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cities & citizens series - bridging the urban divide

adverse employment effects. Researchers observed a general wage-price inflationary spiral, in which persistent inflation offset some of the wage gains. ‘The main policy implication deriving from these results,’ they wrote, ‘is that the potential of the minimum wage to help the poor is bigger under low inflation. Under high inflation, the resulting wage-price spiral makes the minimum wage increase — as well as its antipoverty policy potential — short lived’.70 After taking office, Brazil’s President raised the minimum wage by 20 per cent and indicated his intention to double the value of the minimum wage before his first term ended in 2006. In his second term, his government has continued to raise the MS level. To date, the minimum wage has risen approximately 46 per cent since President Lula da Silva came to power in 2003. Having made the eradication of poverty a cornerstone of his administration, the continual raising of the minimum wage above inflation and increasing government handouts was expected. His government claims to have lifted millions of Brazilians out of destitution in recent years — an achievement discussed in Chapter 1. Households acquire income from different sources that are not always easy to capture in income surveys. A common problem is un-

To date, the minimum wage has risen approximately 46 per cent since President Lula da Silva came to power in 2003. der-reporting by respondents, particularly the poor, who often have two jobs or informal or casual income streams that supplement income from formal employment. Adolescents may also be put to work instead of completing school, or some rooms or floors of houses may be rented out. Other income values, such as utility subsidies, tax rebates or direct cash handouts in the form of social security also need to be assessed. The wealthy also have alternative income streams that may include some informal enterprises, rental from property, dividends on stocks, interest on savings or an inheritance. Clearly, some income such

as social security payments and, in particular, pensions or disability allowance, can accrue as earnings for people who do not work at all, either formally or informally.

Social security incomes Even with the influence of the informal economy, in Brazil, as in most countries, earnings from employment account for the largest share of total household per capita incomes. According to one study, between 1981 and 2004, the share of household per capita income from employment fell from 60 per cent to 50 per cent of the total.71 The share of income from self-employment rose in 1993 and then fell to 15 per cent by 2004. The declining shares of income from employment and self-employment are compensated by rising shares for the labour income of employers and, most importantly, for social security incomes. It is difficult to estimate the effect of public expenditure policy in possibly diminishing consumption inequality relative to income inequality in Brazil, but there is little question that certain public expenditures such as the Bolsa Familia and targeted utilities subsidies improve consumption inequality relative to income inequality. Additionally, the provision of universal free preschool and primary school, and the availability of basic health and sanitation infrastructure in favela areas greatly increase consumption value for the poor, even as their incomes remain low. The ‘relative mean’ for social security transfers doubled from 10 per cent in 1981 to 20 per cent in 2004, reflecting both the ageing of the population and the expansion of coverage and more responsive intervention of Brazil’s social security system. According to the same study, the share of the population receiving incomes from social security programmes has almost doubled since 1981, from 16 per cent to 30 per cent.72 The targeting of most pro-poor social security payments has become more efficient in recent years. In São Paulo, households with a collective income of three MS or less qualify for most subsidies and government benefits.

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Sao Paulo; A tale of two cities  

UN-HABITAT’s new Cities and Citizens series examines urban inequality in the developing world through in-depth analysis of intracity data de...

Sao Paulo; A tale of two cities  

UN-HABITAT’s new Cities and Citizens series examines urban inequality in the developing world through in-depth analysis of intracity data de...

Profile for unhabitat
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