Effects of Income Inequality in Brazil

Brazil is a country with fascinating geographical features, climate and fertile soils that support commercial agriculture. In addition, Brazil, a South American country prides in being home to people with diverse origins, including its indigenous tribes, whites, blacks and Asians. While these diversities are a basis of a strong nation, they also provide ground for social and economic inequalities. Brazil has a long history of inequalities. In 2002, it was the eight most unequal countries on the planet, based on UNDP-Gini index. South Africa is the only large country that is more unequal than Brazil. Others are smaller nations lime Namibia and Seychelles. For this reason, the effects of income inequality in Brazil are real, cutting across the country’s economic sphere.

Understanding the effects of income inequality in Brazil

Despite its significant growth, Brazil continues to grapple with income inequality. However, in recent years, the country has recorded a decline in the level of inequalities. For example, its GINI coefficient dropped from 0.596 in 2001 to 0.543 in 2009. However, the numbers still point to a serious challenge of income disparity.

Brazil’s high-income concentration is among the richest 1% of the population, who add to less than 2 million people. This group alone controls about 13% of the total household income. This figure is similar to what the poorest majority control, who are about 50% of the population, translating to approximately 80 million Brazilians. Thus, the effects of income inequality in Brazil present a scenario that contradicts the economy size of the country.

Causes of income inequality in Brazil

Several factors contribute to the high levels of income inequality in Brazil. Some of these include rural urban divide, low education level, high taxation and land ownership issues among others. In this section, we shall discuss some of these factors in details. Firstly, huge income disparities exist between urban dwellers and the rural inhabitants. Majority of those in rural areas lack proper education, healthcare and infrastructure. Compounded with inability to access technology, formal education and professional training, people in rural areas stare at high levels of unemployment. This means that they contribute less revenue to the economy as compared to their urban counterparts.

In addition, the effects of income inequality in Brazil stem from low levels of education among majority of Brazilians. Low education is a major cause of income inequality as it promotes low social mobility. When people lack proper education, they cannot move around looking for opportunities to better their lives. As a result, the efforts of reducing the gap between the haves and have-nots get slimmer. Notably, Brazil’s illiteracy level is about 10.2% besides having a poor education system.

Another factor contributing to high levels of income inequality in Brazil are heavy taxes, which the government levies its people. Because of this, food prices in the country are too high for the poor to afford, making it a burden to those living in abject poverty. The tax load for those earning high salaries, 30 times more than the minimum wage is about 26.3%. While that for people with lower salaries, less than twice the minimum wage is about 48.8%. The disparity shows how entrenched the problem of inequality is in Brazil.

Analysis of the effects of income inequality in Brazil

Brazil is one of the leading exporters of agricultural produce in the world. As an agri-business economy, there has been high demand for land ownership in the country, with the rich taking advantage of the situation. Through agrarian reforms, the government was able to resettle many family farms that employ up to 74% of agricultural workers. With high land ownership concentration, it becomes hard for families to compete favorably with large-scale producers who control the market.

In understanding the effects of income inequality in Brazil, it is important to look at the social security pension scheme that makes it mandatory for Brazilians through the pay-as-you-go platform. The system is in two forms, for public and private sector workers. For private workers, the rule provides a contribution limit even though this cap does not apply to public service workers. This sheer inequality promotes income disparities between those working for the government and those in the private sector.

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http://www.econ.uzh.ch/ipcdp/theses/BA_YvesKeller.pdf

http://www.ipc-undp.org/pub/IPCOnePager89.pdf                              

http://www.irle.berkeley.edu/workingpapers/153-13.pdf

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1447959/                    

http://www1.wider.unu.edu/inequalityconf/sites/default/files/IGA/Neri.pdf

http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/10/05/000012009_20041005095126/Rendered/PDF/301140PAPER0Inequality0Brazil.pdf