Case Study: Structural economic adjustments in Brazil

Brazil's economy has faced significant cyclical shifts, marked by the end of the global commodity boom, structural fiscal deficits, and fluctuating inflation rates. In 2013-2014, consumption remained relatively high, but a severe recession in 2015-2016 led to a contraction in GDP and rising unemployment. High inflation during these crisis years eroded the purchasing power of households.

Although a modest recovery occurred between 2017 and 2019 due to labor market reforms and lower inflation, subsequent global supply chain disruptions and domestic policy challenges in 2020-2021 again exerted downward pressure on wages. Real wages have struggled to maintain their value against a backdrop of rising food and energy costs.

The government implemented various emergency transfer programmes to mitigate poverty, but high structural unemployment (particularly among young adults in urban centres, which often exceeded 25%) and underemployment have limited overall wage growth. According to official statistics, the informal sector expanded significantly, leading to lower average earnings across the labor force.

Fig. 1