"Bankruptcy for Profit” and Employment Infractions in Fissured Workplaces: Evidence from Brazil (1991-2023)

• In Event: 20881 - Section on Labor and Labor Movements Roundtables
  In Refereed Roundtable (60 minute): Table 2: Labor in Global Perspective

Abstract

This paper investigates the structural determinants of severe employment violations—particularly delayed wage payments or evasion of severance compensation. Drawing on empirical data from employment lawsuits and strikes against employment violations, it estimates the extent of severe employment violations in the labor market and regresses the determinants of these practices, with particular attention to their relationship with fissured work arrangements and business insolvency. We argue that while employment violations are often thought of as exclusively explained by workers’ vulnerability or lack of institutional protection, the structural constraints of a system of fissured workplaces are an important reason why severe employment violations are recurrent even where workers resistance is protected and common, as in the Brazilian case. Statistical analysis shows that severe employment violations are much more common among typically subcontracted activities, and that their frequency is associated with the levels of business insolvency at each month, especially large company insolvencies. We also preliminarily compare our data with alternative sources in Brazil (like data from labor inspection) and another national setting (Chile), both of which reinforce these findings. The evidence also indicates that some of the most “intuitive reasons” of why this might be the case are in fact incorrect (like the “naïve” idea that, because of their insolvency, these contractors “have no other choice”). These findings support a theory of the economic strategies of peripheral contractors which is coherent with accounts by workers, journalists, activists and some scholars. We argue that these strategies put in motion a cycle of undercapitalization, adverse shock, “forced” financing by means of employment violations, and ultimately bankruptcy.

Author

• Alexandre Guelerman, University of Wisconsin-Madison