The Teacher Labor Market in Brazil

Book excerpt: This dissertation explores the significance of the bargaining power of the players involved in the wage decisions for teachers in Brazil, namely the teacher unions and the municipal governments. The dissertation is divided in two parts, which together form a broad analysis of the labor market for public school teachers in Brazil and the underlying institutional factors that have determined its functioning in the past twenty years. This research indicates that the bargaining power of municipal governments and teacher unions plays an essential role in setting wages. Moreover, the results suggest that the bargaining power is more important to the wage levels than the available budget of the municipalities, and that market power is driven by the lack of alternative job opportunities to the teachers. The first paper analyzes the degree of monopsony power held by municipal public employers in teacher hiring. It shows evidence of very low elasticities for the teachers' labor supply curve (of 0.11 - 0.36, depending on the model specifications), suggesting that the market power held by municipal governments allows them to enjoy rents that are, in absence of other players to counterbalance their action, as large as 275% - 901% of the teachers wage value. It also indicates that the proportion of female teachers increase the power that municipalities have to set wages, given the relatively lower elasticity of women's supply curve. The second paper examines the actual behavior of governments in teacher hiring and uses two models -- the Monopoly-Monopsony and the Insider-Outsider -- as possible interpretations of the results. I use the FUNDEF funding reform in Brazil that has redistributed funds across municipal and state systems within each Brazilian state to identify the wage-setting decisions. It shows evidence that municipalities that benefitted from the redistribution were more likely to increase teacher salaries (by an average of 3.9%), while municipalities relatively harmed by the redistribution tended to increase the number of teachers (by 8.8%) and to decrease salaries (by -4.4%). Surprisingly, the analyses of the value transferred to the municipalities reveal that receiving more funds for education does not necessarily translate to higher teacher salaries, suggesting that the bargaining power of the municipal governments and teacher unions matter more to wage determination than the amount of funds the school systems have. This dissertation provides evidence, in the context of Brazil, that policies focused on raising across-the-board wages can be desirable as a counterforce to the market power held by municipal governments. Moreover, it suggests that federal policies focused on changing the bargaining power of the municipalities would be more effective in influencing wage levels than the amount of grants given to local governments.