Working from home could help ease inflation in Brazil – central bank study

Economic Policy Director Diogo Guillen and analyst Sergio Leao noted that wages were below pandemic levels despite a rebound in employment, with real wages of college-educated workers seeing the largest decline .

This suggests that “the convenience of working from home may play a role in easing wage pressure during the post-pandemic recovery,” they write.

Brazil’s unemployment rate fell to 7.7% in the three months to the end of September, the lowest rate since the three months to the end of February 2015.

Despite the lively jobs market, annual inflation resumed its downward trajectory in October, falling to 4.82%, with economists expecting the consumer price index to end the year in the central bank target range.

After analyzing a series of data, Guillen and Leao concluded that before the pandemic, a greater share of college-educated workers in the labor force was associated with an increase in real wages, but that the effect was has since been reversed.

“One possible explanation is that more educated workers, who are more likely to work remotely, have accepted lower nominal wage growth in exchange for the amenity value of greater job flexibility,” they declared.

In the minutes of its latest monetary policy meeting – in which interest rates were cut by 50 basis points for the third time in a row, to 12.25% – the bank’s rate-setting committee Central, of which Mr. Guillen is a member, noted that there was no evidence of strong wage pressure in wage negotiations, despite the falling unemployment rate.

The central bank said it would continue to monitor wage dynamics to better assess the degree of labor market slack and its potential impact on services inflation, an important variable for its policy decisions.