Rural-Urban Migration and Underemployment among Females in the Brazilian

Northeast
Author(s): Peter J. Eaton
Source: Journal of Economic Issues , Jun., 1992, Vol. 26, No. 2 (Jun., 1992), pp. 385-395
Published by: Taylor & Francis, Ltd.

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 Jo' JOURNAL OF ECONOMIC ISSUES
Vol.XXVI No.2 June 1992

Rural-Urban Migration and Underemployment

among Females in the Brazilian Northeast

Peter J. Eaton

Labor theorists of market-oriented Third World countries have

historically been firm believers in the labor-market segmentation
theory. In the 1970s, a neoclassical response evolved, which at-
tributed the existence or exacerbation of segmentation in major
part to governmental policies, whether in the form of labor legisla-
tion or "unbalanced development" policy. Data from two surveys
are used here to demonstrate that, at least for one sizeable seg-
ment of the labor force, the unfavorable responses to governmen-
tal policy predicted in the writings of Michael Todaro [Todaro
1969, 1976, 1980; Harris and Todaro 1970] do not occur.

The Todaro Model

The original Todaro model [Todaro 1969] contains two sectors:

a rural sector and an urban sector. The model is used to
demonstrate that the creation of urban jobs (through a regional
development policy, for example) could, through rural-urban
migration, result in an increase in the rate of urban unemploy-
ment. In subsequent extensions of the model [Harris and Todaro
1970; Fields 1975; Todaro 1976], two urban sectors, an urban for-
mal sector and an urban informal sector, as well as a rural sector

The author is Associate Professor of Economics, University of Missouri, Kansas

City. This article was presented at the annual meeting of the Association for
Evolutionary Economics, New Orleans, Louisiana, January 2-5, 1992.

385

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 386 Peter J. Eaton

are modelled. The assumed characteristics of the three sectors are

summarized in Table 1.

Table 1: Characteristics of the Three-Sector Model

Rural Urban Informal Urban Formal
low, flexible wages low, flexible wages high, downwardly rigid wages
full employment underemployment structurally limited number ofjobs
job stability job instability job stability; opportunity for advancement
no fringe benefits no fringe benefits fringe benefits

Under this set of assumptions, the extended models

demonstrate that job creation in the urban formal sector (through
regional industrial development policies centered in large cities)
could, again through rural-urban migration, result in an increase
in the relative and absolute size of the urban informal sector.
The Todaro model is differentiated from other rural-urban
migration models by the emphasis placed on the expectations of
potential migrants. According to Todaro, the objective of a typical
rural-urban migrant is to obtain a job in the urban formal sector.
Since the number of available jobs in that sector is technologically
limited, the rural migrant typically is employed upon arrival in the
urban informal sector. Earnings in that sector may be below earn-
ings in the rural sector, but the migrant remains in the informal
sector with the expectation of acquiring a job in the formal sector.
Equilibrium (in the sense of no incentive for rural-urban migra-
tion) occurs when expected earnings in the urban formal sector is
equal to expected earnings in the rural sector. If rural-urban
migrants have lower earnings in the destination than in the origin,
then the migration process, stimulated by an unbalanced develop-
ment policy, is responsible for a welfare loss. Put another way,
there is a cost to such a development policy that traditionally is
not taken into account.
Todaro's critics [Willis and Fields 1980; Eaton 1976, 1984] have
found several shortcomings with the theory. These include:

1) The relationship between the urban formal and informal

sectors is not elaborated in any detail.
2) The origins and/or causes of downwardly rigid wages in the
urban formal sector of the labor market are ignored, and there is
no proof that such rigidity exists.

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 Rural-Urban Migration and Underemployment among Females 387

3) The original mathematical formulation of the model com-

pletely ignores earnings of labor in the urban informal sector.
4) There is an implicit assumption that the labor of rural-
urban migrants is homogeneous.
5) The model lacks empirical verification of its theoretical
bases and empirical testing of its implications.

