THE PENNSYLVANIA STATE UNIVERSITY ECONOMICS ASSOCIATION PRESENTS:
EDITOR: JOE KEARNS PRINT EDUCATION COORDINATOR
CONTRIBUTORS: MIKE BARNES, WAHHAJ IQBAL, JOE KEARNS, COLE LENNON, CAMILLE MENDOZA SOTO FALL SEMESTER 2014: VOLUME THREE SEPTEMBER 30, 2014 THE OPTIMAL BUNDLE
In general, Brazilian workers experience low unemployment and relatively high job security due to the countrys labor laws. The Brazilian Labor Market: Putting Economic Theory to Shame The labor market data for Brazil in the second quarter is inconceivable if one assumes that unemployment and economic growth are inversely related. The economy is in a recession facing an economic growth of -0.6% and high inflation at 6.51%, but it has defied conven- tional economic theory by recording a record low unemployment rate of 5%. However, re- ports show that the labor market is low on productivity, accounting for only 40% of the GDP growth between 1990 and 2012. There are two reasons which explain the oddly low unemployment rate in this economic climate. First, the labor laws in Brazil are strict and make it hard for employers to fire the workers. The second reason is that, due to the upcom- ing holiday season, the recruiting process is hard, which further discourages firms from fir- ing employees, thereby keeping the unemployment rate low despite the recession. The low unemployment rate offers a sense of optimism, but it fails to tell the whole story. WI READ MORE: http://econ.st/1ncaGsC http://bit.ly/1pEqpNd http:// bit.ly/1DWAeAB http://onforb.es/1rJ32I6 Income Inequality Improves: Taking Brazil Off the Hot Seat Brazil is on the hot seat as income inequality remains relatively high and the middle class gets weaker. Although Brazil has been facing economic issues for the past three years, there still are valid reasons to be optimistic. It is true that the largest economy in South America has been in a recession since the first half of the year. Nevertheless, pessimists downplay the evi- dence which shows positive economic progress, and overstate the effect of slow investment and waning economic activity since the FIFA World Cup. Brazil has continued to grow its middle class, which now makes up 47% of the nations voters and 55% of the total population. Poverty has also declined from 26% to 10% from 2002 to 2012. This year, Brazil was removed from the United Nations World Hunger Map , which is a validation for the enormous effort they put in in reaching this goal. The recent recession has sparked political unrest and finan- cial instability, but the numbers show that Brazils quality of life is improving.MB READ MORE: http://bit.ly/1ualBFL http://bit.ly/1temuJ6 The proportion of Bra- zilians living in poverty has declined in the past decade. Brazil's Education System: Not So Progressive After All Brazil is proclaiming ordem e progresso in its education system victoriously before it should. Although its literacy rate increased from 75% in 1980 to 90% in 2014 and expenditure on education as a percentage of GDP has increased from 3.5% to 5.8%, these statistics are misleading. For being such a progressive country, it ranks 131st in literacy rate and 38th out of 40 in overall quality of education. If Brazil wants to com- pete with global leaders, the government needs to drastically reform its education sys- tem. Currently, the mandatory level of schooling only goes up to age 14, but extending the mandate to 18 would ensure that parents keep their children in school longer. A longer and stronger education will improve citizens skills , and spill over into other aspects of the economy and help move Brazil into the top five world economies. Then, and only then, would they be able proclaim ordem e progresso with well-deserved confidence.CMS Brazil trails many other big economies in literacy rate and overall quality of education. READ MORE: http://abcn.ws/10l0JjU http://on.wsj.com/1rk2bvz http:// nyti.ms/1qSveTj Special Report on Brazil
An economy with a bright future is one that is making massive growth gains while still underdeveloped. Brazil has done just that, and its economy is now the seventh- largest in the world. So Paulo of The Economist, how- ever, reports that Brazils economy is one marked by decline. Saying that alone is a huge overstatement, as Paulo neglects to mention the great economic news of Brazils past few decades. Brazils progress in reducing income inequality, maintaining low unemployment, and dramatically reducing poverty should not be dismissed, as these accomplishments show the story of Brazils economy is one of progress.
