Labor-intensive sectors like industry, commerce, and construction may face layoffs or increased informality due to higher costs
11/18/2024
The proposal to eliminate the six-day workweek could significantly impact the production capacity of some economic sectors and lead to the closure of small and micro businesses, according to Bruno Imaizumi, an economist at LCA Consultores.
Unlike experiences in developed countries, implementing the six-day workweek in Brazil could harm sectors such as construction, industry, and retail, he notes.
“Some sectors can adopt more modern practices, like flexible hours or flexible work arrangements, such as hybrid or remote work. But in some traditional sectors, like the general industry, especially those involved in raw material processing and manufacturing, agriculture, and parts of commerce, there tends to be more difficulty,” he explains. “In the industry, even with investments in technology and capital, operations are still heavily dependent on labor. The same goes for commerce.”
Mr. Imaizumi warns that a new workweek structure could lead to increased costs for small and micro businesses, potentially making them unviable. For workers, the risk is increased informal employment, where contracts do not have set working hours, he states.
Valor: The proposal to end the six-day workweek is causing concern. What’s your view?
Bruno Imaizumi: The proposal gained considerable attention on social media but was confusing in its presentation. It essentially involves two points: the elimination of the six-day workweek, which is six days of work followed by one day off, and a reduction in the weekly working hours from 44 to 36. If you calculate four days times eight hours, you get 32 hours, not the 36 mentioned. So, the first point is to clarify that. Between eliminating the six-day workweek and reducing hours from 44 to 36 per week, the latter concerns me more.
Valor: What could be the economic losses?
Mr. Imaizumi: What economic scientific evidence do we have so far? When looking at developed countries and some specific companies, we see that when there was a reduction or elimination of certain schedules that left workers fatigued, productivity or growth in the involved companies increased. However, these experiments are primarily found in developed countries. We lack a counterfactual for developing countries. There are some small-scale experiments in Peru and the Philippines for specific sectors, but there’s significant sectoral divergence on this issue.
Valor: Does being a less developed country make it harder to implement a reduction in working days or hours per week?
Mr. Imaizumi: In less developed countries, like Brazil, there is a high rate of informality and a large informal market compared to developed countries. This poses a challenge to implementing workweek reduction policies, as just under 50% of the population works informally without comprehensive regulation. Also, the average qualification level of Brazilians is low, which affects productivity. Therefore, ending the six-day workweek might impact certain sectors.
Valor: Which sectors would be most affected?
Mr. Imaizumi: There’s a sectoral difference. High-skilled sectors like technology and consulting, which don’t involve tangible products, are more likely to adopt modern work practices, a current demand from workers. After the pandemic, work relationships have changed significantly. Record numbers of workers resigning voluntarily each month, for example, highlight worker dissatisfaction with quality of life. Looking at the sectoral issue, some can adopt modern practices like flexible hours or work arrangements, such as hybrid or remote work. But in some traditional sectors, like general industry, especially those involved in raw material processing and manufacturing, agriculture, and parts of commerce, there’s more difficulty. When we see studies citing Japan, Iceland, Sweden, New Zealand, and other emerging countries like Peru and the Philippines, they are experiments in companies more inclined to adopt modern work practices. In the industry, even with investments in technology and capital, operations are still heavily dependent on labor. The same applies to commerce. Therefore, I see that the change could make micro and small businesses unviable.
Valor: How so?
Mr. Imaizumi: It would make some small businesses unviable. Consider the implementation cost. In countries where labor is cheap and abundant, like ours, reducing hours without a reduction in pay could be seen as an additional cost for employers, especially in small and micro businesses, where these costs weigh more heavily. So, what would likely happen? If employers don’t hire informally, which is one possible effect of approving this constitutional amendment, they might not lay off workers but would find it difficult to continue operations.
Valor: What would be the impact in Brazil, considering that over 90% of new companies created in the last year are small and micro businesses?
Mr. Imaizumi: I believe that if experiments were conducted in some sectors, primarily those I mentioned, like technology, that don’t involve tangible products, a reduction might make sense. There are sectors more dependent on labor. Therefore, sectors like construction, commerce, and industry would be affected. But if we look at many service sectors, I believe many companies would benefit. So, there are indeed two sides to this issue.
Valor: Would this new scheme represent a significant change in Brazil? Although most formal employment contracts stipulate 41 to 44 weekly work hours, on average, people work less than this.
Mr. Imaizumi: When analyzing data from the Annual Social Information Report (Rais), we see that nearly 75% of formal employment contracts stipulate 41 to 44 hours, as currently provided by the Constitution. However, when looking at the actual hours worked by employees during the reference week of the Continuous National Household Sample Survey (Pnad), many work fewer hours. The average hours actually worked by a Brazilian employee is 39 hours. When considering only formal employees, that figure reaches 41 hours. So, many people are working less than stipulated. What concerns me is the drastic reduction from 44 to 36 weekly hours. If that happened, some formal workers working more hours would be affected. But overall, the average worker is already working within that range.
Valor: Does this proposal pose any risks for workers?
Mr. Imaizumi: Well, there are many inequalities. Besides the sectoral one, there’s the qualification inequality and the issue of informality. In the Brazilian labor market, there’s also the issue of informal employment. So, a possible effect of approving the constitutional amendment could be an increase in private sector workers without formal contracts, as independent contractors or sole proprietors. These types of work contracts don’t have a set work-hour limit. This is a concern.
*By Marsílea Gombata — São Paulo
Source: Valoar International