Minimum wage increase increases INSS gap by R$28 billion

The next increase in the minimum wage is expected to inflate the Social Security gap by around R$28 billion next year, equivalent to 10% of the deficit projected by the government for 2023. Part of this boost comes from the recovery, by the government of Luiz Inácio Lula da Silva (PT), of the policy of increasing the real minimum salary.

Economist Paulo Tafner, president of the Institute of Mobility and Social Development (IMDS) and associate professor at Fipe, says that the minimum wage has always been a major factor in the system’s imbalance, as it corrects a large part of retirements and pensions. “The current government is doing something crazy by establishing the new policy [de aumento real] without de-indexing the Social Security minimum”, he assesses.

According to a calculation by the Ministry of Planning attached to the Budget Guidelines Bill (PLDO), each R$1 increase in the floor generates an impact of R$259.7 million on the deficit of the General Social Security Regime (RGPS).

The estimate already includes the slight increase expected in the collection of social security contributions (R$ 6.3 million for every R$ 1), much lower than the estimated advance for spending on INSS benefits (R$ 266 million for every R$ 1 ).

Increase in the minimum wage will be defined by the sum of inflation and GDP

Law 14,663/2023, sanctioned by President Luiz Inácio Lula da Silva (PT) at the end of August, establishes that the minimum will once again be readjusted by inflation plus the variation in GDP from two years before, as occurred until 2018. As a result, the salary floor should have a real increase of 2.9% from January 1st of next year.

In the sum of the 2023 INPC (estimated by the government at 5.16%) with the increase in GDP in 2022 (2.9%), the total adjustment of the minimum in 2024 would be approximately 8.2%, around R$108 above the current value (R$ 1,320).

If confirmed, this adjustment will lead to an increase of approximately R$28 billion in the Social Security deficit. For comparison purposes, the expected loss for 2023 is R$276.9 billion, or 2.59% of the Gross Domestic Product (GDP).