Socio-economic impacts of Brazilian sugarcane industry

Author’s Accepted Manuscript Socio-economic impacts of Brazilian sugar cane industry Márcia Azanha Ferraz Dias de Moraes, Fabíola Cristina Ribeiro de Oliveira, Rocio A Diaz-Chavez www.elsevier.com/locate/envdev

PII: DOI: Reference:

S2211-4645(15)00062-7 http://dx.doi.org/10.1016/j.envdev.2015.06.010 ENVDEV236

To appear in: Environmental Development Received date: 25 November 2014 Revised date: 19 May 2015 Accepted date: 25 June 2015 Cite this article as: Márcia Azanha Ferraz Dias de Moraes, Fabíola Cristina Ribeiro de Oliveira and Rocio A Diaz-Chavez, Socio-economic impacts of Brazilian sugar cane industry, Environmental Development, http://dx.doi.org/10.1016/j.envdev.2015.06.010 This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting galley proof before it is published in its final citable form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.

Socio-economic impacts of Brazilian sugar cane industry

Title page - full title: Socio-economic impacts of Brazilian sugar cane industry - all authors and their affiliations: 1 - Márcia Azanha Ferraz Dias de Moraes (corresponding author) University of Sao Paulo (USP), Professor at Luiz de Queiroz College of Agriculture. Avenida Padua Dias,11, Piracicaba, São Paulo, Brazil.13416-480 [email protected] Phone: (55) 1934294444 extension 8716

2 - Fabíola Cristina Ribeiro de Oliveira Professor at Universidade Metodista de Piracicaba. São Paulo, Brazil

3 - Rocio A Diaz-Chavez Research Fellow at the Centre for Environmental Policy of Imperial College London

Abstract This paper analyzes the socio-economic impacts of the Brazilian sugar cane industry, examining the characteristics of the workforce, pay and working conditions. It also examines the role of the family on socio-economic indicators, comparing the indicators for first generation sugar cane workers with those for the second generation of workers, as well as comparing these indicators with those for workers in the agricultural sector as a whole. We draw on data from Relação Anual de Informações Sociais (RAIS) and also from Pesquisa Nacional por Amostra de Domicílios (PNAD, or National Household Sample Survey). The findings show that together, the three key sectors that comprise the sugarcane industry in the country (sugar cane cultivation, sugar production and ethanol production) employed about one million workers in 2012. The results also show that family background plays a role on the choices made by second generation workers relative to work and thus impacting on the socio-economic indicators for the sectors. The comparison between indicators for the sugar 1

cane sector and the overall agricultural sector showed differences, with the sugar cane sector being better off than the agricultural sector. Finally, the assessment of indicators for the second generation shows that they have face better choices and conditions than firstgeneration workers.

1. Introduction The prospect for increased use of bioenergy in many countries has brought to the international debate concerns about environmental impacts (pollution, deforestation, reduction in biodiversity); health problems (particularly due to water quality and pollutant emissions to the air); quality of labor and competition for arable land (which could rise food insecurity for the poor).

There is no consensus in the literature about whether the impacts of increased biomass production for bioenergy use are positive or negative, mainly because of the variety of raw materials and technologies used, leading to a wide range of impacts on land use, ecosystem services and labor market, among other issues. Additionally, impacts vary among countries and regions within the countries, while policy drivers also exert a great influence on energy security, rural development, national economic development, environmental quality, climate change, and job creation.

Potential benefits that bioenergy production include rural and economic development, energy security, and improvement of balance of payments (Lynd and Woods, 2011; Diaz-Chavez, 2011; Walter et al, 2008). Other social benefits include job creation and enabling access to the labor market by people with little or no education, provision of training and skills certification, labour market regulation (Sallum, 2007; Moraes and Zilberman, 2014; DiazChavez, 2014).

This paper aims to contribute to the discussion of the social impacts of the sugarcane ethanol industry in Brazil. It reviews research carried out about this sector, along with an assessment of social impacts of the Brazilian Sugarcane Ethanol Program, focusing three criteria – education, job creation and work conditions. It also provides an analysis of the role of education and working conditions on second generation workers. We compare social indicators of employees of the sugar cane sector with those from the agricultural sector as a 2

whole (excluding the sugar cane sector) in order to examine whether they attain higher levels of education and better formal employment in two regions in Brazil.

2. The Brazilian Experience The Proalcool program that was set up in Brazil in 1975 was designed to stimulate production of ethanol as an alternative to gasoline and significantly altered the profile of sugar and ethanol production in Brazil (Rosillo-Calle, 1987; Goldemberg, 2006, Macedo et al, 2005; Moraes and Zilberman, 2014). Brazilian ethanol production has grown from approximately 555 million liters in 1975 to 23.2 billion liters in 2013, leading to increased sugarcane production, from 88.9 million tonnes to 588.5 million tonnes in the same period. Growth in these sectors is said to have had a positive impact on jobs, including the creation of agricultural jobs (see Moraes 2011a)

