New Lula da Silva government to propose minimum wage of R$1,320, says senator-elect

Senator-elect Wellington Dias (PT, left) said that the elected government will propose a minimum wage of R$1,320 (about US$260)  for 2023.

The figure is 8.9% higher than the current amount of R$1,212 and 1.4% higher than the R$1,302 proposed in the 2023 PLOA (draft budget law).

The minimum wage is transmitted to Congress in the ‘PEC fura-teto’, called the “PEC of Transition.”

President-elect Luiz Inácio Lula da Silva (PT) has promised an adjustment above the inflation rate.

The senator explained the value of the minimum wage in an interview with the newspaper Folha de S.Paulo.

He also gave details of the scheme to correct compensation in the coming years, starting in 2024.

Under the proposal, the adjustment will be based on the average growth of GDP (gross domestic product) over the last five years.

“Since we have had a negative GDP in recent years, the proposal to be submitted to Vice President Geraldo Alckmin (PSB), coordinator of the transition, and by him to President da Silva, is an index that is about 1.4% higher than that proposed in the LOA (annual budget law) for 2023, and from 2024 will follow the rule of the average GDP of the last 5 years,” the senator-elect told the newspaper.

The current law stipulates that the INPC (National Consumer Price Index) must correct the minimum wage.

In August, the government of Jair Bolsonaro (PL, right) calculated that the rate would be 7.43%, underpinning the increase from R$1,212 to R$1,320.

According to the latest Ipea (Institute for Applied Economic Research) projections, the INPC should be close to 6%.

With this percentage, the minimum wage would increase to R$1,285.

FINANCIAL IMPACT

The value of the minimum wage is also the lower limit of social benefits, and the increase impacts public finances.

The estimated effect of a R$1,320 wage is R$42.1(US$8.4) billion. This value is R$7 billion higher than envisioned in the PLOA 2023.

There are two ways to determine this value.

For each R$1 increase in the minimum wage, the fiscal impact is estimated at R$389.8 million.

Multiplying this amount by R$108, the additional adjustment yields a value of R$42.1 billion.

Another possibility is the 2023 budget, with the R$90 increase (from R$1,212 to R$1,302), the government expected to spend R$35.1 billion. Thus, an increase of R$108 would also have an impact of R$42.1 billion.