Brazil Contrato Verde Amarelo Wage Subsidy - An Initial Assessment

Jul 19, 2026

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Brazil’s Contrato Verde Amarelo (CVA) is analyzed as an employer wage subsidy introduced in 2019 to reduce nonwage labor costs for young first-time employees entering contracts of up to 1.5 minimum wages. The assessment explains the program’s design, objectives, and relevance despite its failure to pass the final senate vote. It also discusses how CVA could complement active labor market policies, and provides recommendations for improvements drawing on international experience, particularly in light of COVID-19 labor market impacts.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages22

Reading Time55 min

AccessFree to download

Foreword

Executive Summary

Program design and objectives

Targeting and labor market rationale

Policy relevance and limitations

Recommendations and COVID-19 context

Public Disclosure Authorized Public Disclosure Authorized Report No: AUS0001675 Brazil The Contrato Verde Amarelo wage subsidy. An initial Assessment MAY 2020 Matteo Morgandi, Katharina Fietz, and Malin Ed Social Protection and Jobs Team, Latin America and Carribean Region © 2020 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; [Internet:](Internet: www.worldbank.org)[ ](Internet: www.worldbank.org)[www.worldbank.org](Internet: www.worldbank.org) Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: “World Bank. 2020. Brazil Contrato Verde Amarelo wage subsidy, An initial Assessment. © World Bank.” All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [pubrights@worldbank.org](pubrights@worldbank.org). Contrato Verde Amarelo: An Initial Assessment1 Foreword In November 2019, the Brazilian government introduced, as part of an employment stimulus package, the Contrato Verde Amarelo (CVA), a wage subsidy program for young first-time employees entering in contracts of up to 1.5 minimum wages. Despite CVA did not pass the final senate vote and, consequently, lost its validity, the relevance of this measure remains in light of Brazil’s high labor costs and unemployment, and the dramatic impact that COVID-19 epidemic will leave in its labor market. This note analyzes the design, relevance and potential impacts of the CVA, as it was introduced in 2019, and recommendations for improvements based on international experience. In particular, as government will consider a revised version to speed up recovery of the labor market following COVID-19 epidemic, these recommendations will be useful in the drafting of an improved proposal. Executive Summary CVA was designed to be an employer wage subsidy that reduces the nonwage labor costs from 26.36 percent to 3.85 percent2 for up to two years. The primary objective of CVA was to improve beneficiaries’chances of being hired in the formal sector in a time of depressed labor demand. The rationale of targeting first-time job seekers was to help them gain work experience and thus prevent “scarring”(long-term impactson labor earnings) of the cohort that entered the labor market during the 2016 economic crisis.3 As employers appreciate experience, this should have improved recipients’ employment chances in the subsequent job transition. A secondary objective was to support recovery of hiring in the private sector ina desirable way from a distributional point of view. Encouraging hiring is important since high unemployment during and after the crisis was largely because of a slowdown in hiring; the number of job separations fell between 2015 and 2018, together with the high turnover observed before the crisis (Silva, Almeida, and Strokova 2015) . Despite CVA did not pass the final senate vote and, consequently, lost its validity, the relevance of this measure remains in light of Brazil’s high labor costs and unemployment, and the dramatic impact t

FAQs

What was the purpose of the Contrato Verde Amarelo (CVA) wage subsidy?

CVA aimed to reduce employers’ nonwage labor costs and improve beneficiaries’ chances of being hired in the formal sector during periods of depressed labor demand.

Which workers was CVA designed to target?

The program targeted young first-time job seekers entering contracts up to 1.5 minimum wages, focusing on helping them gain experience and reducing long-term scarring effects.

Why does the note consider CVA still relevant after it lost validity?

CVA remains relevant due to Brazil’s high labor costs and unemployment and the expected labor-market impact of COVID-19, while highlighting gaps in support for unemployed youth.

Jul 19, 2026

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