Study Finds Minimum Wage Nearly Equals Median Income in Seven Northeast Brazilian States

A study by the Institute for Mobility and Social Development (IMDS) reveals that the minimum wage has reached nearly 100 percent of the median salary in seven states in Northeast Brazil: Alagoas, Maranhão, Paraíba, Piauí, Bahia, Rio Grande do Norte, and Ceará. Nationally, the minimum wage represents 65 percent of Brazil's typical income, which is the sixth highest proportion among 34 countries. This is significantly higher than the 25 percent proportion found in the United States, though lower than in Colombia, Costa Rica, Chile, Mexico, and New Zealand.

In contrast, the minimum wage represents a smaller portion of typical income in other regions, such as the Federal District at 49 percent, Santa Catarina at 52 percent, and São Paulo at 57 percent. The current minimum wage is R$ 1,621 and is expected to be adjusted to R$ 1,741 by 2027. Since 2000, the minimum wage has increased by 125.8 percent after adjusting for inflation.

Economists from the IMDS suggest that when the minimum wage approaches 100 percent of median income, companies may be more likely to hire informal workers because they do not see productivity gains that justify the higher costs of labor charges. Additionally, Fernando Veloso, the research director at IMDS, noted that increasing the floor has fiscal consequences. According to Ministry of Planning data, every R$ 1 increase in the minimum wage raises expenses by over R$ 400 million because the floor serves as a reference for social assistance and pension benefits.

The study further argues that minimum wage increases have limited effectiveness in fighting extreme poverty. Data from the Continuous National Household Sample Survey (Pnad Contínua) shows that only 9 percent of retirees and pensioners receiving the minimum wage are among the poorest 30 percent of the population. Conversely, about 60 percent of these beneficiaries are among the wealthiest 40 percent of families. Only 24 percent of poor Brazilians receive remuneration close to the minimum wage.

Regarding political responses, Finance Minister Dario Durigan, acting as the economic spokesperson for President Lula's campaign, stated that changes to the real adjustment of the minimum wage are not under discussion. Candidate Flávio Bolsonaro stated that if elected, he would implement a fiscal adjustment without altering the minimum wage valuation policy.