Brazil has had stubbornly high income inequality for years, but is making strong headway in alleviating it. Economists Jens Arnold and Joo Jalles published a recent paper affirming that Brazil is reducing inequality twice as fast as its regional peers. This achievement comes as many advanced economies like the United States have seen rising income inequality over the past few decades. Another sign that pessimists are overre- acting is the persistently low unemployment in the Bra- zilian economy. Unemployment in Brazil has remained below 6.5% since 2011. The current rate is around 5%, which is considerably lower than its global counterparts like the United States (6.1%) and the European Union (10.2%).. Finally, another point which validates opti- mism is Brazils progress on poverty reduction. Econo- mists Jens Arnold and Joo Jalles conducted this re- search and found that absolute poverty in Brazil has steeply declined in the last decade. It went from 23.2% to 5.9% from 2002 to 2012, meaning that the percent- age of people living on less than two U.S. dollars a day has fallen dramatically. These statistics help show Brazil has been and continues to be moving in the right direc- tion for millions of its citizens.
Any tales of Brazils decline are overstated. It has made impressive strides in areas where other countries have struggled. By decreasing income inequality, sustaining low unemployment, and decreasing poverty, Brazil has shown that it is a resilient economic power which can resist international economic problems. Its economic story over the past decade is a tale of significant pro- gress. Despite much smaller difficulties along the way, it is a tale that bears repeating. CL A decade ago, the future looked bright for Brazil. That future, however, is now and the Brazilian economy is in a recession. President Dilma Rouseff has defended her track record in the ongoing Presidential elections by arguing that the labor market is strong and social pro- grams have lifted millions out of poverty. Yet, markets are pessimistic about the impact of Rouseffs efforts, as the Bovespa Index fell 3.75% on Sept. 29. Falling invest- ment, industrial output, and manufacturing illustrate that Brazils economic anemia is no mere short-term aberration. The lack of consumer and investor confi- dence illustrates that the market conditions which cata- pulted Brazil to prosperity in the past are gone and un- likely to reappear in the near future. Brazils economic growth fluctuated in the past decade with spikes and falls of commodity prices due to its Achilles heel: its lack of diversification. As a response to inflationary fears, the central bank implemented tight monetary policy which increased the relative value of the real by 100%. Brazilian exports became more ex- pensive to foreigners and the strengthening of the real caused the manufacturing share of GDP to fall from 16.5% in 2004 to 13.5% in 2010. The signs of doom were clear in 2012 when Ruchir Sharma, head of Emerging Markets and Global Macro at Morgan Stanley Investment Management, argued, Few developing na- tions have sustained rapid growth for even one decade, let alone two or three, and virtually all of those that have did so by expanding their share of global manufac- turing, not riding the tides of commodity prices. Along with the decline in productivity which resulted from past monetary policy, current fiscal and regulatory policies continue to stifle an economic recovery. Ac- cording to The Economist, Brazil takes in 36% of GDP in taxes, while payroll taxes (58% of salary) are higher than that of any other big economy. Brazilian firms re- quire ten times the global average time length to pre- pare its annual tax return, while strict labor laws have led to more than 3 million court cases in a year. Many obstacles stand in the way of building a stable and pros- perous economic future. If she wins the election, Ms. Rouseff would be wise to cease being one of them. JK Brazil: An Economy of Progress Turn out the lights, the partys over Psuea.org EA Homepage Psuea.org/blog Education Blog Upcoming Events: Oct. 1 Gallup U.S. Job Creation Index READ MORE: http://bbc.in/1v1y5NU http:// bit.ly/1uznbT1 http://bit.ly/1nGIQXz http://1.usa.gov/1bRMzLI http:// econ.st/1oSBEB8 READ MORE: http://fam.ag/1nGHU5q http:// econ.st/10l0TaM http://bbc.in/1C9zdEB http:// on.barrons.com/1uanOAW http:// on.wsj.com/1nKp6wj Is the Brazilian economy moving in the right direction? Oct. 2 Jobless Claims