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One Hundred Years of Inequity

One Hundred Years
of Inequity

It is disheartening to witness Brazil once again discussing
a minimum salary that belongs in a surrealist nightmare.
Even at the equivalent of US$100 per month, the minimum wage
in Brazil is completely inappropriate, as it would be
most anywhere in the world.
By ADHEMAR ALTIERI

Food for thought: given that Brazil’s terribly inadequate official minimum wage is the
object of vigorous political debate year after year… why does it make so little upward
progress? And why are politicians of all stripes so eager to join the annual fray—to
a point where next year’s minimum wage review, which normally happens in the second
quarter of each new year, is already under way?

This is a direct consequence of what happened earlier this year, when minimum wage
discussions for 2000 became a battle for media attention and political points with the
underpaid masses, between government opponents and, yes, government allies. The government
was left in a lose-lose situation, as it became the villain defending fiscal austerity
while others fought to see who stood for the biggest minimum wage increase of all. The
fact that nationwide municipal elections were on the horizon helped fuel the debate:
fighting a good fight for the minimum wage could certainly be worth a few votes come
October…

Senate President Antônio Carlos Magalhães, the PFL (Partido da Frente Liberal-Liberal
Front Party) kingpin from Bahia state who swings between supporting and attacking the
government according to political needs of the moment, cashed in above all. He managed to
become known for defending an amount equivalent to US$100 per month for this year’s
minimum wage. In effect, he stole the limelight from the left-wing opposition, who
normally start things off and make the biggest demands in the minimum wage debate. When
the dust settled, this year’s monthly minimum wage, which took effect in May, came in at
R$151 (about US$86 at the time), a paltry R$15 increase.

Now, here we are in October and next year’s minimum salary possibilities are sharing
headlines with oil prices and trouble in the Middle East. The salário mínimo
usually becomes a topic of discussion in Brazil about two months into the New
Year—its annual review happens in the second quarter, and the new, higher amount,
takes effect on Labor Day, May first. But the minimum wage is already front row center
because the government, probably not wanting a repeat of what happened the last time
around, decided to take the initiative and try to control the agenda.

Brasília jumped ahead of the crowd, announced its proposed minimum wage increase to be
included in next year’s budget, and tagged it with this: the government would have no
problem with a bigger increase than it is proposing, so long as whoever proposes the extra
increase can show, precisely, where the money will come from.

The good side here is that if things progress in this way, this is going to be an
unusually positive exercise for the typically unruly Brazilian political establishment. Of
course, the Budget Subcommittee is the right place to discuss a big jump in spending, such
as an increase in the minimum wage would bring about. And the proper way for an elected
official to proceed in order to change the budget is to introduce amendments. This is
almost unheard of in previous years, so it’ll be extremely healthy to see politicians, for
once, following procedure to get things done, and also thinking of what cuts to make in
order to pay for what they say must be done.

The usual minimum wage routine is the total opposite of this: the debate tends to come
well after the budget is approved, and whatever "solution" is arrived at must be
implemented above and beyond what the budget calls for. And seldom does anyone in Congress
stop to think of where to get the money… the main thing is to appear to be on the side
of the people, regardless of what that costs the people. Finally, it’s also positive to
see the federal budget being treated with respect, which again is hardly ever the case.

To corner the combatants even further, the government also calculated the cost of
raising the minimum wage beyond the amount suggested in the budget. The proposed increase
of 5.57 percent, which takes into account the past year’s inflation, would carry the
minimum from the current R$151 (now worth about US$81) to R$159 (about US$85) per month.
To go beyond this measly US$4 increase, say, to the equivalent of US$100 per month as some
are again calling for, it would cost an additional R$2.9 billion (about US$1.5 billion)
per year. Or, as Finance Minister Pedro Malan explained at a Budget Subcommittee meeting,
for every R$1 added to the monthly minimum wage, R$182 million (about US$97 million) would
be added annually to the government’s fixed operating costs.

Whether it was planned or accidental, the fact is this series of pre-emptive government
moves seems to have come at the right time. Not only has the annual verbal battle with
little practical gain been neutralized for the time being, but government opponents and
allies actually appear ready to play by rules they’ve hardly ever considered before. The
main reason for this is that all agree that a better increase than 5.57 percent is an
absolute must for the minimum salary.

This unlikely consensus has everyone, regardless of political stripe, looking for the
best answer for the government’s question: what will you cut in order to offer a better
minimum wage increase? Procedurally speaking, the current edition of the minimum wage
debate represents a major improvement over the posturing and chest-thumping for television
cameras that have characterized this annual bout over the years.

Still, in spite of what appear to be gains of a bureaucratic, organizational nature, it
is disheartening to witness Brazil once again discussing a minimum salary that belongs in
a surrealist nightmare. Even at the equivalent of US$100 per month, the minimum wage in
Brazil is completely inappropriate, as it would be most anywhere in the world. And it’s
hard to figure how it belongs—and remains the object of heated debate that leads only
to negligible improvements, in one of the top ten economies in the world.

The fact that millions in this country must squeeze out a living of some sort from this
level of income, still seems like a distant reality to the well fed and dressed folks in
Brasília. In various political camps, the US$100 minimum—which many feel is gettable
in 2001—is considered quite the accomplishment. Incredible as this may sound, an
extra US$19 per month would make a big difference to many in Brazil. But it’s high time
this entire debate shifted into high gear, and looked further into the future than the
next set of media headlines. Such small gains, which do little more than maintain the
status quo, simply cannot be an acceptable long-term objective for Brazil’s wages.

Government and opposition in Brazil must make it a political priority to pump up the
minimum wage, so that this annual debate doesn’t end in practically meaningless
pseudo-victories. The minimum salary must make faster progress, and this would be possible
if the root causes were attacked more decisively. These include concluding key changes
like tax reform, to reduce the tax burden, bring billions in economic activity out of the
underground economy, and make it less costly for employers to hire more workers.
Currently, for every R$100 paid out in wages, an employer must pay at least another R$100
in a variety of taxes, deductions, contributions and duties. This is a major contributing
factor to the growing legion of unregistered workers in Brazil, who have no benefits,
generate no income tax revenue for the government, and pay into no social programs. They
number in the millions, and they represent a formidable time bomb Brazil will have to deal
with in future years if nothing changes in the short term.

At best, this year’s minimum may reach the US$100 mark, so the most visible progress is
on the procedural front. The federal government certainly came prepared, to a point where
it is cashing in on a detail of last year’s minimum wage hike. At the time, the government
decided to allow state governments to set their own minimum salary levels—in other
words, state administrations which felt they had room in their budgets for increases above
the national minimum, were free to implement such increases for the first time ever. And
yet, as several federal government officials—among them President Fernando Henrique
Cardoso—have pointed out with a grin in the past few days, not a single state
government took advantage of this change in the law. And that includes states governed by
members of opposition parties, which constantly attack the federal government for not
moving more quickly on the minimum wage…

Adhemar Altieri is a veteran with major news outlets in Brazil, Canada and
the United States. He holds a Master’s Degree in Journalism from Northwestern University
in Evanston, Illinois, and spent ten years with CBS News reporting from Canada and Brazil.
Altieri is a member of the Virtual Intelligence Community, formed by The Greenfield
Consulting Group to identify future trends for Latin America. He is also the editor of
InfoBrazil (http://www.infobrazil.com), an
English-language weekly e-zine with analysis and opinions on Brazilian politics and
economy. You can reach the author at editors@infobrazil.com

 

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