In a series of votes late Wednesday, Brazil’s lower house of Congress approved a 6.8 percent increase in the minimum wage to 545 reais a month ($326.50), from 510 reais. Labor unions and some politicians had sought to increase the wage to as high as 600 reais. The bill will now go to the Senate, where it is expected to be approved next week.
The approval is considered an important victory for Brazilian President Dilma Rousseff, who took office on January 1. Although she was elected by a landslide last October and her governing coalition holds a majority in Congress, that coalition is itself made up of politically disparate groups, including everything from radical leftists and union leaders to socially conservative Christians.
Wednesday’s approval by a strong majority in the lower house shows Rousseff was able to rally her coalition even on politically sensitive issues for her labor constituency. Nonetheless, she risks losing some of her popularity by pushing austerity measures, including planned cuts in federal spending. Last week Rousseff’s government announced a goal of reducing the federal budget for 2011 by 50 billion reais ($30 billion), as she seeks to curb inflation and hold down interest rates. Inflation reached a six-year high of 6 percent in 2010.
Limiting increases to the minimum wage is important because the wage is used to calculate a range of government salaries and benefits, including federally-funded pension funds. Each real added to the minimum wage amounts to a 300 million reais ($180 million) annual increase in federal spending.
Under Rousseff’s predecessor Luiz Inácio Lula da Silva, a former union leader, the minimum wage increased nearly 60 percent between 2002 and 2010, which helped millions move out of poverty and earned him enormous popularity. Current union leaders critical of Rousseff’s proposal say the limited increase in minimum wage and other measures of fiscal austerity will hurt the poor and working class the most.
A 2006 agreement between Lula and labor unions, which Rousseff has pledged to extend, determined that the minimum wage increase would be calculated by adding the previous year’s rate of inflation to the rise in GDP of two years ago. The Brazilian economy stagnated in 2009, meaning the government only had to increase the wage in line with inflation this year. It will face a more difficult decision next year, when the wage rise will have to reflect Brazil’s 2010 economic growth rate of 7.5 percent.