The approach here is to attempt to verify with survey data

whether or not there is a welfare loss among one subgroup
(females) of rural-urban migrants to a large city in the northeast
of Brazil (Fortaleza, in the state of Cearai). The northeast of
Brazil, historically underdeveloped relative to the rest of the
country, was the target of a concerted regional development
policy2 during the two decades prior to the surveys. Brazil also
has extensive labor legislation that attempts to guarantee a mini-
mum wage, an annual bonus of one month's wage, participation in
national health and pension plans, and a variety of lesser
benefits.3 This context seems to be an ideal one to verify the
Todaro conclusions.4
I chose to analyze females for two reasons. First, there seems
to be a clear segmentation of jobs on the basis of gender in the
Brazilian northeast. There are few job alternatives for women in
the rural sector, and a large majority of females in the large cities
are first employed as domestic servants. The concentration of
females in a relatively small number of occupations also facilitates
the categorization of females into formal and informal sectors of
the urban labor market. Second, the majority of rural-urban
migrants in Brazil are female, which has resulted in an un-
balanced distribution of the population by gender. More than 56
percent of the population of the major urban centers of the
Brazilian northeast was female, while less than 51 percent of the
total population was female, according to the 1980 census
[Fundavao IBGE 1982].

Empirical Characterization of Formal -

Informal Dichotomy

To compare the economic activity of typical migrants before

and after migration, it would be ideal to follow individuals over
time. Unfortunately, panel data are not generally available in un-
derdeveloped countries. My approach is to use cross-sectional data

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388 Peter J. Eaton

to compare the economic activity of females in rural areas with

that of females who are recently amrved rural-urban migrants.
Data for economic activity in rural areas are from the 1980 census.
Data for recently arrived rural-urban migrants are from two sur-
veys in the city of Fortaleza, Ceart. One of the surveys was taken
at the same time as the census, the other in 1986.5
According to Todaro, the welfare loss should be observed among
those rural-urban migrants who are unable to acquire jobs in the
urban formal sector. To isolate those individuals, it is necessary to
define the formal and informal sectors empirically. I define jobs as
being formal or informal for the following functional categories:
employees, employers, self-employed, and unemployed. All
laborers (migrant and nonmigrant, male and female) are classified
in this fashion.6
For employees and employers, the task is relatively simple.
Employers made up about 2 percent of the female labor force and
were uniformly categorized in the formal sector. For employees I
use the fact that Brazilian labor law requires that all employer-
employee relationships be registered with the ministry of labor.7
The employer signs the employee's "labor card," which entitles the
employee to the provisos of labor legislation, including payment of
all benefits and strong protection from dismissal. For employees,
the criterion used was whether or not the employee had a signed
labor card. Employees made up more than 66 percent of the female
labor force. Of these, 40 percent had no signed labor card. For low-
skill occupations, the evidence is thus that labor law is widely ig-
nored. If this is the case, then the hypothesis that legislated wage
rigidity divides the formal sector from the informal sector becomes
questionable.
Self-employed females are classified in the informal sector un-
less their primary occupation is classified as "professional" or
"technical," or unless they participated in group health in-
surance/pension arrangements. The self-employed made up 26 per-
cent of the female labor force, with 75 percent of these classified in
the informal sector.
There are formidable problems associated with classifying un-
employed individuals. In our surveys, unemployed females had, on
average, in excess of two years more formal education than
employed females. Studies of the informal sector, in general, indi-
cate that the unemployment rate is virtually zero [Cavalcanti
1978; Fundagao IBGE 1984], whereas our surveys found an un-

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 Rural-Urban Migration and Underemployment among Females 389

employment rate of approximately 5 percent for all females.

Among recently arrived migrants in the survey, the unemploy-
ment rate is under 1 percent. My decision was to ignore the un-
employed for the purpose of this classification.
Overall, this classification scheme shows that 48 percent of
working females were in informal jobs. When job situation is
cross-tabulated with other variables such as years of residence in
the city for migrants, or migrant status, it appears that a Todaro-
like mechanism is at work. Recently arrived migrants are more
likely to be in informal jobs than are natives, and migrants with
more than six years of residence are less likely to be in informal
jobs than natives. However, such simple cross-tabulations may
miss other underlying variables such as age composition and labor
force experience.
In Table 2, I attempt to use survey results to trace the formal-
informal job history of rural-urban migrant females. The data are
cross sectional, so the conclusions are much more inferential than
if panel data were used. They yield results consistent with the
Todaro characterization of arrival in the informal sector and, with
the passage of time, ingress to the formal sector. Most females (51
percent) who migrate to Fortaleza do so between the ages of 10
and 19. Table 2 contains the formal-informal relative and absolute.
count at the time of the survey of all female migrants, by current
age, who first arrived in Fortaleza between the ages of 10 and 19.
The table clearly shows that the probability of having a formal
sector job increases with length of residence in the city. On the
surface, then, it appears that the process envisioned by Todaro is
at work.

