LABOUR-BRAZIL: Minimum Wage Hike Set to Clear Final Hurdle

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Oct 31 2000 (IPS) - The Brazilian parliament is expected to increase the minimum monthly wage — a long-frustrated demand of leftist parties and trade unions here — to 180 reals (94.50 dollars) from Jan 1, as part of efforts aimed at curbing poverty and social inequality.

Although the past few governments have pledged to raise the minimum wage, in the end they have put off the move on the argument that it would lead to even greater fiscal disequilibrium, given the fact that the pensions of 13 million public sector retirees are based on the minimum salary.

Some 15 million workers in this country of 168 million earn the minimum monthly salary, which currently stands at 151 reals, or 80 dollars, according to Marcio Pochmann, an Economy of Labour researcher at the University of Campinas.

Early this year, Senate president Antonio Carlos Magalhaes added his voice to the calls for a raise, running against the current of his own Liberal Front Party (PFL) and against President Fernando Henrique Cardoso, of whom the prominent lawmaker is a staunch ally.

The pressure for a raise in the minimum wage grew this month, and Cardoso decided to accept the proposal, on the condition that Congress specify the new fiscal revenues that would cover the increase in public spending, in order to ensure a balanced budget next year.

The president of the Chamber of Deputies, Michel Temer, said that there was finally a consensus among all of the parties represented in parliament on the urgent need to raise the minimum salary.

The debate on the issue normally crops up on the eve of the First of May, the day the government sets the minimum salary for the next 12 months, generally indexed to inflation.

But on this occasion, the parliamentary debate was taken up earlier, because in its proposal for the 2001 budget, the government is planning on a mere 5.5 percent raise in the minimum wage next May, to 84 dollars.

In the past few months, the voices calling for more effective action to reduce poverty in Brazil have grown louder, and the World Bank even organised a seminar on the question in Brasilia two weeks ago.

According to a World Bank study presented at the seminar, Brazil’s Gross Domestic Product (GDP) would have to grow six percent a year over the next 15 years in order to cut poverty in half. The study reported that some 38 million people, or 22.6 percent of the population, currently live on one dollar a day or less in Brazil, the world’s eighth largest economy.

The World Bank recommended increasing goverment social spending — especially on education — and ensuring that the expenditure more effectively benefits the poor.

One of the most frequent criticisms of the government is that social spending is poorly distributed — which Cardoso himself admits.

The World Bank indicated that only 19.5 percent of social spending actually reaches the poor, because most of the public funds assigned to social areas go to activities like higher education, which benefits the already-privileged, or are swallowed up by a sea of bureaucracy.

The director of social policies at the Planning Ministry’s Institute of Applied Economic Research (IPEA), Ricardo Paes de Barros, said the poor distribution meant economic growth in and of itself would not resolve the problem of poverty.

The right path would be to improve distribution of education and income, he said.

In Brazil, the income of the wealthiest one percent of the population is equivalent to that of the poorest 50 percent, according to the IPEA.

Brazil’s minimum wage is one of the lowest in the world, and many believe that raising it would help guarantee better distribution of wealth.

In many cities in the northeast, the country’s poorest region, pensions equivalent to one minimum monthly sarlary constitute the single biggest source of income.

However, not everyone is happy with the projected increase, which would still keep Brazil’s minimum wage among the lowest in the world.

Economic authorities argue that there is not only the danger of the increase causing a fiscal deficit, but that a number of state and municipal governments are in no position to pay 180 reals a month to their functionaries, most of whom earn the minimum wage.

Marcelo Neri, with the IPEA, pointed out that the rise in the minimum salary would drive up social security expenses and pensions, which mainly benefit the elderly, while — he said — social investment has a greater impact on poverty when it is channeled towards children and education.

A better solution, he argued, would be to further expand programmes that have already proven successful, such as an initiative first launched in Brasilia five years ago and now expanded to other parts of the country, which provides money, food and other kinds of assistance to families that keep their children in school.