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RIO DE JANEIRO, BRAZIL – President Jair Bolsonaro issued a provisional measure (MP) that increases the minimum wage from R$998 to R$1,039 (US$260) as of Wednesday, January 1st.
The new amount corresponds to the readjustment of inflation for the year, which closed 2019 at 4.1 percent, according to the National Consumer Price Index (INPC), calculated by the Brazilian Institute of Geography and Statistics (IBGE).
It’s the first time in history that the minimum wage has exceeded R$1,000 since the Real Plan began in 1994. The MP was published in a special edition of the Federal Gazette on Tuesday, December 31st.
In relation to the 2020 Annual Budget Law (LOA), approved by the National Congress two weeks ago, the amount was R$8 higher. This is because the previous forecast of the federal government for inflation in 2019 was 3.3 percent, but it ended up at 4.1 percent, according to the latest estimate measured by IBGE.
In a statement, the Ministry of Economy said the increase in the price of meat in recent months pressured the general growth in prices at the end of the year, increasing the percentage of inflation.
“Previously, the government projected the minimum wage at R$1,031 per month for 2020, according to the Amending Letter to the 2020 Budget Bill (PLOA-2020). The recent rise in the price of meat has put pressure on inflation and thus generated an expectation of higher INPC, which is reflected in the 2020 minimum wage. But as the announced amount was above the previously estimated level, it will be necessary to make further budget adjustments in order not to compromise the achievement of the primary result target and the expenditure ceiling defined by Constitutional Amendment no. 95,” the letter says.
Until last year, the minimum wage readjustment policy, approved by law, provided for a correction for inflation plus the variation in the Gross Domestic Product (GDP, the sum of goods and services produced in the country).
This model was in force between 2011 and 2019. However, there was not always a real increase in this period because the country’s GDP recorded a retraction in 2015 and 2016, with a seven percent drop in the accumulated of these two years.
The government estimates that for each R$1 increase in the minimum wage, expenses rise by R$355.5 million, mainly due to payment of Social Security benefits, salary bonuses, and unemployment insurance, all of which are linked to the minimum wage.