Latin America 2 - Formal & Informal Labour

2. Formal and Informal Labour: Definitions and Data

Restructuring of production also bears a direct relationship to the labour market, in a sense altering the informal characteristics present in any Latin American economy. Some figures on the degree of existing informality in the Brazilian labour market serve as a good example. According to the IBGE (the Brazilian census bureau), of the some 40 million employees in the 1980s, 58.8% had signed working papers, which are considered evidence of a formal job relationship. A total of 41.2% did not have signed working papers. Of the men, 61% had signed working papers, as compared to 39% who did not. Some 55% of women had signed working papers, while 45% who did not. When the figures are broken down by age bracket, one observes a blatant non-compliance with labour legislation. Only 8.6% of workers in the 10 to 14 year age bracket had signed working papers, as against 91.4% without them. In the 15-19 bracket, it was 39.6% to 60.4%. The situation was a little better in the 20 to 24 year bracket, with 61.7% having signed working papers as compared to 38.9% without. However, in the over-60s group, the proportion of workers with signed papers dropped once again, to 42.7% versus 57.3%. (Desep Indicators, 1994: 106-107).

Discussion on the formal and informal labour markets can be approached from various angles. In a recent article, Machado da Silva (1993:32) produced a classification beginning in the 1960s, when the aim of approaches to informal labour was to describe the existence of unstable labour relations, with low productivity and preposterously low pay. Informal labour was seen as an effect or expression of underdevelopment. In the 1970s, "[analysts] began to suggest that workers in informal labour would never have the opportunity to be incorporated into capitalist relations. It was a surplus population contingent that was not allowed even the classical role of a market reserve, since modernization was based on labour-saving techniques." In addition, emphasis was on a strictly economic explanation, but there was a review of the understanding of informal labour issues based on a concept affirming the essentially contradictory organicity of the production process. Thus, attention was shifted to relations between the various forms of social use of labour, from the perspective of its complementariness in the capital accumulation process (Idem:32). In the 1980s, as the author goes on to state (1993:34), the notion of informality acquires an entirely new content. It was no longer defined as contrary to wage-earning, but rather vis-à-vis a kind of economic initiative that escapes state regulation. "The economic analysis produced in the 1960s that was maintained as an empirical approach for another kind of explanation in the 1970s was replaced by a vehement critique of political and institutional conditions in production. The new interpretative matrix, based on the classical model pitting the state against the self-regulated market, directly challenges all aspects of the legitimacy of state regulation in the production process. Taking this approach, a profound change was made in the informal labour issue, since the previous interpretative matrices failed to discuss social conflicts related to the state's capability as the political sphere responsible for institutional requirements related to economic activity."

Data on the Brazilian labour market point to important changes in recent years. Sabsia (1994:26) highlights three such changes: 1) the entry of a large contingent of women in its make-up; 2) an enormous turnabout in the sectoral composition of labour between agriculture and the tertiary sector, with an increase of some ten percentage points in the latter over the course of ten years (see also Leite Lopes, 1995:10); and 3) a clear trend towards an increase in the proportion of self-employed workers and workers without signed working papers.

Sabsia (1994:29) also stresses the fact that the presence of a large informal sector makes unemployment statistics confusing. "In fact, what is called the unemployment rate should actually be called the idleness rate. This is the correct term. The idleness rate in Brazil makes use of developed countries' methodology for estimating employment rates... In fact, it measures actual unemployment, i.e., individuals who remain idle during the survey's reference week. If an individual has not taken any steps to seek employment during the survey's reference week, he/she is simply left out of the Economically Active Population (EAP) and disappears from the statistics. We have a huge informal sector which has the capacity to absorb these idle individuals one way or the other." In an analysis of the Greater Sco Paulo Metropolitan Area using data from 1989-1990, Troyano (1991) shows that unemployment is increasingly associated with the use of the labour force outside of any formal job contract, by either employment without legally signed working papers, subcontracting, or even wage-paying disguised by hiring self-employed labour. According to Telles (1994:94-95), these are the terms under which so-called "labour flexibilization" has been applied, as a way of avoiding trade union pressure and labour benefit costs and further broadening the freedom to fire. With the possible exception of a more skilled, valuable, and job-safe segment of workers, the vast majority suffer a career of insecurity, instability, and even precariousness in their labour relationships.

3. Workers' Organization and New Business Strategies

The industrial restructuring process directly affects the trade union movement in Latin America. Notwithstanding the various countries' historical specificities, one notes an overall drop in union membership and above all a defensive stance in the attempt to maintain the number of jobs and labour gains won in past struggles. In fact, major confrontations with capital are symbolically present in today's struggles.