A number of studies have demonstrated the positive socio-economic impacts of sugarcane ethanol industry in Brazil (Assato and Moraes, 2011; Chagas et al, 2011; Satolo and Bacchi, 2013; Neves et al, 2013, Bacchi and Caldarelli, 2015). The studies have emphasised different socioeconomic aspects such as job creation, the improvement of the human development index (including education) and income, and the improvement in working conditions and corporate social responsibility in the factories. The opening of the Brazilian economy in the late 1990s was successful in attracting foreign capital into several sectors of the country. According to Moraes and Zilberman (2014) foreign capital has been invested in the sugarcane, sugar and ethanol sectors since 2000 (French groups Louis Dreyfus, Tereos, and Sucden having acquired ethanol plants in Brazil that year). After 2007 there was a greater still influx of foreign investment from various countries. Foreign investment largely came not only from sugar-producing companies in other countries (such as Shree Renuka Sugars, India’s largest sugar refiner), but also from companies with extensive experience in the production and trading of agricultural commodities, such as Bunge Limited, Cargill, Louis Dreyfus, Tereos, Abengoa, Glencore, and the Noble Group (Moraes and Zilberman, 2014). Large oil companies, including companies such as Shell and British Petroleum, along with the Brazilian state-company Petrobras, have invested in the sugarcane ethanol sector (Moraes and Zilberman, 2014).

3

Along with the influx of foreign capital, a process of consolidation has taken place with profound changes in the organization of production, along with the professionalization of management, which can be attributed in part to the presence of new players in the industry. New technologies and new forms of coordination of the production chain, as well as production management systems that are economically and environmentally more efficient, have been adopted, in order to meet the growing list of sustainability criteria required by the market (Moraes and Zilberman, 2014).

Supply chain The benefits of the bioenergy sector can also be seen through its impacts on some economic indicators. Chagas et al (2011) analysed the effects of the increased sugarcane production on municipal revenues of São Paulo state. They showed that the value of agricultural production of sugarcane is higher per hectare than for most crops, thus accruing a greater value of agricultural income to the municipality in terms of tax revenue. Satolo and Bacchi (2013) assessed the effects of the sugarcane sector expansion over the municipal per capita Gross Domestic Product (GDP), noting that the GDP for one municipality and that of its satellite neighbouring municipalities grew from 24% in 2000 to 55% in 2010. Assato and Moraes (2011), in turn, analyzed the socio-economic impacts of the expansion of the sugarcane sector in two municipalities (Nova Alvorada do Sul and Rio Brilhante), located in the Mato Grosso do Sul state They found that an increase in aggregate income followed the establishment of sugarcane processing plants at the two municipalities. They also noted that real state sector experienced a particularly large expansion in the years following the arrival of sugarcane processing plants. Their research pointed out improvements in education in the period after the installation of the sugarcane industry, which can be seen in Figure 1. Nevertheless, there does not seem to be a clear correlation with an economic positive impact.

4

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Illiterate Up to 5th grade (incomplete) Up to 5th grade (complete) Middle school (incomplete) Middle school (complete) High school (incomplete) High school (complete)

2000

2008

Higher education (incomplete) Higher education (complete)

Figure 1. Evolution of Education in Nova Alvorada do Sul Source: Assato and Moraes, 2011

Additional models can be used to complement the assessment of the impact of biofuel supply chain on the economy, for instance Computable General Equilibrium (CGE) models and Input-Output (IO) analysis. Martinez et al (2013) used an input-output model to assess the socio-economic impacts in terms of value added, imports and employment of sugarcane-derived bioethanol production in the Northeast (NE) of Brazil. The model showed significant positive socioeconomic impacts achieved in developing and expanding the sugarcane–ethanol sector in the region under the conditions studied in their research. Despite I/O models are generally applied to a national level, regional levels can also been assessed as demonstrated by Martinez et al (2013). Santos (2013) analysed the impacts on the Brazilian economy of the expansion in the production of ethanol and biodiesel in substitution of part of fossil fuels between 2010 and 2030, based on the Plano Nacional de Energia – PNE (National Energy Plan). A Computable General Equilibrium model of the Brazilian economy was used for this purpose. Results showed that the impacts generated by biofuels policies increases the macroeconomic aggregates in the economy, especially in the case of the biodiesel policy. The author concludes that the policy of gradual insertion of biofuels in the Brazilian economy can generate both economic and environmental positive effects.

Job creation and income The Brazilian experience in producing sugarcane, sugar and ethanol is an important example of the socio-economic benefits that can be achieved, since the number of workers involved is

5

high as well as the revenue levels created by the sector (Moraes, 2007; Hoffmann e Oliveira 2008; Moraes et al. 2010).

Moraes et al. (2011b) conducted a study on socioeconomic indicators on sugarcane production, ethanol, oil extraction and oil byproducts production, highlighting the importance of the sugarcane industry in terms of job creation, income and regional development. The authors found that sugarcane production is located in the countryside of almost all Brazilian states. Moreover, as the extraction and production of oil byproducts are limited to a few coastal cities, the sugarcane industry can contribute greatly to regional development (see Figure 2).

Figure 2. Location and number of jobs for sugarcane and ethanol sectors (on left) and oil extraction and oil byproducts (on right). Source: Prepared from RAIS data, 20111

Other authors have also noted improvements in indicators, such as employment (quality and quantity), as well as the wages sectors (Balsadi and Borin, 2006; Moraes, 2007; Oliveira, 2009; Moraes, 2011a; Moraes, 2011b; Gerber Machado and Walter, 2011; Neves et al, 2013). Bacchi and Caldarelli (2015), for instance, analyzed the impacts on employment/income, education and health, using a panel data for all state municipalities from 2005 to 2009. 1

The authors thank Luiz G. A. de Souza for the elaboration of the maps.

6

Significant and positive interaction between the sugarcane supply chain production and employment/income (positive elasticity) was reported. Nevertheless, the authors did not find significant interaction between the sector expansion and the levels of education and health.

