Brazil Government Proposes R$1,088 Minimum Wage in 2021, Covering Inflation Estimate

RIO DE JANEIRO, BRAZIL – The federal government has forwarded to Congress its projection of R$1,088 for the minimum wage in 2021, with no real increase over projected inflation. The monthly wage floor in 2020 is R$1,045.

The estimate considers the Ministry of Economy’s projection for the 2020 NCPI (National Consumer Price Index) inflation of 4,11%. The indicator is used by the government to readjust the minimum wage.

In April, when it submitted the Budget Guidelines Law Proposal, the government estimated that the minimum wage for 2021 would stand at R$1,079. However, higher-than-expected inflation forced the government to revise the amount.

The minimum wage for 2021 should only be confirmed in January, when the government will have the consolidated inflation data for 2020.

Real increase ended last year

Between 2007 and 2019, the law ensured that the minimum wage would increase in real terms, above inflation, whenever there was economic growth, in line with the governing PT (Workers’ Party) administration’s policy.

This calculation formula considered inflation in the preceding year, as measured by the NCPI, together with the GDP (Gross Domestic Product) result of the past two years.

Minimum wage inflation higher than official inflation

To readjust the minimum wage, the government considers the NCPI, an IBGE (Brazilian Institute of Geography and Statistics) index that measures prices for families in urban areas with an income between one and five minimum wages. However, the government considers the Extended National Consumer Price Index as official inflation, also measured by the IBGE, but which points to the variation of the average cost of living of families with a monthly income between one and 40 minimum wages.

Until November, the National Consumer Price Index accumulated a 3,93% increase, while the Extended National Consumer Price Index was up 3,13%. Thus, the index adjusting the minimum wage should be above the official inflation.

In the document forwarded to Congress, the government projected the minimum wage up to 2023, considering inflation estimates:

Projection for 2022: R$1,123 (3.5% accumulated NCPI)
Projection for 2023: R$1,163 (3.4% accumulated NCPI)