The minimum wage in Brazil in 2022 is R$1,212. According to calculations by Dieese (Inter-Union Department of Statistics and Socioeconomic Studies), released in April, it should be R$ 6,394 to meet the basic needs of a family of four.
The official minimum wage is determined by law and covers the entire national territory, including rural and urban workers. But why doesn’t he reach that value of Dieese. How is it determined?
Economic factors determine value
“The minimum wage is determined by economic factors and social policies. In Brazil, for example, until 2019, it took into account the Gross Domestic Product (GDP) of the previous year and inflation in the country according to the National Consumer Price Index (INPC) of the same period. As of 2020, it was readjusted only by the INPC”, says lawyer Francisco de Assis Brito Vaz, partner in the labor area of the SiqueiraCastro office.
Each country sets a rule on its minimum wage. The one in Brazil was created in 1940, during the government of Getúlio Vargas. The objective was to enable families to buy the minimum amount of food and maintain other expenses, such as housing and transportation. Over the years, there may be a loss of purchasing power, due to inflation, which is not even replaced.
Experts say the country’s economy limits the increases. Neither companies nor the government would be able to keep spending at a very high minimum wage, they said.
Companies would fire if salary were higher
For analysts, a considerable increase in the value of the minimum wage would lead to more layoffs, as companies would not have the money to pay employees.
“The dilemma of the minimum wage is that, if it is too low, it makes labor relations precarious. And a very high minimum wage has the same effect, because of layoffs and informal work”, says economist Marcelo Neri, from FGV (Getulio Vargas Foundation). Informality is the hiring of workers without a formal contract. In this case, the company avoids paying the minimum wage.
For Paulo Feldmann, professor of economics at USP (University of São Paulo), it is possible to raise the minimum wage only when the economy is doing well, because that would avoid layoffs.
“The increase in the minimum wage was very large between 2007 and 2010, and that was great at that time, as unemployment was falling and consumption was increasing. Companies were able to pay their employees. But it was a very different economic moment than current”, he says.
Salary also impacts public accounts
The minimum wage does not only affect private companies. Several public expenditures are linked to it, such as INSS pensions and social benefits for poor families.
“Our minimum wage has a great impact on the pension, because the income of retirees is also regulated by its value. When the minimum wage increases, the government has to increase the value of the pension”, explains Feldmann.
“Apart from that, a serious problem for the government accounts is the people who never contributed to social security and who today receive a minimum wage.”
In addition to pensions, several benefits and income transfer policies also increase when the minimum wage is readjusted, such as the BPC (continuous benefit benefit, paid to low-income elderly and disabled people), unemployment insurance and salary bonus.
Can the ideal minimum wage be a reality?
According to Feldmann, Dieese’s calculations, which suggest an ideal minimum wage of R$6,394, take into account basic expenses, but are far from reality.
“Although the calculation is quite valid, the values are completely different from what the minimum wage is today. And about 70% of Brazilians do not earn even R$ 3,000 per month. Dieese’s proposal is to show that Brazil’s income is very low, although the value they suggest is not economically viable because companies would not be able to pay even half of that”, he declares.
Alternatives to the situation
There is no easy and quick solution when it comes to raising the minimum wage without having as a counterpart the growth of unemployment and high inflation, but experts analyze the various economic factors involved in this issue.
“To reach a more dignified minimum wage level without having these side effects as a consequence, it would be necessary to increase productivity proportionally, which depends, among other factors, on public policies capable of leveraging the economy, reducing social inequalities. , starting with improving education and seeking greater qualification of the workforce.”, says Brito Vaz, from SiqueiraCastro.
For Juliana Inhasz, coordinator of the Economics course at Insper, the first measure would be for the government to adjust the public debt and control inflation.
“The government needs to analyze the structural problems of the economy very carefully. It is only by solving these issues that Brazil will grow economically, and it is by growing economically that we will be able to pay a higher minimum wage.”