In addition, Hoffmann and Oliveira (2008) reported that the average income of people employed in the sugarcane sector had grown over the period 2002 – 2006. Comparing the features and remuneration of workers in sugarcane crops in Brazil with those of other crops (rice, banana, citrus, cassava, soy, corn and grapes), it can be noticed that the highest average income occurs in soy crops, where most employees are involved with mechanized activities (such as tractor drivers). Income of workers in the sugarcane crops were the second highest (Hoffmann and Oliveira, 2008).

The increase of modernization in agricultural activities is leading to major changes in techniques and social relationships. Nowadays, almost all sugarcane in the Center-South region is harvested green (which constitutes an advance in environmental terms), being more efficient in this case the use of mechanized harvesting2. However, the change from burnt cane to green cane (and consequentially from manual to mechanical harvesting) has led to a sharp decrease in jobs, given that one harvesting machine substitutes on average 80 working men (Moraes, 2007). To overcome this job reduction, the private sector has provided training and skills programs for manual cutters through the Renovacão project, that is a artnershi bet een

I

, the

ederation of Rural

orkers in S o

aulo State ( eraes ), the

Solidaridad Foundation and supply-chain companies: Syngenta, John Deere and Case IH, with support from the Inter-American Development Bank (IADB). The s eciali ed training for a

ro imatel

,

roducing areas in S o aulo (Sugarcaneorg,

ro ect ro ides

orkers er ear in si of the ma or sugarcane )

Working conditions In recent years, capital and effort have been invested in improving working conditions in the sugarcane sector with quite favorable results. Several factors can explain the better working conditions nowadays: (i) banning the practice of pre-harvest burning of sugarcane fields; (ii) improving compliance with environmental and labor standards; (iii) increase in exports of 2

It is not the case for the North-Northeast region, where the land slope does not allow mechanization, mainly in the state of Pernambuco. It should be noted that this region nowadays produces less than 10% of the total sugar cane produced in Brazil.

7

sugar in the international market; (iv) the opening of the Brazilian economy and foreign capital inflows; (v) restructuring and industry consolidation (Moraes and Zilberman, 2014). The mechanization of harvesting of green cane brought about two main benefits. The first relates to the environment, as it is more efficient because the straw can be used for cogeneration of electricity. The second is social, with the improvement of the working conditions and the requirement of employees with higher education. The mechanical harvesting also decreased the migration of workers from poorer states of Brazil, which used to come to harvest sugarcane by hand in the state of São Paulo. Problems of housing and working conditions of these migrants are practically over3. (Moraes and Zilberman, 2014).

Human development index Different indicators can be used to assess socioeconomic issues (Garcia de Oliveira, 2010; Diaz-Chavez, 2011, 2014; Rutz and Jansen, 2014). A number of indicators have been derived from both national (e.g. GDP), and international data sets which, have been used for bioenergy sector. The GDP can be considered to have an indirect effect on human development because it helps to understand the effects of expenditure and government programs on health and literacy at national level (Ranis, 2004). According to Ranis (2004) at a micro-level more positive direct causality links can be explained using the Human Development Index (HDI) at the household and family level. The HDI was developed to measure the average achievement in key dimensions of human development: health, education and a decent standard of living (UNDP, 2015). The HDI is the geometric mean of normalized indices for each of the three dimensions mentioned above but the index cannot explain inequality (the Gini index is used for this) HDI’s indicators ha e been used in Bra il to examine how they vary across municipalities with different levels of sugarcane production, without sugar cane production. For instance, Garcia de Oliveira (2010) used the Human Development Index to measure sustainability in all municipalities in the State of São Paulo to compare those with production of sugar cane and those without production in a time series (1970, 1980, 1991 and 2000). The main finding were that those municipalities that had sugar cane production in general improved their HDI between 1970 and 2000. A further finding was that sugar cane production contributed to job creation and more general economic

3

Most of these migrants were probably absorbed in the infrastructure constructions of the north-northeast region (ports, airports, stadiums for the World Cup, hydroelectric, etc). RAIS data show that in 2002 the building sector employed 2,258,853 workers, and in 2011 this number was 5,782,225. There was a great increase of lowschooling workers in these sectors.

8

benefits. Martinelli et al (2011) also assessed municipalities with different levels of sugar cane production and cattle ranching in São Paolo and compared them with the Northeast region. For this they developed a classification of the municipalities according to land use class and used the S o aulo State Go ernment’s Social Res onsibilit Index (SRI) which includes indicators for wealth, longevity, and education. In this form they could compare to the HDI from the United Nations. Martinelli et al (2011) did not focus only on the sugar cane production from the agricultural point of view. They also reviewed the social costs of the sugar industry (both agriculture and processing) from 2000-2007 (in average). Their research showed a positive relationship between the socioeconomic indicators used and the presence of a sugar mill across municipalities in São Paulo. Although this was statistically significant they concluded that further research is still needed to demonstrate a causality link between development and this sugarcane/ethanol sector in Brazil.

More recently, Bacchi and Caldarelli (2015) undertook a panel data analysis in order to identify the positive externalities related to the expansion of the sugarcane industry by evaluating the Municipal Development FIRJAN Index (IFDM). They showed evidence that the expansion of the sugarcane industry in the state of São Paulo generated positive effects on employment and income, but there was no significant positive impacts on health and education. To assess the micro-levels impacts of the presence of the sugarcane industry more studies need to be conducted.

