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The Little One

The Little One

The main beneficiaries of the new minimum wage increase will be the
12 million retirees who get Social Security. It will be hard to find the money to fund the
raise. There was money reserved for an increase, but it was assumed that the minimum would
go up less than it did.
By Émerson Luís

Traditionally, the government uses May 1st (Labor Day in Brazil) to announce the annual
correction for the minimum wage. The announcement this year, due to a political struggle
among the government’s allies who raised the flag of a more substantial increase, was
anticipated by a few weeks. But the frustration for those who benefit from the raise
wasn’t smaller than in previous years. The new minimum, which is in force since April 3,
is 151 reais ($84) a month. The increase was a mere R$15 a month, representing a gain of
less than 9 dollars. "It’s low, it’s low," Labor Minister, Francisco Dornelles
himself, admitted.

In still another move to steal some thunder from the opposition, the Cardoso
administration announced that from now on state governors will have the power to decide on
minimum wages for their states and there will be no upper limit to this increase. Labor
Minister, Francisco Dornelles, in an attempt to simplify that complex issue and in order
to lessen the burden for the President, placed on the governors’ shoulders the
responsibility to raise minimum wages above the federal index.

"The President," said Dornelles, "grants the governors the power to
adopt the state minimum wage they choose. If the governor decides that the salary in his
state can be R$500 ($280), it will be R$500. If he can give R$1.000 ($560) he will give
R$1.000." Everybody knows, however, that such numbers presented by the minister are
just a rhetoric game, since the economic situation of most states would not allow any
largesse at all. Dornelles nevertheless warned governors that they will need to take the
initiative and informed that laws governing this matter will not be allowed on election
years.

The main beneficiaries of the minimum wage increase will be the 12 million retirees and
pensioners from the INSS (Instituto Nacional do Seguro Social-Social Security National
Institute). And where is the money for the raise coming from? There was money on the
budget reserved for an increase, but it was assumed that the minimum would go up to 143
reais ($79) and not to R$151 ($84) as it ended up happening.

The senate President, Antonio Carlos Magalhães, a government ally who defended the
adoption of a minimum that would correspond to $100 (roughly R$180) didn’t seem too upset
that he couldn’t prevail. "That was not the ideal solution," he said, "but
it was the possible one. The various leaderships and the President had to overcome
opposition inside the government itself."

"I will not allow Brazil to lose its way," declared President Fernando
Henrique Cardoso, a little before the increase was announced. "This is the moment to
show courage," he added, urging his allies in congress to go along with his
administration. "I ask the allied basis to back me up and I will insist on getting
this backing."

During the two-hour meeting that the President held with his cabinet, Finance Minister
Pedro Malan used the occasion to announce a recovery of the Brazilian economy and
forecasted a 4-percent growth in the economy this year. Said the minister, "We have
turned a page and we will consolidate this new trend this year. The President is taking a
mature and responsible decision from the fiscal point of view."

According to the government, the R$15 increase represents an 11 percent raise. Not as
much as that, said Dornelles, for whom the real gain was a more modest 5.08 percent. Not
as much as that, corrected the experts at Dieese (Departamento Intersindical de
Estatística e Estudos Sócio-Econômicos—Inter-Union Department for Statistics and
Socioeconomic Studies). According to them, the raise was a mere 3.3 percent above the
inflation rate of 7.5 percent, which occurred between April 1999 and April 2000.

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