Brazilian real and the minimum wage Brazil’s labor Union Força Sindical says it will insist on a minimum wage of 580 reais (US$ 344) while the Brazilian government also deciding to take a hard line, insists on R$ 545 (US$ 324). The union also wants a correction of the income tax tables of 6.5% (the government wants 4.6%) and a 10% adjustment in benefits paid to retirees receiving more than a minimum wage.

    A minimum wage of 580 reais would add over 7 billion (US$ 4.2 billion) annually to the social security system deficit. Revenue loss from the income tax correction the union wants would be close to 2 billion reais (US$ 1.2 billion).

    The government has not said anything about the 10% benefit increase for retirees who receive more than the minimum wage.

    Labor unions had a meeting with the president’s top administrative aide (Secretaria-Geral da Presidência), Gilberto Carvalho.

    However, before the meeting, Paulo Pereira da Silva, president of the Força Sindical, said he could accept a minimum wage of 560 reais. And a government spokesperson reportedly said that 550 reais was possible.

    In Brazil the minimum wage (presently 540 reais per month) has a broad and deep impact. This is especially true at the municipal level.

    According to Paulo Ziulkoski, president of the National Confederation of Municipalities (CNM), even if the Dilma Rousseff administration gets its way and the minimum rises to only 545 reais, it will still mean an additional cost to local government payrolls of 1.3 billion reais (US$ 772 million) annually.

    “Between 2003 and 2010, successive real increases in the minimum wage cost municipalities an additional 10.8 billion reais (US$ 6.41 billion). That is money that could be spent on other things. Our hands are tied by a series of norms, mainly the Fiscal Responsibility Law,” declared Ziulkoski.

    This law establishes a limit of 54% for city hall payroll expenditures plus another 6% that the city legislative body can spend on its payroll.

    Ziulkoski explained that most Brazilian municipalities operate at the very limit of the Fiscal Responsibility Law: 60% of municipal revenue going to payrolls.

    There is also the problem that at the local level the number of civil servants who receive the minimum wage is high (around 5.3 million Brazilians are employed by local governments). So, when the minimum wage goes up more than inflation, the mayor’s payroll expenditures go above the limit and his administration is penalized. At the same time he cannot fire anybody or create other sources of revenue, explains Ziulkoski.

    ABr

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