Informal Economy in Brazil: Informal labor – structural and cyclical results

João Hallak Neto

The analysis of informality in Brazil draws on two complementary IBGE household data systems: the decennial Demographic Census (2022) and the Continuous National Household Sample Survey (PNADc), which has produced quarterly series since January 2012. The Census, with near-universal coverage and a sample form applied to roughly 10% of the population, provides granular structural snapshots across all 5,570 municipalities and enables detailed disaggregation by activity, occupation, age, race/color and other characteristics. PNADc, based on a quarterly sample of about 211,000 households covering some 3,000 municipalities, serves to monitor cyclical fluctuations and medium-term trends in the labor market.

The analysis follows the ILO recommendations adopted at the 19th International Conference of Labor Statisticians (2013) and uses two operational proxies for informality among employed persons aged 14 and over: D1, which identifies individuals who do not contribute to social security (hence lacking formal access to retirement and paid-leave benefits), and D2, an enterprise/contract-based construct that aggregates employees and domestic workers without formal contracts, self-employed and employers without a registered business, and unpaid family workers. These two definitions are highly correlated; D1 is slightly more conservative because some workers contribute to social security even while linked to informal enterprises.

Structural results: 2022 Census

Census results for 2022 confirm that informality remains a significant, geographically concentrated feature of the Brazilian labor market. Nationally, informal employment accounts for roughly one third of the employed population, but the incidence and income implications vary markedly across regions and municipalities. The North and Northeast consistently present informality rates well above the national average, while the South, Southeast and Central-West register much lower levels. Municipal heterogeneity is pronounced: although many municipalities lie in a 20–30% informality range, over 3,600 municipalities exceed the national average of 32.7%, and more than 2,000 municipalities record informality rates above 50%. The 15 municipalities with the lowest informality are concentrated in the South and Southeast, particularly in states such as Rio Grande do Sul and Santa Catarina, whereas the municipalities with the highest rates are all in the North or Northeast. At the state level, only ten states — located in the South, Southeast and Central-West — fall below the national average; Maranhão and Pará stand out with more than half their employed population classified as informal.

Sectoral composition further illuminates the structure of informality. Five activity sections — Trade, Manufacturing, Construction, Agriculture and Education — account for nearly half of all employment, but informality is concentrated in a slightly different set of activities: Trade, Construction, Agriculture and Domestic Services together account for over half of informal employment. Highest informality rates are observed in Domestic Services, Agriculture, Construction and other service activities, reflecting the prevalence of small-scale, family-based and irregular employment relationships in these sectors.

Income measures underscore the welfare consequences of informality. Between the 2010 and 2022 censuses, average real monthly income of informal workers declined while formal workers did not experience a comparable fall, widening disparities in earning capacity. Because informal workers earn less on average and constitute about one third of employment, the share of total labor income attributable to informal work fell from about 22.1% in 2010 to 18.8% in 2022. Regional differences in informal income are also large: the North and Northeast record average informal incomes substantially below the national average, while the South, Southeast and Central-West are above it. In 2022 the North’s share of total informal income approached 29%, in contrast with the South’s roughly 15%, reflecting both higher informality incidence and lower average earnings in the northern region.

Cyclical results: PNADc (Continuous National Household Sample Survey)

The PNADc quarterly series complements the structural findings by documenting cyclical dynamics and medium-term changes since 2012. Over the PNADc period through 2025, informality fell roughly 10% in relative terms — about a 3.7 percentage point decline from the series’ start to the most recent quarters — and continued to decline after 2022. The pattern of territorial inequality proved persistent even as rates declined; proportional reductions were largest in the South (around – 22%) and Central-West (around – 12%).

Demographic patterns reveal both continuity and gradual change: gender differences in informality have converged over time, producing similar rates for men and women, while race/color and education disparities remain significant. Indigenous, Black and Brown (mixed-race) individuals face higher informality incidence than White and Yellow groups, and lower levels of schooling continue to be strongly associated with greater likelihood of informal employment. Nonetheless, PNADc also shows relative convergence across schooling levels, in part because the average schooling level among employed persons rose during the series.

Final comments and perspectives

Taken together, the Census and PNADc evidence indicates that informality in Brazil is simultaneously structural and cyclical: it is rooted in persistent territorial, racial and educational inequalities, yet it responds to labor-market dynamics and has declined modestly over the past decade-plus. Informal employment continues to affect roughly one third of workers while generating about one fifth of total labor income, a pattern that highlights constrained access to social protection and lower earnings for informal workers. Persistent concentration of informality in the North and Northeast, higher incidence among Indigenous, Black and Brown populations, and the strong inverse relationship with education underscore the distributional and policy - relevant dimensions of informality — areas where ongoing improvements in measurement and targeted surveys should materially inform social-protection and labor-market policy design.

Measurement advances at IBGE will enhance future monitoring and policy analysis. PNADc has introduced a module on platform-based work, with the second edition released for 2024 and a third planned for the next year, enabling characterization of app-mediated occupations such as drivers and delivery workers. IBGE’s forthcoming National Accounts series — aligned with SNA-2025 and scheduled for release in 2027 — includes a dedicated chapter on the informal economy and should permit more comprehensive estimates of the informal productive sector’s contribution to aggregate output. The planned return of the Urban Informal Economy Survey (ECINF) in 2026 will generate household-level data on small and family-run informal enterprises, improving understanding of production functions and survival strategies within the informal sector.