Lula government foresees minimum wage of R$1,502 in 2025 – 04/14/2024 – Market

The government of Luiz Inácio Lula da Silva (PT) foresees a minimum wage of R$1,502 next year, according to government interlocutors interviewed by Sheet.

The value follows the valuation policy correction formula, which includes adjustment for inflation over 12 months up to November of the previous year plus the variation in GDP (Gross Domestic Product) from two years prior (in this case, the 2.9% increase observed in 2023).

The data guides the accounts of the PLDO (Budget Guidelines Bill) for 2025, which will be sent to the National Congress this Monday (15).

If confirmed, the value will represent an increase of 6.37% in relation to the current floor.

Since January 1, 2024, the minimum wage is R$1,412. The figure was updated through a decree by Lula, who applied the rule provided for in the new law on increasing the minimum wage, approved last year.

The forecast for 2025 may still change throughout the year, depending on variations in the estimate for inflation and possible revisions by the IBGE (Brazilian Institute of Geography and Statistics) in the performance of GDP in 2023. A new estimate will be sent with the budget proposal, in August, 31.

The price index used to correct the minimum wage is the INPC (National Consumer Price Index), which measures the inflation perceived by families with incomes of up to five minimum wages. In the government’s forecast, it should increase 3.25% this year.

Although it is favorable to workers, the policy of valuing the minimum could put pressure on the fiscal framework designed by Minister Fernando Haddad (Finance) in the coming years.

It is possible that the minimum wage will advance at a faster pace than the general spending rule, which has real growth limited to 2.5% per year.

As Social Security benefits are, for the most part, indexed to the minimum, this tends to generate pressure on the limit, leading to the flattening of other expenses.

The PLDO will also indicate fiscal targets for the period from 2025 to 2028.

When presenting the new fiscal framework last year, the government indicated its intention to pursue a surplus of 0.5% of GDP in 2025. The target should be reduced to a level between zero and 0.25% of GDP, as revealed The Sheet.

The relaxation of the fiscal policy target is a way of reconciling the trajectory of accounts with the expectation of a slowdown in revenue collection, which is already showing signs of losing steam. Furthermore, most of the revenue measures approved for 2024 are extraordinary and will not be repeated in 2025.

The maneuver to change the fiscal framework and bring forward the opening of R$15.7 billion in credit also makes the scenario more challenging for the government.

As the report showed, engineering will facilitate the opening of extra space in the Budget also in 2025, since the credit will be permanently incorporated into the expense limit calculation basis.

Authorization to spend more puts pressure on the fiscal target, given that it would be necessary to pursue an even greater volume of revenue to seek a more ambitious positive result.

The PLDO will be released this Monday by the Ministries of Finance and Planning and Budget.