Brazil’s House of Representatives, in a session that lasted oven ten hours and ended late at night, approved a Dilma Rousseff administration bill for a minimum wage of 545 reais (US$ 328) a month. The same bill establishes guidelines for minimum wage adjustments from now until the year 2015 based on inflation and GDP growth.
In order to approve what the government wanted, the deputies had to vote down two other proposals. They voted 376 to 106 against a 600-reais (US$ 361) minimum wage. And 361 to 120 against a minimum wage of 560 reais (US$ 337).
The chamber accepted the government proposal in what is known as a symbolic vote with only the P-SOL opposing (the total votes actually needed to approve this kind of bill is 257, a simple majority plus one – there are 513 deputies in the Brazilian Chamber of Deputies. The Dilma Rousseff government officially has a coalition of 373 votes.
In Brazil the minimum wage has an enormous impact. The government says that more than 45 million Brazilian workers are paid a minimum wage, and more than 18 million retirees have their social security benefits linked to it.
The bill now goes to the Senate where it is expected to be voted on next week.
The coordinator of Applied Economics at the Brazilian Economics Institute (Ibre), which is housed in the Getúlio Vargas Foundation (FGV), Armando Castelar Pinheiro, says the new minimum wage will have an economical impact.
“Historically, increases of the minimum wage in Brazil are based on past inflation. The 545 reais basically brings salary purchasing power up to date. It will have an impact this month on consumption and inflation because some prices remain indexed to the minimum wage. In the future the impact will be less,” explained Castelar.
“At this moment, the most important aspect of the Brazilian minimum wage is fiscal. It has a significant impact on government spending. The government by insisting on a small increase in the minimum wage is signaling the market that it is committed to reducing the deficit and increasing the primary surplus. That is certainly positive. A bigger increase would have a negative impact on inflation,” said Castelar.
The Dilma Rousseff administration showed its firepower by getting the modest increase it proposed. The administration had presented a bill that would raise it to 545 reais and refused to negotiate any further increases.
The bill will also continue present policy until 2014. That policy is to set the minimum wage based on inflation in the prior year and GDP growth of the last two years.
Minister of Finance, Guido Mantega, speaking in the Chamber of Deputies as union members in the visitors galleries screamed for a higher minimum wage, made it clear that the administration was determined to hold the line on its proposal, saying that a minimum of more than 545 reais would be “fiscally irresponsible.”
The minister cited “budgetary limitations and the need to obtain the confidence of society” as reasons for the government’s insistence on nothing more than 545 reais. For good measure, Mantega pointed out that each 1 real added to the minimum wage would cost the government 300 million reais (US$ 181 million) annually.
Meanwhile, outside on the Ministries mall (“esplanada dos ministérios”), civil servants protested their own salary problems, calling for changes in the negotiating process.
The annual legislative process to approve a new minimum wage is an opportunity for Brazilian political parties to connect with workers and labor unions, which is to say that, this year, for example, after raising their own salaries 61.8%, they would like to give workers and labor unions more than the cost-of-living adjustment the government is offering.
According to the government statistical bureau (IBGE), retail sales in Brazil rose 10.9% in 2010, the highest since records began in 2001. Since then the government has run a monthly survey of commerce known as the PMC and the IBGE numbers are based on that survey.
The IBGE says that sales rose for seven consecutive months, before they were flat in December (compared to November), while nominal income in the sector rose 14.5% during 2010, compared to 2009.