Direct Benefit Of Minimum Wage In Brazil example essay topic

The Minimum Wage in Brazil Brazil has a population of 169 million people - is the country with the highest inequality index in the world, according to the 1999 Human Development Report of UNDP. About 80 percent of the population in the world have an average income below the average income of Brazil. Nevertheless, the richest 10% of Brazil's population receive 48% of the total income and the poorest 40% have a share of only 7% of the total income. This means that the average income of the rich is more than 20 times the average income of the poor. In most Latin American countries this factor remains around 10, whereas in the highly industrialised European countries it does not even reach 4. In Brazil, there are therefore a lot of very poor people surrounded by sufficient resources to eliminate their poverty.

According to the governmental Institute of Applied Research (IPE A), 33 percent of the Brazilian population is considered poor, that is 50.1 million people. The big pockets of poverty in Brazil are the children. 46 percent of the persons below 16 years of age are poor, against 33 percent of the total population. Another pocket of poverty is the informal sector.

About 56 percent of the poor are members of families headed by a person working in the informal sector. Moreover, poverty affects women in particular: Even though women receive more schooling than men, their income is on average 60% of the male income. In such a context the State has to urgently meet its obligation to fulfil the right to an adequate standard of living for the population by using the maximum of available resources. Never in the Brazilian history was there any national plan aiming at the eradication of poverty and hunger. Development has always been geared more to economic growth than to the sharing of income. The consolidation of democratic mechanisms, however, led to an increasing debate about the need for action by the State and the whole Brazilian society to secure the sharing of income.

This debate develops along three lines of action: Traditional social policies to combat poverty, a guaranteed minimum wage, and the minimum income programmes. This paper will focus on the effect of the minimum wage since there are many controversies regarding this topic. In Brazil, as in other countries, the purpose of the minimum wage legislation is to redistribute earning to low- paid workers in order to assure the satisfaction of their basic needs. Determining the level of the minimum wage that best accomplishes this goal is not, however, an easy task, as there are a number of trade offs and indirect effects involved.

The necessity of ensuring that all workers receive a satisfactory living wage was first accepted by the 1934 Constitution in Brazil. In 1936, the legislation adopted a law establishing a national minimum wage system, and in 1940 this law was introduced. Since then the minimum wage system has been modified several times, but its main objective has remained unchanged: to provide protection for almost all workers against improperly low wages. The 1934 Constitution referred to the minimum wage as a level of earnings which is sufficient to meet the basic needs of workers, taking into account the cost-of-living in the respective regions. To determine minimum wage levels, the Government set up regional Minimum Wage Commissions in 1938, one for each of the 20 states and 2 territories.

The commissions consisted of an equal number of employer members and worker members, and they were headed by government representatives. The commissions developed their proposals on the basis of empirical studies, including a household budget survey of low-income families and the analysis of the wage levels of low-paid workers in different sectors. The criteria used to calculate the needs of workers was a basket of goods and services, including food, clothing and transportation. The proposals of the commissions served as reference for fixing initial minimum wages. Since the introduction of minimum wage regulation, the notion of basic needs has been reconsidered twice. First in 1946 when, instead of the individual worker, the household became the new reference for considering basic needs so that the minimum wage should be sufficient to enable household heads to provide for the entire needs of their families.

Then in 1988, the new Constitution defined a wider coverage of goods and services considered essential for meeting worker needs. However, both modifications in the concept of basic needs have remained on paper and have not affected minimum wage fixing. In 1988 the federal constitution in Brazil established new parameters to define a new political definition to the minimum wage salary. In one hand the economy at the time had to revise the minimum wage salary as well as its value.

It was created the "basic basket, which is a added benefit to the minimum wage worker in Brazil. The " basic basket it was a way that the federal government and the employers could add a value gain to the worker and not translate that into fiscal gain, meaning that the employer could assist their worker sin giving them another benefit that would translate directly into their basic need and not have to add new expenses in the form of taxes, social security and insurance benefits. The " basic basket" was just that, a basket with the basic foods of the typical Brazilian worker with some variation of some local and regional tastes, the basket included a bag of beans, rice, spices and a starch flour which is a delicatessen in Brazil to accompany the rice and beans meal. That was a clever way that an employer could help itself, meaning the bottom line of the company and not compromise with a higher payment of taxes and employee benefits, and also have a added value in the relationship they had with their employees and their family therefore creating an image and straighten the relationship between boss and employees. Ironically the creation of this "basic basket" has become the symbol of charity in Brazil; an easier way that a person could make a donation to any institution that deals with poverty and the poor.