Integrated Sustainability and Corporate Social Responsibility As a result of increased biofuel production in several countries the sustainability of fuels made from agricultural raw materials began to come under scrutiny (Moraes and Zilberman, 2014). As a result, great attention has been paid to a socio-environmental agenda, and the increasing need to comply with internationally accepted environmental and social standards. In the same way, multinational and national companies in the food and beverage sectors (significant sugar consumers) increased certification requirements of the supply chain, which also had a positive impact on social indicators of the sugarcane sector. In addition, compliance with environmental and social requirements has begun to influence the strategies and investments in the ethanol sector, which seeks to export ethanol to the United States and the European Union (Moraes & Zilberman, 2014; Diaz-Chavez, 2011). 9

A research project funded by the European Commission, the Global-Bio-Energy project (2014) assessed socio-economic impacts of biofuel production in different countries in Latin America, Africa and South-East Asia. The testing of the selected indicators in private companies demonstrated that several companies are engaged in activities that benefit local communities, whilst in general local communities (particularly in Brazil) have acknowledged the benefits they bring in terms of job creation. From the point of view of environmental issues and ecosystem services, communities were more aware of negative issues, such as the burning of sugar cane (as in the case of Brazil). Changes in environmental issues and ecosystem services were less perceived by the communities (Diaz-Chavez and Vuohelainen (2014). The next section presents the methodology for assessing indicators based on secondary data from two regions in Brazil.

3. Methodology In order to examine changes in employment levels in the sugarcane, sugar, and ethanol sectors, along with education and wage levels, we used data obtained from two government sources: (i) Relação Anual de Informações Sociais (RAIS4, Annual Report of Social Data), published by the Brazilian Ministry of Labor and Employment 5; and (ii) Pesquisa Nacional por Amostra de Domicílios (PNAD, National Household Sample Survey), a cross-sectional field survey conducted annually by the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística, IBGE). The PNAD database was used to analyze the changes in education and working conditions in two generations of rural sugarcane workers, as well as to compare these conditions with those of workers of the agriculture sector as a whole (excluding the sugarcane sector). We selected the indi iduals

ith the status of “family reference person” and “offspring” (ne t generation)

based on following criteria:

4

RAIS is an annual census of the formal labor market based on information provided by employers. RAIS data related to the sector are organized at the municipal level. The PNAD is an annual survey of socioeconomic information related to formal and informal workers, obtained through questionnaires applied to a sample of households. The PNAD data related to the sector are organized at the state level. 5 Formal job refers to a work hired under a formal labor contract.

10

i) PNAD defines a family made up of an adult who is the "famil reference erson”, his/her spouse (if applicable), or/and people who may be linked to it, these may be relatives or nonrelatives (Medeiros et al., 2002); ii) The family reference person (who may be male or female) is the person defined as the person responsible for a family unit within a household;6 iii) The offspring can be legitimate, adopted or stepchild of a reference person. In our proposed analysis, we only use information from the descendant who resides in the same family unit of reference person, aged 18 years7 or older and spends 15 hours or more in an occupational activity per week. Note that the descendent may also be female or male, but for the sake of simplification will be briefly designated as "son". It is important to point out that the son of the reference person who resides in another family (lives with his mother, with grandparents, or is already married) is not part of the universe of this research.

With respect to the occupation of the reference person, we consider two definitions (as used in Oliveira, 2009): i) For agricultural workers, we included persons which perform all kinds of agricultural activities, including temporary and permanent crops, with the exception of the sugarcane sector. Forestry activities, animal husbandry, plant extraction, fishing and fish farming are not included in this sample8. ii) Among the group of all agricultural workers, we highlighted the subset of those who worked in establishments whose main activity was sugarcane9. Incomes and all monetary values are expressed in September 2013 U.S. dollars (US$)10.

6

According to PNAD a household may have more than one family We opted for the criterion of 18 years or older offspring because they are above the age group of young people in the process of formal schooling (6 to 17 years old). Other studies can be designed to obtain a complete indicator of age / grade lag and years of studies with offspring, young people and adolescents which were not part of this investigation. 8 These activities added to agricultural activities form the set of agricultural activities, which are not used in this study, since the main interest is to investigate the socio-economic conditions of workers in the sugar cane opposite the productive segment of all crops. To extract the data from PNAD database we use the following activity codes indicated in the PNAD dictionary: V9907 = 1101 to 1104 and V9907=1106 to 1118. From 2002 PNAD started to adopt the Brazilian Classification of Economic Activities (CNAE-domiciliar); 9 The PNAD code of this activity is V9907 = 1105 10 Initially the brazilian reais (R$) have been deflated for the month of August 2013, using the Brazilian Consumer Price Index (INPC). Due to PNAD records income in the month of September and the relevant part of the population receives payment in early October, as proposed by Corseuil and Foguel (2002), the appropriate index is obtained by calculating the geometric mean of the values of the INPC September and October 7

11

4. Results The results are presented in two main sections. The first section presents the findings regarding the number of employees for the whole sector of sugar cane, sugar and ethanol production. The second section focuses on the findings of the improvement in education and working conditions for sugarcane workers in the agricultural sector, considering an intergenerational analysis. The years selected for the findings vary according to the indicator selected and the availability of data. These are clearly shown in each one of the analyses.