Table 2. Employment Sector of Working Female Migrants

Who Arrived in Fortaleza Between the Ages of 10 and 19

Age at Time of Survey Number % Informal % Formal

10-14 34 97.1 2.9

15-19 193 78.2 21.8
20-24 155 36.1 63.9
25-29 94 27.7 72.3
30+ 192 18.2 81.8
Total 668 45.1 54.9
Source: 1979 survey conducted by author with support from the Brazilian Planning
Ministry.

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390 Peter J. Eaton

Welfare Lo88

There is a welfare loss to society if the output sacrificed by

rural-urban migrants, plus costs to society associated with ur-
banization, is greater than the output of rural-urban migrants plus
societal benefits associated with urbanization. I here ignore exter-
nal costs and benefits associated with urbanization. This is not to
say that I consider these costs and benefits unimportant. However,
the clear emphasis in Todaro is on output and the private decisions
of individual migrants.
The first step is to determine the origin of rural-urban migrant
females to Fortaleza. According to the 1980 Demographic Census,
93.7 percent of female migrants to the metropolitan area of For-
taleza are from the state of CearA. My surveys yield similar per-
centages (92.7 percent in the 1979 survey and 93.1 percent in the
1986 survey). Based on these figures, I assume that the origin of
all female rural-urban migrants is the state of Ceara.8
Two elements are analyzed to determine whether or not a wel-
fare loss is observed. First, I compare labor force participation
rates of female migrants to Fortaleza with overall participation
rates in the state of Ceari. Second, I examine average earnings of
the two groups as a proxy for average productivity.
In Table 3, the labor force participation rate from the 1980
Demographic Census for the state of Cearai is compared with the
labor force participation rate from the contemporaneous survey.

Table 3. Labor Force Participation Rate of Females

in the State of Ceara

Age Total Urban Rural Migrants to Fortaleza

10-14 7.8 6.7 8.9 11.3
15-19 21.9 24.8 17.9 40.2
20-24 32.8 41.5 19.2 50.0
25-29 32.9 43.1 17.4 48.8
30-39 32.1 41.9 18.2 45.0
40-49 29.5 38.3 17.8 40.5
50-59 22.5 27.7 15.8 29.4
60+ 7.3 7.9 6.5 8.2
All ages 22.8 28.7 15.0 36.4
Sources: Columns 2,3,4 from Fund
Tomo 4, Ndmero 9. Column 5 from 1979 survey conducted by author with support
from the Brazilian Planning Ministry.

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 Rural-Urban Migration and Underemployment among Females 391

For all age cohorts, a higher participation rate is found among

migrants to Fortaleza.9 For the second cohort (15-19), in which
migration is most likely to occur, the gain in labor force participa-
tion on the part of female migrants to Fortaleza is the largest. The
disparity between participation rates of females in rural areas and
migrants to Fortaleza is also particularly noticeable. It should be
noted that the census data do not permit the exclusion of For-
taleza from the urban and total participation rates. Excluding
Fortaleza would make the disparities even larger.
I next compare the average earnings of working females in the
state of Cearai (excluding Fortaleza) to the average earnings of
recently arrived working female migrants in Fortaleza.10 Ideally,
this would be done by age cohort to control for work experience,
but this information is not available by age cohorts in the census.
The lack of control for work experience tends to bias average earn-
ings of nonmigrants upward relative to recently arrived migrants,
since recently arrived migrants are generally younger than the
average working female. In addition, the earnings of both groups
probably understate true earnings, since neither includes income
in kind. Many residents of Ceara (excluding Fortaleza) have some
income in kind as participants in subsistence agriculture. On the
other hand, the most recently arrived female migrants receive in-
come in kind as domestic servants (meals and housing).11
Despite these shortcomings, average earnings can at least be
used to get an idea of the magnitude of difference between produc-
tivity of working females in the place of origin versus that of
working female migrants in a large urban area. The earnings
comparison is made in terms of the number of minimum monthly
salaries earned, since the minimum monthly salary is the most
commonly used index of wages in Brazil. Survey results show
average earnings of recently arrived females in Fortaleza to be
.625 minimum salaries. The census shows average earnings of
working females in the state of Ceara (excluding Fortaleza) to be
.566 minimum salaries.
Both labor force participation rates and average earnings for
female migrants to a large urban area are thus higher than for
their counterparts in the areas of origin. The evidence is contrary
to the predicted Todaro result of a welfare loss.
The main reasons that the Todaro model does not fit the
Brazilian northeast appear to be the inadequacies of his assump-
tions of full employment and homogeneous labor among rural-

