What Lula 3 can do to repeat Lula 1’s minimum wage – 02/15/2023 – Vinicius Torres Freire

The minimum wage should see another real increase in May, say political advisers to Luiz Inacio Lula da Silva. In addition to the real increase that happened to happen in the last year of the government of darkness, to R$ 1,302, the minimum should go to R$ 1,320: another R$ 18. He pays four bus tickets in São Paulo.

It’s little, but it’s what you can do and look there, because the readjustment increases government spending — more on that later.

In itself, the value of the minimum is minimal, not least because the country is quite poor and has been impoverished for a decade. In 1979, a boy asked the last dictator-general, João Baptista Figueiredo, what he would do if he were a child and his father lived on a minimum wage. “I would shoot the coconut [na cabeça]’ said the ruffian.

The minimum wage had real readjustments, above inflation, particularly in the Lula years (and almost nothing beyond the monetary correction after 2016). The gap between the minimum wage and the average wage has narrowed.

At the beginning of Lula 1, in 2003, the minimum was equivalent to around 38% of the average salary. In the last year of Lula 2, 2010, at 45%. From 2012 to 2016, the minimum amount was around 43% of the average income from work; from 2017 to 2022, 44%.

In other words, Lula’s policy, from a certain point onwards, prevented the minimum from losing out to the advancement of wages determined in general “on the market”. Then, the Great Recession (2015-2016) and the following years of PIBinho contained wages in general and, thus, contributed to the stabilization of the difference.

If Lula’s last readjustment policy had been followed after the PT years, the minimum would be equivalent to almost 49% of the average salary. But this is an arithmetic abstraction and a further simplification of the complications of the world of work and wages. For various reasons, in years of crisis it would have been very difficult to give a real adjustment to the minimum. By the way, how close can the minimum be to the mean? It has a limit. The average needs to be increased.

What increase it will be possible to give in the coming years is another question. The average growth prospect for the first biennium of Lula 3 is, for now, at best, similar to that of the years sandwiched between the Great Recession and the epidemic (close to 1.4% per year). Even if the old rule of raising the minimum wage were to return (adjustment for GDP growth in the previous biennium, in addition to inflation), not much would come of it.

A more immediate problem is that the minimum amount also determines the floor of INSS benefits (retirements and others). An increase in the minimum, as is known, therefore increases federal government spending.

The people at the Treasury are still doing math to find out how to accommodate the extra expense of the readjustment scheduled for May, as well as the likely loss of income with the Income Tax of those who earn up to two minimums (which will be exempt, which by the way reduces one tico of the tax of those who earn above that too).

In March, the government presents its new method of limiting public debt growth (some expenditure and deficit limiter). The government also intends to increase investments, social spending and civil servant salaries. It will be difficult to accommodate the increase in the minimum and all that in the Budget, even if federal spending remains at last year’s level (as a proportion of GDP). The economy would have to grow much faster and now, which has been our big question for a decade (not to say 40 years).

Note: even adjusting these accounts for the minimum, some caution is necessary: ​​official methodologies for calculating average labor income (“salary”) have changed, and statistics on the subject have certain tricks.

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