th from 117th among 138 nations.
If this happens, we estimate that Brazil’s GDP per capita can expand 3.2% in the next four years (0.8% p.a.) and lower the structural unemployment rate by around 1.4 p.p. (approximately 1.5 million jobs).
In international comparisons, Brazil’s labor market stands out for its lack of flexibility, high costs and inefficient relations between employees and their employers. The chart below makes this point clear, based on 10 gauges of labor market efficiency set by the World Economic Forum’s Global Competitiveness Report (GCR)1 . In the GCR ranking, Brazil currently scores 3.7 on a 0-7 scale and placed 117th among 138 countries. Therefore, this survey showcases Brazil’s labor market as one of the least efficient in the world, contributing to the economy`s low competitiveness.