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New Labor Legislation Could Help Brazil’s Economy

New Labor Legislation Could Help Brazil’s Economy

When government officials ushered in the laws that now govern the Brazilian workforce, lawmakers could not have foreseen how the nature of labor would change. The Consolidação das Leis do Trabalho, or Consolidation of Labor Laws, was signed into law in 1943, a different era in social, political, and economic history. Now, the government is considering changes that will update Brazilian labor law for the modern age. According to one report, the bill could be sent to the legislature by the end of the year.

The broader goal of the new labor legislation is to make Brazil’s labor laws simpler and more consistent. In the words of the Minister of Labor and Social Security Ronaldo Nogueira, as it stands, “The Consolidation of Labor Laws is a patchwork which allows [for] subjective interpretations.” According to Nogueira, a new, simplified law would be interpreted by judges the same way for both workers and employers.

Specific changes could include strengthening collective bargaining and raising the minimum wage. The bill could also disallow paying end-of-year bonuses in installments or breaking up holidays, practices that are viewed as unfavorable to workers. The bill would also deal with outsourcing, a factor that was not considered when the labor laws were originally drafted. This largely unregulated type of labor frequently results in lower wages for workers and lower collections in taxes and Social Security.

Updates to Brazil’s labor laws have the support of labor groups that feel the laws have not kept pace with changes in the workforce. In the 1940s and 1950s, services represented a relatively small part of a Brazilian economy that was still in transition from rural to urban. The services sector now employs more than 12 million workers. Regulating this sector would mean that outsourcing would be considered a career choice rather than a temporary job. A revamped regulatory framework would eliminate legal uncertainty, while also creating incentives for business investment and job creation.

Brazil’s economy is currently struggling through its worst recession in years. Along with rising inflation, the economy is experiencing high levels of unemployment. An update to the country’s labor laws would give employers greater legal certainty, which in turn would put them in a better position to make business decisions, such as hiring. Consequently, workers should benefit from job opportunities and the government should benefit from increases in tax revenue. Labor legislation alone will not restore Brazil’s economy, but an update to the Consolidation of Labor Laws would certainly be a good first step.

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