Government Considers Removing Minimum Wage Adjustment From Constitution

RIO DE JANEIRO, BRAZIL – The Ministry of Economy is studying a means of authorizing the freezing of the minimum wage in situations of fiscal constraint. The aim is to remove from the Constitution the obligation for the figure to be adjusted by the variation in inflation.

The measure would be included in the PEC (Proposed Amendment to the Constitution), which amends tax rules and is currently being considered by Congress.

Authored by Deputy Pedro Paulo, the text is in the Lower House’s CCJ (Commission on Constitution and Justice) and is under discussion by a group of deputies, representatives of the Ministry of Economy and budget technicians in Congress.

The bill includes deterrents that would be used in risk situations of non-compliance with tax rules. The bill’s original version does not provide for the freezing of the minimum wage, but the government argues for the inclusion of this new item in the text. The information was released by the newspaper O Estado de S.Paulo and confirmed by Folha.

The rule that made it possible to readjust the minimum wage above inflation ceased to apply this year. Now, the new change would go a step further, allowing the freezing of the minimum wage, with no inflation recoupment.

The forecast is proposed by the Ministry of Economy, Deputy Pedro Paulo confirms. For the deputy, however, before any initiative of this kind, the government should strive to defend the proposal: “As long as the government does not clearly speak in favor of the PEC, it does not have to keep discussing more measures,” he said.

The Constitution states that the minimum wage must have periodic readjustments in order to preserve its purchasing power.

With the measure studied by the government, this forecast would cease to exist. The freezing of the minimum wage would be permitted to assist in the fiscal adjustment for a certain period. Two years is one of the options.

Given that the government has expenses linked to the minimum wage, such as pensions, the measure would relieve the budget. Today, for each real adjustment of the country’s minimum wage, the Union increases its expenses by R$300 million (US$75 million).

For next year, the government expects that the adjustment will raise the minimum monthly salary from R$998 to R$1,039. The increase considers only inflation.

Should, for instance, the government freeze the current figure, the economy to the public coffers next year would amount to R$12.3 billion.

The proposal is in line with Economy Minister Paulo Guedes‘ argument to remove budget ties. The minister argues that public accounts have excess mandatory spending, linked and indexed.

Source: Folha de S.Paulo