Socioeconomic Indicators of the sugarcane, sugar and ethanol sectors

Number of employees and wages The first indicator refers to the formal levels of employment11 in the three key sectors (sugarcane, sugar and ethanol), as summarized in Table 1. The results are presented separately for the two major sugarcane-producing regions, the north-northeastern and south-central regions12 of Brazil. It can be observed that in aggregate, the sugarcane, sugar, and ethanol sectors employed over one million people (in 2012 the number of worker formally employed in the three sectors was 1,091,575.13 )

Nationwide, between 2000 and 2012, the whole industry experienced a significant increase (69.8%) in the number of formal workers (from 642,848 in 2000 to 1,091,575), an increase which can be explained by significant growth in production during that period. It is also worth noting that some 72% of all workers in 2012, were employed in the south-central region. The number of formal workers employed at ethanol plants and sugar mills increased (205.2% and 153.93% respectively) in the period whereas for the sugarcane sector there experienced a decline (7.4%), which can be attributed to a shift from manual to mechanized harvesting. The ban on burning sugarcane fields accelerated the mechanization of agricultural activities in many Brazilian states, thereby reducing the demand for labor whilst changing the 11

Labor rights prescribed in the legislation, such as the right to receive unemployment insurance, the right to paid vacation, and the right to an annual bonus (known as the 13th salary in Brazil) apply to all formal workers. 12 The north-northeastern region includes the states of Alagoas, Bahia, Ceará, Maranhão, Pará, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, Sergipe, and Tocantins. The south-central region includes the states of Espírito Santo, Goiás, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraná, Rio de Janeiro, Rio Grande do Sul, Santa Catarina, and São Paulo. 13 According to RAIS, the total number of employees in all national sectors in 2012, December 31, was 47,459 millions, of which 3.1% were employed in agriculture. Among agriculture jobs, sugarcane employees accounts for 27.1%

12

profile of the workforce (demanding more years of schooling and more specialized training, related to the mechanical harvesting activities). The proportion of workers engaged in sugarcane cultivation dropped from 55.5% in 2000 to 30.3% in 2012.

Table 1. Number of Formal Workers by producing Regions and by Sector in 2000 and 2012

Sector

Region NNE

Sugarcane

Ethanol

2012

Δ (%)

81,191

74,484

-8.3

SC

275,795

256,226

-7.1

Total

356,986

330,710

-7.4

NNE

143,303

230,443

60.8

74,421

322,431

333.3

Total

217,724

552,874

153.9

NNE

25,730

45,232

75.8

SC

42,408

162,759

283.8

Total

68,138

207,991

205.2

642,848

1,091,575

69.8

SC Sugar

2000

National total

NNE, north-northeastern; SC, south-central. Source: Prepared from RAIS database (http://www.rais.gov.br/).

According to the PNAD database (annual survey of socioeconomic information related to formal and informal workers), in 2012 out of the 2,214,485 agricultural workers in the country, 20.9% (representing 463,046 workers) were engaged in sugarcane production. As shown in Table 2, the Center-South region of Brazil accounted for 60.8% of the total of sugarcane workers. Although it was the main producing state, with approximately 60% of national production, São Paulo was responsible for only 33.7% of all sugarcane jobs, due to its higher level of harvest and planting mechanization, which demand fewer workers than manual activities.

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Table 2. Selected Socio-economic Indicators of the Sugarcane Sector in 2012 for Brazil, two Producing Regions and the State of Sao Paulo Number of Workers

Brazil North-Northeast Center-South São Paulo

463,046 181,526 281,520 156,191

Average Age

Montly Average Wage *

(years) 37.1 35.5 38.1 38.2

(US$) 417.64 298.68 495.40 534.95

Male Share

91% 96% 87% 88%

Average Schooling

(years) 5.3 3.9 6.2 6.8

Source: Prepared based on PNAD database * in US$ September 2012

No large variations were observed in the average age of the workers in the different producing regions. In relation to the gender, it was seen that male workers prevailed in the different regions, while the percentage of women is higher in the Center-South region (13%). As previously mentioned, mechanization has effectively reduced the number of manual labor jobs in the agricultural sector. In addition, wages have risen and the profile of the workforce has changed because a higher level of education is now required to operate the machinery. As for average wages, it can be seen that in 2012, the average wage paid in São Paulo was the highest one.

Oliveira (2009) compared the sugarcane wages with others agriculture sectors, and found that the wages of soya sector are the highest ones. The author estimated an earning equation, and after the control of other variables that influence wages (schooling, age, region, color, gender), the average monthly wage of sugarcane almost the same as the soya sector. The wages in agriculture sector are quite low in Brazil, what can in part be explained by the low educational level of agricultural workers14. Moraes et al (2012) analyzed the wages variation between 2002 and 2009 of the main sectors of the Brazilian economy (agriculture, industry, building, commerce, public administration and services), and compared the wages 14

Different authors, among whom Langoni (1973, apud BARROS; MENDONÇA, 1995); Langoni (2005); Corrêa & Hoffmann (1995); Corrêa & Hoffmann (1997); Hoffmann & Simão (2005), Mori (2007), Hoffmann & Ney (2004), Kassouf (1997), Moraes (2011) analyzed wage differences associated with age, sex, schooling, occupational group, prior property and wealth variables, among others. In most of the literature, education is seen as the main income determinant.