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392 Peter J. Eaton

urban migrants. It may be true that there is "full employment" of

females in the rural sector, in the sense that all females who are
looking for work can find it. The large disparity in female par-
ticipation rates between rural and urban areas results from the
fact that most females do not participate in the labor force in rural
areas. Segmentation appears to be gender-based. The creation of
urban jobs opens opportunities previously not available.
I argue that the objective of female migrants to urban areas in
the Brazilian northeast is not to secure a "formal" or "modem" job.
Rather, it is to secure a job in the informal sector. Rural females
live at or near subsistence. They cannot afford to look beyond the
very near future in making a migration decision. According to sur-
vey results, it takes between six and seven years for more than 50
percent of female migrants to have a formal sector job, although it
is true that the great majority (82 percent) do at one time or
another have a formal sector job.
Finally, I have serious doubts about blaming wage rigidity on
labor legislation. As stated in the text, survey results indicate that
it is common practice for employers to ignore labor legislation for
unskilled workers. Is there reason to believe, then, that eliminat-
ing the minimum wage, for example, would have a significant im-
pact on the employment situation of unskilled workers? I think
not.
There are, of course, weaknesses to my arguments. One is the
cross-sectional nature of the data used. It is known that the migra-
tion process is selective of those individuals who are most educated
and motivated. It could be argued that using the average participa-
tion rates and eamings in origins tends to understate the output of
migrants had they not migrated.

Conclusions

The attribution of the increasing impoverishment of urban en-

vironments to unbalanced development policy and labor legislation
is found to be inconsistent with data for females in a large urban
center of the northeast of Brazil. As a descriptive device, the three-
tiered categorization of labor markets in the Third World may
have some merit. But the analytics proposed by Todaro seem
weak, given that much of the Third World is characterized by sub-
sistence agriculture and job segmentation on the basis of gender.

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 Rural-Urban Migration and Underemployment among Females 393

Notes

1. Rural is defined broadly to include all areas with an economy

based on agriculture.
2. This regional development policy consisted mainly of fiscal in-
centives for investments in the northeast. Most of the funding
came from the more developed south and the great majority of
funded projects occurred in the urban centers of the northeast
[Goodman and Cavalcanti 1974].
3. With minor exceptions, all employees are theoretically covered
by this labor legislation. The cost of employing a laborer in
compliance with labor legislation was approximately 40 per-
cent greater than the nominal salary during the early 1980s.
4. It should be stressed that the Todaro models admit only the
possibility of the welfare loss outlined in the text. However,
the literature implies that there is such a loss. The model was
widely heralded as the explanation of the increasing
impoverishment of urban centers in the developing world.
5. The 1979 survey was conducted with the support of the
Brazilian Planning Ministry, and the 1986 survey was con-
ducted with support of the Brazilian Labor Ministry. Both
consisted of an approximately 1 percent sample of all
households in the metropolitan area of Fortaleza. For further
details and additional results, see Eaton [1985].
6. Other empirical studies of the informal sector [e.g., Cavalcanti
1978; Merrick 1976] have in general suffered from a trunca-
tion problem, in that surveys were conducted only in poor
areas.
7. The only major exception is that employers of domestic ser-
vants are not required to sign a labor card for the employee. It
is surely not mere coincidence that labor law does not apply to
precisely the occupation most frequently found among recent-
ly arrived female migrants.
8. Most of the remaining migrants are from neighboring states
with similar agricultural conditions.
9. Females who are engaged in subsistence agriculture are
counted as participants in the labor force.
10. "Recently arrived" is defined as having lived in Fortaleza for
three years or less.
11. According to our survey, the first job of 75 percent of working
female migrants to Fortaleza from rural areas is domestic ser-
vant. Many of these are live-in maids.

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394 Peter J. Eaton

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