By Ben Tavener, Contributing Reporter
RIO DE JANEIRO, BRAZIL – The national minimum wage in Brazil will top R$800 per month by 2015, according to predictions by a federal budget proposal unveiled recently. Presenting the proposal to Congress, the Joint Budget Committee said that the minimum wage in Brazil in 2015 would reach R$817.97, an increase of fifty percent.
The current minimum wage is R$545, paid thirteen times a year, and is already slated to rise fourteen percent in 2012. Earlier this year a mechanism based on GDP performance and inflation was approved for indexing the rate up to 2015.
For those on the minimum wage, like Hemilly Shirloanny who works in sales, the news of further increase is welcome. “It’s definitely good news, although how much difference will be felt is another issue as if wages go up, taxes and prices will go up, too,” she said to The Rio Times.
As pensions are pegged to the minimum wage, pensioners are also behind the plans – although many believe they will still have to work to supplement their income given the high cost of living in Brazil.
Some analysts believe that higher wages will boost consumer confidence and therefore the economy, but others are more skeptical about whether the country will be able to afford it.
Luiz Alberto Esteves, professor of economics at the Federal University of Paraná (UFPR), points out that the country’s minimum wage has already gone through significant growth – and that this has brought with it a number of positive effects for the economy.
“Between 2002 and 2010 the minimum wage increased by some sixty percent, but between 1997 and 2002 productivity in Brazil increased more than wages did: this gave room for expansion. But I don’t see the same room for large-scale increases now. A fifty percent increase in the minimum wage [by 2015] could possibly bring Brazil’s economy more harm than good,” he explains to The Rio Times.
But Professor João Saboia from Rio de Janeiro Federal University’s Instituto de Economia says there is plenty of good to be taken from the plans. “A number of studies have shown that increasing the minimum wage over the last few years had a big influence in reducing inequality and helped improve distribution of wealth around the country. Staying with the same policy will continue this favorable trend,” he said to Globo News.
Experts believe that although a minimum wage of R$815 will prove favorable for some sectors such as banking, technology, construction, manufacturing and the civil service, it could bring significant negative consequences for other labor-intensive, low-skilled sectors, such as shop workers and cleaners, and those requiring less work experience.
Brazil’s current minimum wage rate is fairly in-line when compared to other Latin American countries, such as Argentina and Venezuela, which are higher, but Brazil has fewer people earning just the minimum wage.
When comparing the other BRICS countries though, Brazil is considerably higher: it is around double that of China or India, for example.
But few doubt that the 47 million workers in Brazil who earn the rate will appreciate this move.
Although President Rousseff’s first legislative victory in office was to restrict a rise in the minimum wage to control inflation and public spending, analysts still see a political motive behind this massive wage increase.
“Increases in the minimum wage under President Lula secured him a political legacy that led not only to his reelection in 2006, but also of whomever he picked to succeed him, i.e. President Dilma Rousseff,” says Professor Esteves of UFPR’s economics department.
Budget projections for the national minimum wage rate have been approved for the period until 2014, and now require extrapolating to 2015 – but the figure from 2016 will depend on whoever is president then.
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