Wage cost of incidence and duration of unemployment in Brazil

Abstract

This paper analysed the impact of incidence of unemployment by means of a comparative study of income for two groups of workers: group 1, composed of permanent workers, group 2, composed of newly employed workers. Using micro-data from Pesquisa Mensal de Emprego, from 2006 to 2014, and different methodological techniques [Ordinary Least Squares (OSL), Quantile Regressions and the methods of Chernozhukov et al. (Econometrica 81(6): 2205–2268, 2013) and Firpo et al. (Econometrica 77(3): 953–973, 2009)] it was noted that (1) workers who recently moved from unemployed to employed (newly employed workers) earn an average wage inferior to those who stayed on the job (permanent workers) regardless of the position they occupy in wage distribution (2) Wage differential is higher for higher quantiles of wage distribution (reaching 32.7% in quantile 0.9 in 2008); (3) A reduction of differential was noted in the past few years, especially for superior quantiles in the distribution (quantile 0.9 differential income in 2014 was 21.9%). Concluding, the estimates confirm that turnover leads to wages cost for workers in terms of wage loss.