The management strategy of considering workers' participation in decision-making processes pertaining to production - and in some cases even giving workers a certain degree of autonomy - and the implementation of a policy to blend workers' interests with company objectives and decrease the number of job positions have weakened trade union action. In Brazil, even though there has been some decrease in the number of strikes in recent years, labour stoppages in the late 1970s and 1980s made the trade union movement an obligatory interlocutor for government and industry. In this case, open confrontation in the past provided the essential framework for current bargaining strength. Discussion involving workers, business, and government in sectoral chambers has pointed to effective action by trade unions in the sense of seeking a negotiated solution to unemployment, problems generated by out-sourcing, and the introduction of new technologies.

Still, problems remain. The already existing degree of flexibilization in the Brazilian labour market (suffice it to recall that approximately half of the country's economically active population lack signed working papers) makes the trade union struggle difficult. In addition, unions themselves need to review their strategies. Union policies are doomed to failure if they fail to consider the female labour force, differences between generations of workers, the growth of household labour, and other factors.

4. Recent Developments in the Brazilian Trade Union Movement

One could say that the Brazilian trade union movement is not the same in the 1990s as it was in the 1970s or 1980s. It should be viewed in a context where it has come to play an acknowledged role as an important political actor, meanwhile recognizing that while this legitimacy was built in the union struggles against the military dictatorship and in regional and nationwide strikes, it also served as the basis for establishing more recent relations with business, in the search for common ground to safeguard employment and wages.

The words of Vicente Paulo da Silva, president of Brazil's Central Unica dos Trabalhadores (Unified Workers' Confederation), are paradigmatic of this new phase. In an interview with Jornal do Brasil on February 7, 1993, with the suggestive title "Today's struggle is for what is new", he expresses his concern over "the challenge to seek what is new... What is new is restructuring production, the issue of technology, quality, productivity, and workers' sharing in profits." He recognizes that all this is only possible now because of all the past struggles allowed unions to mature and better understand reality: "...we are still able to strike, but in a more intelligent way. It would be impossible to have this vision today without having undergone the joys and tribulations of struggles, the trial and error of the last 15 years."

Recent experience with sectoral chambers in Brazil has bolstered prospects of trade unions' playing an outstanding role in negotiating both industrial and social development (see Ferreira, 1994). The bargaining process involving trade unions and business in the current economic and political context raises the need to consider workers' participation in any alternatives for new economic growth policies. In fact, trade unionism has sought to go beyond the struggle for wage increases to propose changes in Brazilian society and deal with problems affecting both labour itself, like wages, employment, and vocational training, and society as a whole, like hunger, health, housing, transportation, education, and income distribution. "There must be a close link between conquering workers' citizenship in the factories (representation, stability, and reduction in the workday) and broadening gains in democracy and citizens' rights (unemployment insurance, training, and flexible retirement), based on the emergence of a political actor with social expression in the trade union movement."(Castro & Guimarces, 1990:222)

The Brazilian and Latin American trade union movement is also faced with the challenge of influencing the restructuring process (Salerno, 1993:10-11) with a kind of action allowing for the transformation of industry and business in general, conquering citizens' rights in the workplace and struggling at the company level for minimum space for negotiation in the future definition of labour.

Industrial restructuring has led to a drop in the employment rate in Brazil, although it has produced extremely high gains in productivity for industry as a whole and for some segments in particular (automobiles and automobile parts, for example). This confirms a process whereby the employment level has become more precarious: an increasing proportion of workers do not have signed working papers and are shifted precariously to the so-called informal economy. In general, job and salary scales do not keep up with actual changes in factory labour (Bresciani, 1994:201-202). According to Arruda (1994), "...the flexible system in the globalization process is eliminating more jobs than it is capable of creating. Capital and a deregulated market do not give priority to either jobs or human needs. The principle of competitive modernization is to keep a limited number of stable jobs inside companies and precarious part-time jobs outside, in a process of sharing unemployment.".

Ramalho, page 1 - 2 - 3

	1. Labour and Industrial Restructuring		5. Negotiation, Social Bargaining, and the Effects of Restructuring: A New Latin American Trade Unionism in the 1990s?
	2. Formal and Informal Labour: Definitions and Data		6. Labour, Employment, Poverty, and Economic Growth: Issues for a Sustainable Development Strategy
	3. Workers' Organization and New Business Strategies		7. Bibliography
	4. Recent Developments in the Brazilian Trade Union Movement