Dividing the Pie in Brazil: Income Distribution, Social Policies and the New Middle Class

Brazil has made remarkable progress in reducing poverty and inequality. This reduction is explained by strong growth but also by effective social policies. Besides growth, public services and cash transfers have played the biggest role, the latter notably through the successful “Bolsa Familia” programme. Among public services, improved access to education has played a major role, allowing more Brazilians to move into better-paid jobs. However, shortages in physical school infrastructure are limiting the hours of instruction that students receive. The high drop-out rate needs to be reduced through early interventions such as expanding early-childhood education, by reducing grade-repetition and through more tailored support for those at risk. The quality of teaching could also be raised through more in-service teacher training and stronger performance incentives for teachers. Performance of public services devoted to health and transports has been mixed. Public health services are widely available but suffer from underfunding and training places for medical staff need to be expanded. The public urban transport system suffers from a shortage of investment which is urgently needed to upgrade capacity. Regarding cash transfers, the success of “Bolsa Familia” and new programmes put in place under the umbrella of the “Brasil sem Miseria” programme is remarkable but transfer payments remain too heavily focused on pension benefits. Giving more priority to “Bolsa Familia” and “Brasil sem Miseria” while limiting the real growth of pension expenditures in the future would improve the effectiveness of social expenditures for reducing poverty and inequality. This Working Paper relates to the 2013 OECD Economic Survey of Brazil (www.oecd.org/eco/surveys/brazil).