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among sectors. The authors found that the average wage of workers increased by 36.9 percent in the agricultural sector (farming and livestock); by 8.8 percent in industry; by 17.9 percent in the building industry; by 9.4 percent in commerce; and by 14.5 percent in the service industry in the 2002-2009 period. The increase in the wages of agricultural workers came closest to matching the value of the variation of the minimum wage in real terms, which was 48.4 percent over the period 2002–09. Although the biggest increase was in agricultural wages, the sector also features the lowest wages and levels of schooling. In 2009, agricultural wages corresponded to only 45 percent and 40 percent of the average wage paid to employees in the industrial sector and service industry, respectively. In 2009, the average length of schooling for agricultural workers was less than half that of the average schooling of the other sectors. It is important to bear in mind that the farming and livestock sector is one of the only sectors in the Brazilian economy that continues to employ workers with extremely low levels of schooling, even going so far as to hire illiterate people (Oliveira, 2009, p. 72).

Education and Working Conditions: Intergenerational assessment Several studies have shown that the levels of education in Brazil are unsatisfactory, especially when educational data is compared with international standards (Barros et al. (2002). Brazilian education is divided into three levels: (i) elementary school, (ii) high school and (iii) higher education. Elementary school is compulsory for children between the ages of six and fourteen, and it is subdivided into two categories: the elementary school I (for children from one to five years old) and elementary school II (six to nine years old). High school is for youths from fifteen to seventeen, or adults who have not completed the minimum compulsory education.

According to the United Nations Education, Scientific and Cultural Organization (UNESCO, 2014), literacy levels in Brazil have improved from 70.6% in 1980 to 91.4 % in 2011. Changes in the levels of education among employed persons in Brazil, considering all sectors of the economy, are shown in Figure 3. Between 2002 and 2012 the average number of years of schooling increased from 6.9 to 8.6 years. The average number of years in education of employed persons in the northeast region, increased by 2.1 years. This is greater than that

15

observed in other regions. However, in 2012 the education level of employed persons in this region was still the lowest in the country.

Brasil 9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0

6,9

7,1

7,2

7,3

7,6

7,7

North 7,9

8,1

8,4

8,6

9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0

2002 2003 2004 2005 2006 2007 2008 2009 2011 2012

6,8

6,9 6,2

5,2

5,4

5,6

5,7

6,0

6,2

6,4

6,5

6,7

7,0

7,3

9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0

7,2

7,4

7,5

7,8

8,2

8,3

8,5

8,6

7,9

7,7

7,4

7,4

7,7

8,0

8,2

8,4

8,8

9,0

2002 2003 2004 2005 2006 2007 2008 2009 2011 2012

Southeast 8,0

7,1

Center-South

2002 2003 2004 2005 2006 2007 2008 2009 2011 2012

9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0

6,9

2002 2003 2004 2005 2006 2007 2008 2009 2011 2012

Northeast 9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0

6,7

South 8,8

8,9

9,2

9,4

2002 2003 2004 2005 2006 2007 2008 2009 2011 2012

9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0

7,3

7,5

7,7

7,8

8,0

8,1

8,4

8,5

8,7

8,9

2002 2003 2004 2005 2006 2007 2008 2009 2011 2012

Figure 3 – Evolution of average years of study(1) of occupied people of all economic sectors, above 10 years old. Brazil and Geographical Regions, 2002-2012 Source: Prepared by the authors based on microdata from PNAD / IBGE (2002-2012) (1)

Data on workers with non-specific statement or without study.

The influence of the family context in vocational development has been demonstrated in a number of studies (Whiston and Keller, 2004 apud Sobral, 2009). In this study we compared socio-economic indicators of the rural sugarcane workers (named parents or family reference person15) with their offspring, and compared them with the indicators of the workers of the agriculture sector as a whole (excluding the sugarcane sector) 16. Additionally, the offspring’s

15

ntil the 99 , “famil reference erson” as named as “head of the famil ” in D (free translation of terms in portuguese: “pessoa de referência no núcleo familiar” and “chefe de família”). 16 The employment generated in the industrial phase of ethanol production was not analyzed because the agricultural market has worse socio-economic indicators than the other sectors, which justifies the focus on this market.

16

work activities were reviewed to identify occupational mobility among different sectors of the economy.

The analysis is conducted using the micro data of the Brazilian Household Survey (PNAD, 2012). To understand the role of the sugar and ethanol production sector, not only in the generation of employment for the sugarcane workers themselves, but also in the intergenerational transmission17 of socio-economic conditions for their offspring, we chose to use only the information of rural employees (sugarcane and agriculture). This analysis focuses on agricultural workers (those ones who work in the sugar cane plantations and in the agriculture sectors in general) because traditionally the agricultural sector presents lower educational and formalization levels, migration problems, among others issues. There are few reported problems of this nature in the productive sectors of sugar and ethanol.

Agriculture is an economic activity that still hires workers with very low educational levels, including a large number of illiterate workers. In the Brazilian agricultural sector, in 2009, the average length of schooling for agricultural workers was less than half that of the average schooling of the others sectors. Thus, the average number of years of schooling for workers were 4.2 years for agriculture; 9.2 years for industry; 6.7 for construction; 9.6 years for commerce; 10.7 for public administration and 8.9 for services (Moraes et al, 2012).

Table 3 shows the average schooling, age and income for agricultural workers and for sugarcane workers, as well as for their offspring, for Brazil. It can be observed that in 2012, the average level of education among agricultural workers nationwide was 4.0 years of schooling, which is quite low; for the Brazilian sugar cane sector the average is five years, which is a little higher but still very low.

