grid-database

Brazil formalized fast. In its six largest cities, the share of workers in informal jobs fell from 39% in 2002 to 25% in 2015, with the biggest drop among the lowest paid. Even so, more than half of the lowest-paid quarter still work informally.

Moving between formal and informal sectors changes pay a lot. Going from a formal to an informal job came with an average earnings fall of about a third. Going the other way, a rise of over 40%.

Informal earnings are less stable. Big year-to-year gains and losses are much more common, and differences in age, gender, education, industry or occupation explain very little of that.

Informal jobs pay less. On average, informal workers earn less than half what formal workers do. Most of that gap reflects who works informally, but even for the same person in a similar job, informal work pays about 11% less.

Earnings became more stable. The risk of a large year-to-year drop in earnings spiked during the hyperinflation years of the late 1980s and early 1990s, when annual inflation peaked above 6,500%. It fell sharply after the 1994 stabilization.

Rapid real earnings growth at the bottom drove the fall, and the authors point to a minimum wage that more than doubled in real terms as one likely factor. The exception is the very top, where the highest earners pulled further ahead.

In Brazil’s formal sector, inequality fell remarkably. Between 1995 and 2018, the ratio of earnings at the 90th percentile to the 10th roughly halved, for both men and women.

Another 28% increased their time in formal employment: 16% gradually, and 12% rapidly. In the former group, earnings rose faster, although in both groups they stayed below the cohort average.

The largest group, 42%, had persistently low formal employment, averaging just over one month a year, and the lowest earnings. This contrasts with the 22% identified earlier which paired high employment in each year and highest earnings in the cohort.

Only about half of Colombian workers are formal in any given month. But follow Colombians over time and formality looks… fragile. Few workers are persistently formal and even fewer hold a formal job for an entire year. New research by @LeoMoralesZur, @socampdi & @Brenda_Sama👇