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Crescimento com distribuição

Minimum Wage


Real gains increase the purchasing power of the population and help to reduce income inequalities

Not only did the real increase of 72.75% of the minimum wage replace the losses suffered by workers during the lost decade of the 1980s and the 1990s neoliberal period — marked by low growth and the privatization — but also it safeguarded the greatest increase in purchasing power in its history. Considering the most expensive basic products basket values in January this year (R$ 325.26), the worker today has a purchasing power equivalent to 2.21 baskets — by far the best minimum wage/average food basket ratio recorded annually since 1979.

In a study entitled A Década Inclusiva (2001-2011): Desigualdade, Pobreza e Políticas de Renda (The Inclusive Decade (2001-2011): Inequality, Poverty and Income Policies), IPEA (Institute of Applied Economic Research) analyzed data from the PNAD (National Household Sample Survey), and produced a list indicating the source of Brazilian family income: Labor (58%), Social Security (19%), Bolsa Família (13%), Continuous Cash Benefit (4%), Others, such as rent and interest, (6%). The data show that a significant part of the decline in inequality was due to the strong expansion of the labor market and the increase in the minimum wage (95% of the jobs created in the last decade were for workers earning up to 1.5 MW). This, according to researchers, made the redistributive process that was adopted sustainable. "Without the redistributive policies sponsored by the Brazilian government, inequality would have fallen 36% less over the decade," explained the document.

Besides a powerful impact on reducing income inequality between rich and poor, the continuing increase in the real minimum wage also has been a tool for reducing regional inequalities. The lesser developed regions of the country, North and Northeast, are precisely those where there are more workers with incomes tied to the minimum wage: 58.2% in the Northeast and 42.4% in the North.

Institutionalization of gains and international reference

At the beginning of the Lula government’s second term in 2007, government and unions reached an agreement that became known as the Minimum Wage Valuation Policy: the MW would be adjusted each year based on the variation of the Gross Domestic Product (GDP) in the previous year (2014 considers 2012’s GDP), plus the previous year's inflation as measured by the National Consumer Price Index (INPC). In the Dilma government, in 2011, approved by the National Congress, the policy became Law No. 12,382, effective 2015.

The constantly rising value of the minimum wage sanctioned by the Lula and Dilma governments led Brazil to be highlighted in a recent study by the ILO (International Labor Organization). The paper reported on the Brazilian experience and its positive impact on recent socio-economic development in the country. It was an initiative different from those put into place by European countries such as Spain, Portugal and Greece to confront the global economic crisis, where higher unemployment rates were accompanied by a cutback of labor and social rights.

The ILO report, entitled “Fixing the economic and social fabric,” featured the importance of system-wide coverage of the minimum wage and an appropriate policy to establish the level of this wage as part of efforts to expand social protections. Furthermore, in a scenario where there is less demand in more developed countries, minimum wage gains help stimulate domestic demand.