17

It is understood as intergenerational transmission of social opportunities the analysis of the "parents" (the reference person) and offsprings conditions with respect to employment, income and education.

17

Table 3. Agriculture and Sugarcane Workers in Brazil: Average Schooling, Age and Income Sector of Activity of the reference Person Agriculture excluding Sugarcane Sugarcane Family Reference Offspring Family Reference Offspring Person Person

Average Schooling (years of study) Average Age Average Income (US$)

4.0

8.1

5.0

8.4

41.1 720.58

22.2 697.23

39.63 1,055.38

23.1 905.59

Source: Prepared by the authors based on the micro data of the PNAD/IBGE (2012) Comparing the indicators for the offspring with those ones of their parents it can be noted that the average number of years of schooling is higher for the offspring compared to their parents in both categories (agriculture excluding sugarcane and sugarcane). Nevertheless, they receive a lower average income. It has been shown Moraes, 2012; Oliveira, 2009; Hoffmann, & Oliveira 2008) that income level also varies with age, although this variation is not linear. According to the estimates by Oliveira (2009), the age associated with maximum wage gain expected in agriculture employee was 44 in 2007. According to the data analyzed in this study, the average age of employed in agriculture (except sugar) in 2012 was 41.1 years and for their offspring was 22.2 years old. In the sugarcane sector, the average age was almost 39.6 years and for the offspring was 23.1 years old.

It is possible to observe a small difference in the average education of employees' offspring for the two groups: in sugarcane sector was 8.4 years of study, while for the next generation of the agricultural workers this value was 8.1 years. There were no important differences in the average age between the analyzed groups for both family reference person and for the offspring of the two groups.

The distribution by levels of schooling of the reference person employed in agriculture and sugarcane sector as well as their offspring (Figure 4), shows that a large proportion of employees (reference person) in both activities comprise people with less than one year of education: 24% of total agricultural employees (531.476) and 20.8% of the employees of sugarcane sector (96,313). Moreover, 64.2% of agricultural employees (1,421,699) and 51.6% of employees in the sugarcane sector (238,931) had 4 or less years of schooling.

18

Although this proportion is lower for sugarcane, it represents an important amount of low schooling workers, which are unlikely to find jobs in other sectors of the economy Ac vity Sector of the Reference Person: Agriculture (excluding sugarcane)

Son 2,5

Reference Person

14,5

27,3

24,0

0,0

10,0

Illiterate

48,0

40,2

20,0

1 - 4 years

30,0

40,0

5 - 8 years

5,7

25,3

50,0

60,0

9 - 11 years

70,0

80,0

More than 12 years

9,3 0,7

90,0

100,0

No informa on

Figure 4 – Distribution of schooling levels of reference person(1) employed in agriculture(2) and sugarcane sector and their offspring. 2012 (3). Source: Prepared by the authors based on the micro data of the PNAD/IBGE (2012) For the category of 9-11 years, the proportions are quite similar. However, at a higher education level (over 12 years old), the proportion of employees in the sugarcane sector (19.8%) is nearly double that of those in agriculture (9.3%). When comparing offs ring’s educational indicators, the proportion of offspring in the first two brackets together (illiterate and up to 4 years of study) represented 17% of agriculture employees’ offspring and

% of sugarcane em lo ees’ descendants, indicating a little

better situation. In the category 5-8 years of schooling, the proportion of sugarcane is higher

19

than agriculture (32.7% and 27.3%, respectively). Thus, we find relatively higher proportions of sugarcane

orkers’ offspring in higher levels schooling (with the exception of the last

subset), indicating that the transmission of educational characteristics from parents to offspring occurs. Regarding income, employees of the sugarcane sector earn on average 45% more than those working in agriculture as a whole; when we compare the wages of offspring, the descendants of sugarcane workers earn about 29.9% more than the descendants of the agricultural sector. Regarding working conditions, it is known that the formality of employment (workers hired under a labor contract) guarantees some basic rights for workers, such access to retirement, social security, elimination of child labor, protection or insurance against unemployment, among others, improving quality employment. Jobs protected by labor law, which gives access to the formal or statutory regime, are traditionally referred to as "quality jobs". This is a limited view of the quality of employment, although widely used (Ramos and Reis, 1997).

Table 4. Percentages of formal employment among the groups analyzed. Brazil, 2012

Percentage (%)

Formal Informal Total

Activity Sector Agriculture (excluding Sugarcane)

Sugarcane

Reference Person

Offspring

Reference Person

Offspring

34,23 65,77 100,00

49,31 50,69 100,00

86,98 13,02 100,00

70,05 29,95 100,00

Source: Prepared by the authors based on the micro data of the PNAD/IBGE (2012) It can be observed in Table 4 that the number of workers formally employed in the agricultural sector in Brazil is relatively small, accounting for only 34.2% of the agricultural workforce in 2012. However, the situation is completely different within the sugarcane sector, in which 87% of workers were formally employed that year. Other authors (Basaldi, 2008; Moraes et al, 2010, and Oliveira, 2009) observed a similar trend. The number of formally employed workers in the sugarcane sector in the state of São Paulo, the leading sugarcane-producing state, reached 156,191 in 2012, representing more than 90% of the total (PNAD). It is worth noting that the offspring employed in sugarcane sector have higher rates of formal employment (70%), compared with other agricultural sectors (49.3%).

