See economists’ warnings about the impacts of the end of the 6×1 scale | Brazil

Duque is the author of a study in which he outlines scenarios of how the economy will behave if the proposal is approved. In the most optimistic scenario, in which the reduction in working hours would not be accompanied by job losses and with an average growth of 1% in productivity per hour worked, the the loss for Brazilian GDP would be 6.84%.

In the most pessimistic scenario, in which companies close or lay off employees due to higher costs, the GDP would collapse by 8.12% and there would be a reduction of 1.1 million job vacancies.

“Supporters of the proposal do not seem to realize that Unless productivity increases significantly, it is impossible for such a proposal not to generate a strong economic impact.. GDP is nothing more than productivity and the number of hours worked. To imagine that we can reduce the second without reducing the population’s income is wishful thinking,” he says, using the English expression which defines a thought which contains more desire than reasoning.

Even if working hours are reduced and wages prevented, the law cannot prevent layoffs, nor the reduction in hiring, nor the freezing of wages, he continues.

“And even if there are compensatory mechanisms that increase the productivity of the economy – through factors such as longer rest or better mental health – this compensation will hardly be equivalent.”

A sign that even the government understands the extent of the negative impact of the 36-hour proposal, he continues, is the fact that it was working on another project, underway in the Chamber, which advocates a smaller reduction in working time, to 40 hours per week. The PEC, which progressed in the Senate and which is reported by Senator Rogério Carvalho (PT-SE), proposes the end of the 6×1 scale and a gradual reduction of the weekly working day to 36 hours, with up to eight hours per day and without reduction in salaries.

“I don’t see a problem with the end of the 6×1 scale. Europe has chosen to work fewer hours per week than the United States — and that is largely the reason for the gap between the two countries’ GDP performances. But I think we are missing the opportunity to discuss new formulas, which could take into account the greater flexibility of working hours that the labor market allows today.“, says Duque.

One example is the gig economy, embodied by ride-sharing and delivery apps. There are different workers and preferences that change over time. “The government is trying to impose a limit on hours worked, but the workers in this sector themselves refuse this limitation”note.

Another debate concerns pay by the hour worked, instead of a fixed salary, which also allows greater flexibility for employers and workers.

“Of course, such changes create additional challenges. A person who works 4 hours a day could not earn half as much as a person who works 8 hours – the proportion would have to be higher, even to encourage longer hours. Everything should be better discussed, but there are also other experiences in the world to reflect.”

The end of the 6×1 working day, with the transition from 44 hours per week to 36 hours per week, could have an impact on GDP, due to the reduction in the number of hours worked by the worker, taking into account the country’s historical productivity per hour worked. A reduction to 36 hours would result in a loss of up to 6% of the overall value of GDP. The loss would occur throughout the transition period for the reduction in weekly working hours, according to economist Fernando de Holanda Barbosa Filho, researcher at the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV Ibre).

The Constitution and Justice Commission (CCJ) of the Senate approved on Wednesday (10) the Draft Amendment to the Constitution (PEC) which establishes the end of the 6×1 scale by gradually reducing working hours to 36 hours per week. The idea is that the total workday would decrease the year after the PEC is approved to 40 hours per week, then decrease by one hour per week, year after year, for a total of five years of transition.

“If we imagine a person who currently works a maximum of 44 hours per week, and who will see their working hours reduced to 40 hours the following year, we are talking about a drop of almost 10% in hours worked. It is impossible for a person to produce the same thing as before. This should have an impact on productivity per worker. And given that his salary will be maintained, as will the proposal to reduce working hours, we must expect an increase in costs for companies. It is impossible to think that this will not have an impact on worker productivity,” says Barbosa.

The biggest concern, he says, is the impact on GDP. The estimate of a study already published within the framework of the FGV Ibre, it is said, is a reduction in added value in the economy of around 6%.

