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Economic Concern in Brazil with focus on Unemployment
Unemployment rate as per the International Labor Organization is the workers that are not currently working but are willing and able to work for a certain amount of money, are available for work and are actually searching for employment.
Brazil suffered high unemployment rates in its recession in late 2008 whereby almost 8% of the population was unemployed. Most workers did not have any occupation; others had unstable jobs while others worked with little or no remuneration at all. As a result, the growth of the economy is negatively affected while the growth rate is actually slowed down.
Brazil has been known to have a very high population in the western hemisphere next to the USA. The Brazilian employment sector usually requires high level of qualifications from the citizens thus they end up taking informal jobs.
The Philips Curve, which displays a correlation between the rate of employment and the prices of commodities, has been used for proper analysis. It displays that decrease in employment decreases prices in a country. This also brings about increase in the inflation rates. At the same time, the growth of the GDP has reduced. The rate of unemployment in Brazil has affected other sectors of economy because of the great impact that the industrial sector has.
With a bad economy the access to proper health care and education is affected. When the growth level of the employees’ falls, the economic growth is decreased while the inflation rates increased. This is a characteristic that is referred to as Keynesianism whereby there is an effect of socialism for the rich (Frenkel & Taylor, 2005).
The rate of unemployment actually affects taxes, expenditures, exchange rates as well as the rates of interest in the country. It affects a country’s economic activity due to the reduction in the industrial production as well as the business confidence. Production is also negatively affected. In Brazil the demand for iron and steel has reduced hence outputs and exports dropped significantly.
Banks were highly affected due to the rising interest rates that were brought about by the situation, hence small banks’ operability was greatly diminished. The high interest rates also affected the borrowing power of citizens and most restrained from borrowing the bank loans.
Demand for local products was also affected since citizens lacked the purchasing power for commodities as well as services. The gross domestic product of the country also diminished.
The Government expenditure is increased since they have to pay out benefits which could make it possible for the needs of the citizens who are unemployed. This measure is taken to continue catering for the population in the country.
The revenue that is collected from taxes is also reduced because of the fact that citizens do not have any source of income hence the tax that is being collected by the Government is drastically reduced. This results in less activities being done by the Government due to a lower revenue rate. Profitability of organizations and companies is also reduced hence reducing the ability of the Government to make any worthy investments.
In the graph above is seen that Brazil has actually dropped economically in the period of early 2008. This crisis was also evident in other countries during the recession.
This affected the stock market by the values of the stocks strongly depreciating and displaying some levels of instability. The financial markets were also affected since credit facilities were actually not available and the few that could offer such were quite highly priced.
The high rates of unemployment have also led to social unrest since individuals have to find other means of income for themselves and may end up engaging in activities that are socially unacceptable thus increasing the rate of insecurity in the country as a whole. The Government may also be forced to put in measures that will increase the levels of security of citizens, to curb the fast increasing rates of robbery as well as the unlawful acquisition of property by the affected population (Frenkel, 2004).
The spending ability of people that are unemployed actually reduces thus having a negative impact on the economy as a whole. The smaller number of the population that may be working tends to get affected also due to factors such as increased taxes as well as developing insecurity about their own work positions lest they end up being unemployed. The income per individual, standards of living, as well as the poverty levels are affected, thus leading to a recession in the economy.
Employment gaps of employed staff also have negative effects since most employers tend to sideline individuals that have not been working for a while (Colinsk, 1996). Sao Paolo was accredited as being the city highly affected by unemployment. It is the largest city of Brazil as well as the major contributor to the economy. Most citizens were employed temporarily during the holiday seasons and would have their contracts cancelled after the season was over hence leaving them in a situation of unemployment once again. Appropriate policies need to be established in order to tackle the problem of unemployment so as to prevent it. Implementation of proper labor reforms should be done to enable the creation of more employment opportunities. Brazil has already taken some measures to improve the situation and prevent further outbreaks such as the sale of insolvent banks and having the assets liquidated and sold to private and better-established banks.