20

It is possible that a higher proportion of formal employment of the reference person in sugarcane sector is influencing the offspring decision to offer work under similar conditions. A combination of higher education and a higher proportion of formal employment is certainly reflected in a higher wages for the sugarcane

orkers’ offspring, compared with the value

obtained for other agricultural sectors, in the two years investigated (see Table 3).

To analyze the mobility of offspring, we examined the sectors in which they work to see whether they are able to work in non-agricultural activities. Table 5 shows the distribution of offspring according to the work sector. Table 5 – Distribution (%) of the Sectors of Activity of Offspring. Brazil, 2012 Sector of Activity of Son

Sector of Activity of Reference Person Agriculture Excluding Sugarcane Sugarcane

Agriculture 43.2 29.3 Services 37.4 35.3 Industry 13.0 20.9 Building 5.2 8.1 Public Administration 1.2 4.9 Others 0.0 1.5 Total (%) 100 100 Source: Prepared by the authors based on the micro data of the PNAD/IBGE (2012) For the group whose family reference person works in the agricultural sector, 43.2% of offspring are engaged in enterprises whose main activity is related to the agricultural sector, and the service sector being the second largest share (Table 5). On the other hand, among the offspring of sugarcane employees the participation of the agricultural sector (29.3%) is much lower. For this group, the highest proportion is for the service sector (35.3%), while the industrial sector is the third largest destination (20.9%). This result indicates that there is mobilit for other sectors of acti it , and this mobilit is higher for the sugarcane em lo ee’s offspring.

21

5. Discussion The results obtained in the study focused on three topics of socio-economic importance: labor in the sugarcane sector (including ethanol and sugar production), education and working conditions. The last two topics were examined in relation to the intergenerational effects.

The main findings demonstrate that the total number of employees considering the three sectors altogether increased over the period of twelve years. However in the agricultural sector it was observed a reduction, probably due to increase of the mechanical activities in the sugarcane crops in the Center-South region. The increment in the number of workers in sugar and ethanol sectors was higher in the South central region. The results for education compared the agricultural sector in general and the sugarcane sector in particular shows that the overall education levels observed in the sugar cane sector are slightly higher than in agriculture. Nevertheless, the main difference can be observed in the next generation of workers (offspring), who had attained higher levels of education. These results were reported for the year 2012

The distribution by sector of the reference generation and the next generation also revealed an interesting new insight. An influence by the family background was observed in regards to the choices available to the next generation, which has an impact on the socio-economic indicators of employees' offspring of the sectors analyzed. One possible reason is that a father who works under a formal contract of work and under better working conditions, exerts a positive influence on their offspring, encouraging them to follow in their steps. In this study, socio-economic indicators (e.g. education, wages) for sugarcane workers and their offspring show more of an improvement than the offspring of agriculture workers in general.

The same pattern was observed considering the mobility of offspring to other sectors of the economy. Among the offspring of sugarcane employees the participation in the agricultural sector is much lower. For this group, the highest proportion is for the service sector (35.3%), while the industrial sector is the third largest destination (20.9%). This result indicates that there is mobility for other sectors of activity, and this mobility is higher for the sugarcane em lo ee’s offs ring

22

Overall, the results preclude identifying a causality-link between the selected indicators and the sugar cane sector (as a whole). Although it was demonstrated that there are improvements, no statistical analysis was carried out to test correlation. Furthermore, a clearer link with other indicators from the Human Development Index might have been examined.

6. Conclusions and recommendations This paper examined selected socio-economic indicators (such as literacy and schooling levels for education, and wages and number of people employed and type of contracts for working conditions) for the specific sector of sugar cane production in Brazil compared to the agricultural sector in general. The literature shows that data gathering has improved on these topics and secondary data is available for an assessment of indicators. Some factors may explain the improvement of the indicators, such as greater enforcement of the existing labor legislation in the recent years. Also, with the growth of Brazilian exports of sugar made from sugarcane, Brazil competitors in the international sugar market (especially the EU countries) began to question the competitiveness of domestic production, claiming that Brazil had lower production costs because it degraded the environment and had inadequate working conditions. Although these were not the factors of lower cost of Brazil, certainly influenced companies to adopt best practices and certify production.

The comparison between the sugar cane sector and the overall agricultural sector showed differences, with the sugar cane sector better off in the performance of the selected indicators than the agricultural sector as a whole. Furthermore, the assessment on the next generation, this is, the offspring of the current workers, also demonstrated an improvement in the choices and conditions for the offspring. The literature indicates positive impacts of the existence of sugarcane and sugar and ethanol sectors in the municipal per capita Gross National Product (GDP) for the state of Sao Paulo, and that in general the existence of these sectors improved the socio-economic indicators. This was also sustained by the number of jobs created and the general economic benefits analysed in the study.

23

Further analysis of these and other socio-economic indicators need to be conducted in the main productive regions in Brazil to provide a fuller picture of improvements in the sustainability of the sector. This should be considered one of the main areas of sustainability, including monitoring and reporting, not only in Brazil but also in those countries where the bioenergy sector is growing and contributing to economic growth.

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HIGHLIGHTS  We analyze the evolution of the number of employed people, level of workers

education, and wages in the sugarcane, sugar, and ethanol sectors  We compared the socio-economic indicators of the rural sugarcane workers with their

offs ring, as

ell as the sugarcane

orker’s indicators

ith those of the workers of

the agriculture sector as a whole.  The sugar cane sector better off in the performance of the selected indicators than the

agricultural  The assessment on the offspring of the current workers also demonstrated an

improvement in the choices and conditions for the offspring.

28