“Productivity per hour of work in Brazil has, at best, stagnated in recent years. The talk that workers will become more productive tends not to come true. And therefore, if the working day is reduced by 10% in the first year, as proposed, the sectors in which people today work 44 hours will fall to 40 hours per week, with a loss of value added in that sector of almost 10%. As in the economy as a whole, the working day average today is already around 38 hours, the loss will be more concentrated in certain specific sectors.

The impacts on the well-being of those who keep their jobs will be evident, says Barbosa Filho, because the person will “keep the same salary” by working fewer hours.

“The additional problem is for workers who work on commission, such as salespeople. Commission typically makes up a significant portion of their compensation. If they work fewer hours, they will not be able to maintain the same level of total compensation.”

On the question of costs, he says, companies will try to make adjustments, but it will depend on the sectors. Currently, he emphasizes, the labor market is positive for workers, because the level of unemployment is very low.

A gradual shift from 44 to 36 hours per week reduces a certain risk of precariousness in the labor market, but does not eliminate it. Whatever the good intentions, the change, given the structure of the labor market in Brazil, should lead to an increase in the rate of informality or pejotization. The assessment is that of Bruno Imaizumi, economist at 4intelligence.

He draws an analogy with legislation that sought to formalize domestic workers. “Obviously, some benefits were guaranteed to people in formal positions, but the reduction in the number of domestic workers with formal contracts has been quite sharp. »

As working hours will be reduced and there may be a gain in productivity per hour worked, he says, this This may lead to increased operating costs in some sectors and for some businesses, particularly micro and small, who could suffer a little more.

Some businesses, he says, may have difficulty continuing to operate, which could lead to layoffs, but without a major impact on the labor market as a whole.

“What I see is rather a substitution of work that could be formal for informal work. Or for more fragile contracts, like pejotização.”

There are studies, remember, which show a loss of GDP when working hours are reduced. “I don’t really see a problem with going from 44 to 40 hours per week, which is the working schedule of the vast majority. In a reduction to 36 hours, I already see more problems, because we do not have such a well-adapted labor market. Our market has some weaknesses and, although unemployment is low, we do not have decent incomes for most professions.

The reduction in working time provided for in the PEC which eliminates the 6X1 regime revives the need to review productivity measures and incentives to achieve a form of compensation, at the same time as it can put pressure on inflation by generating more costs for companies if there is not some form of equivalence, such as a salary adjustment or productivity gains. This is what the economist and former Minister of Labor in the government of Fernando Henrique Cardoso, Paulo Paiva, appreciates.

However, the economist emphasizes that the approval of the new text approved this Wednesday (10) by the Senate Committee on the Constitution and Justice appears more as a “political-electoral symbol than an effect on the efficiency of the labor market”.

Think in the medium term, he recommends that the country rethink productivity indicators as quickly as possibleas the labor market is increasingly complex – with new employment models, such as app-based jobs, and an increase in informality.

Paiva also recalls that the criterion of working hours can be modified by agreement or collective agreement, as maintained by the PEC, as well as the prohibition of reducing wages. “It is the most natural way (the conventions) not to generate additional costs for production. However, in the case of a reduction in working time, without compensation by a reduction in wages or productivity gains, the cost of the product increases and, therefore, can exert pressure and generate more inflation,” he affirms.

The measure only concerns formal workers. Self-employed workers are not covered by labor legislation and constitute the complex challenges that Brazil will face in the years to come, Paiva emphasizes.

Commenting on long-term developments in the labor market scenario, he says that when thinking about “the reorganization of working time, it is essential to understand where productivity is going – both due to demographic changes and technological transformations that affect the structure of the labor market”.

For Paiva, it is necessary to pay attention to the active population and demographic aging, which will have repercussions on the composition of the increasingly complex labor market, well beyond the formal and informal duality mentioned in the 1970s. These challenges are linked to the methods of measuring productivity which, according to the economist, will also have to be revised.

“This is why we need to think about the productivity measures we use. They were designed for traditional industry, linked to tangible economic activities. However, today work is much more complex: it involves knowledge-based services, intellectual production and activities that do not fit into the classic logic of productive measurement. This is the big question: measuring productivity in a world that has changed,” he says.