Centrals meet today with Lula and consider three minimum wage policies; understand

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President Luiz Inácio Lula da Silva meets this Wednesday morning (18) with representatives of the trade union centrals to start debates on a new policy for the minimum wage.

It will be his first expanded meeting with trade unionists in this government, when the administration intends to announce the creation of a National Board to debate labor issues.

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In addition to the minimum wage, they want to discuss strengthening the Ministry of Labor, incentives for collective bargaining and regulation of work in applications.

The immediate theme, however, is the value of the minimum wage for 2023 and the new minimum wage valuation policy.

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A document prepared by the Inter-Union Department of Statistics and Socioeconomic Studies (Dieese) obtained by CNN should substantiate this negotiation.

It shows what the centrals intend to bring to this debate.

There are three formulas under debate for the resumption of the policy of valuing the minimum wage.

1) Inflation and GDP of the last 2 years

The preference of the centrals is the rule that informally prevailed between 2007 and 2020, which predicted a value resulting from the inflation rate measured by the INPC of the previous year and the GDP of the two previous years.

In 2015, a Provisional Measure made this policy official, which ended in 2020 in the Bolsonaro government.

According to Dieese’s study, if this rule were in effect today, the value for this year would be R$ 1,382.71.

However, the value predicted by the Bolsonaro government and intended by Lula’s economic team is R$ 1,302.

The centrals try to expand to at least R$ 1,320 as of May.

The increase is supported by the government’s political wing, which fears a negative impact on the new government’s popularity if there is a smaller readjustment.

The centrals also admit to debating two other possibilities.

2) Inflation and GDP of the last 5 years

The second is the increase in the minimum according to inflation plus the average GDP growth rule over the last five years.

According to this formula, the minimum value today would be R$ 1,299.

3) GDP per capita and inflation of the previous year

Another is the increase in the minimum according to inflation plus the GDP per capita of the previous year.

According to this rule, the value today would be R$ 1,333.

See what the full document says about each of the formulas:

1) Inflation plus GDP average of the last two years

In a context of economic growth, it is the most favorable wage rule. The social security and assistance floors are raised more quickly than by other rules.

The real SM (minimum wage) grows more than the productivity of the economy. In public accounts, the increase in the value of benefits is added to the increase in the beneficiary population.

When there is a slowdown or drop in GDP, there is a mismatch between the real increase and the possible capacity of companies and states to afford readjustments, given that it is the GDP of two years ago.

In the deceleration phase, the SM, increasing more, can help the demand, but if this is not enough to revive the economy, it starts to generate very high costs.

2) 5-year average GDP rule
The readjustment for 2023 would be softened because, in the average account, the negative GDP rate for 2020 enters, offsetting the sharp rise in 2021.

The average rate causes the series of readjustments to be “smoothed”, that is, it does not suffer such sudden oscillations as in the previous rule.

The average rate discounts the rate of a recessive year from the readjustments resulting from years of growth, otherwise, expressive declines in GDP, followed by low growth, could “carry forward” several years of zero readjustment.

But, in a scenario of continuous growth for a few years, the final effect is practically the same as the previous rule. In this case, SM will rise above the productivity of the economy.

3) Adjustment rule based on GDP per capita

The readjustments would be smaller than with full GDP readjustments, because population growth is discounted from this (GDP per capita = GDP rate – population rate.

The readjustments are closer to the productivity of the economy as a whole. This means that the economy is better able to support the increase in MS.

In public expenditure as well: the increase in value for SM is reduced/softened by considering the growth of the population that the State has to serve.

The relationship with cycles is the same as under the 5-year GDP average rule, however, as this rule is linked to productivity gains, it tends to cause lower cost and public expenditure pressures.

Source: CNN Brasil

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