The Brazilian society adopted this benefit that was created specially for the worker and brought it to the Brazilian social scene. Today is very common that any donation to charitable institutions be made in the form of a b" basic basket" even though is not directly for a worker, but in most of the cases is for a family of a family of a minimum wage worker. The creativity of the Brazilian employer and the necessity of the big companies to create a way to augment the life and earrings of the minimum wage worker, translated into the " basic basket" and the gains form that were directly felt in the economy, the employers need not to expend more of their bottom line gains and have to pay more taxes with employees. The results of the creation of the " basic basket" is still felt today in the economy and it has become a success in assisting mainly the minimum wage worker and their families.

The value of the goods in the " basic basket, were directly related to the economy, meaning that the basic foods needed to create this basket, was derived from costs of goods and how these goods were priced, therefore somehow keep a tab on the whole process of cultivation, industrialization, handling, transport and the final stage of commercialization the foods included in this basket, this was an added benefit not foreseen in the creation of the this benefit, but that was very welcomed by the both sectors the government and private sector. The new constitution of 1988 had a new article 5 of the article number 195, that assured the minimum wage worker a guarantee of a preservation of living standards and to also preserve the buying power of the minimum wage, and the direct affect that any increase can have in the preservation of the benefits of this class of workers. This article has been the pillar of the negotiations between the workers and employers as in how to fixate the minimum wage amount, and how this amount directly affects the poverty and the unemployment numbers in Brazil. Since it was introduced by a federal article of law, the minimum wage in Brazil has had many oscillations in relation of the inflation and standards of living for the Brazilian workers, President Vargas vision of the minimum wage for Brazil has been transformed in a political tool that is used to contain, control and direct the economy in Brazil and that affect is most felt in presidential elections years. The minimum wage has had a few adjusts and most in a sensible amount on percentage of growth, but even though these adjustments has translated in somewhat high numbers with an average of 5% a year, the direct affect in the pocket of the minimum wage worker has not been felt, and as mentioned as an editorial I believe that these increases have been mostly been a result of political tactics and bargain between political parties in Brazil. The real gains in increases of the minimum wage, no pun intended, was really felt and observed after the introduction of "The Real Plan" or the new money in Brazil.

This was a result of the lower and more e stable economy. The lower inflation is the primary reason of the real gains received in the minimum wage adjustments, the government was able to analyze two months with low inflation and then be able to analyze an average of that inflation and therefore stabilize and correct any adjustments necessary to comply with wage negotiations and really have an positive affect in the fixation and adjustments necessary. I have read that a very interesting data gathered form many studies on the minimum wage in Brazil, is that the most beneficial and actual result of the fixation and stabilization of the minimum wage were not even for the traditional worker, and to the informal sector. The informal sector is the poorest of the segments in the Brazilian economy, these workers have used and set parameters for the their labor in the minimum wage. The informal sector before this stabilization could have any type of bargain chip to charge for the services. And even though is an economy totally formed of unregulated workers, it has a tremendous affect in the economy, especially in the poorest fractions of the Brazilian war against poverty.

Another very strong unperceived and unforeseen result of the fixation of economic parameters and the adjustments made to the minimum wage is that many sectors of the economy, starting with public sector and government, have set the standards for living and the method of compensation of the Brazilian workers in the number of minimum wage salaries received. The creation of this scale directly related to the minimum wage have brought the attention form the poor worker to the low and mid level economic class, any worker that have their salary directly connected with the minimum wage have paid a lot more attention to the negotiations and to the adjustments made by the government. Most of the federal and state workers have their salaries and bonuses directly tied to the minimum wage, they receive their salaries and in numbers of minimum wage, meaning that the set minimum wage is the multiplied by the number of minimum wage salaries they receive, therefore those who a great numbers and those with minimum number of salaries to receive have a great interest in what that number is set, and all the benefits and bonuses are also set by that index... The direct benefit of minimum wage in Brazil is felt in 65% of the Brazilian homes, it is a huge impact in the economy as it fluctuates. The present situation of the Brazilian economy is one to be watched closely, the new ruling party the Party of workers have always proposed a much higher minimum wage that the one now.

The new political scene is one to be very well observed, the power struggle between the right and left wing will in no doubt result in a extreme change of the minimum wage, the new president Lula and his party that have always asked for wages reform and a policy to be directed to the Brazilian workers, will now feel the pressures related to the necessary changes. The private sector will definitely pressure the president and the congress to maintain the status quo, and the supportive voters of the many workers unions will definitely ask the new president to reform and increase the minimum wage. The events that will follow the negotiations between the public and private sectors and the government will certainly shake the economy in Brazil. The negotiations will certainly involve a power struggle and all the dealings and concessions will have a direct affect on the economy and the workers, this is a long waiting campaign that the Brazilian worker has been waiting for, to have a president that in their eyes will give them the redemption of many years of suffering.

The new president has in his hand a huge challenge, one that will take a while to be resolved and one that can certainly divide his political party, the new negotiations about the minimum wage will have the eyes of the country and most Brazilian are in one way of another affected by any changes made to the actual minimum wage.