In Simple Words
Think of getting a formal job like applying for a position that requires reading technical assembly manuals. If workers lack basic literacy and numeracy, employers will hire them informally for off-the-books manual labor. Upgrading worker education equips workers with the skills needed to qualify for structured formal employment.
Research question
High labor informality in Brazil persisted during the 2000s despite significant real minimum wage increases, creating a puzzle regarding what macroeconomic force drove the concurrent formalization drop.
Participants
Brazilian national labor force tracking from 2003 to 2012 across PNAD household survey data.
Study Design
Calibrated theoretical labor market model using empirical macroeconomic data (Haanwinckel and Soares, 2017).
Results
Increased average schooling levels served as the primary mechanism explaining the 12 percentage point drop in Brazilian labor informality from 2003 to 2012, counteracting the informalization pressure from rising minimum wages.
Takeaway
Expand public secondary and vocational education infrastructure to raise baseline worker qualifications for formal sector employment.
Source and citation
See source →Evidence in Labor Market Policies and Implications for Brazil: Informality
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Plain-English glossary
Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.
- Percentage points
The difference between two percentages.
ExampleA rise from 40% to 50% is 10 percentage points. Relative to the starting value, that is a 25% increase.
Office for National Statistics · Percentages ↗Read more about percentage points →