Labour market transitions in the time of Covid-19 in Brazil:a panel data analysis

The Covid-19 pandemic caused the most recessive shock the Brazilian labour market has ever experienced in its history. In the second quarter of 2020, more than 11 million jobs had been lost compared to the pre-pandemic period. Paradoxically, informal employment has paid the heaviest price for the crisis with two thirds of jobs destroyed. While unemployment has increased significantly, the main mode of adjustment has been an unprecedented withdrawal from the labour market which results in an explosion of inactivity. Since then, there has been a progressive recovery. At the end of 2021, the shock seems to be absorbed, the main labour market indicators returning to their pre-pandemic levels. However, this macro picture based on net labour flows only partially reflects the micro dynamics at work. What happened to the workers who lost their jobs? Who are they? Has the pandemic changed the nature of professional mobility, or has it only accentuated previous structural transitions? This study aims at answering these questions by mobilizing data from the PNAD-Continua panel. After correcting the selective attrition in the samples due to the changes in survey collection modes during the pandemic, re-weighted transition matrices are elaborated by distinguishing five main employment statuses: occupied workers (formal and informal), unemployed, discouraged workers, other inactive. Econometric models are then estimated to draw profiles and to identify the main socio-demographic factors associated with these transitions. Estimates are carried out for the three sub-periods (prepandemic, shock and recovery), in order to disentangle what is specific to the Covid-19 crisis. The results highlight labour flows that are much more massive and complex than the macro approach suggests. Paradoxically, the overall rate of sectoral mobility remained constant during the shock, despite its magnitude. It even collapsed in the recovery phase. The increase in exits from the informal sector into inactivity has been offset by greater immobility of the unemployed, without disrupting either the structure of the transitions between statuses or their determinants. The exclusion from the labour market that has affected the most vulnerable underlines the importance of the category of discouraged workers, a neglected phenomenon which deserves special attention. Finally, we find that the pandemic has exacerbated the inequality dynamics, particularly those related to gender, already at work before the crisis.