Brazil implements new national minimum wage

Brazil has implemented a new national minimum wage starting from January 1. The new amount, set at BRL 1,412, represents a 6.97 percent increase compared to the previous wage of BRL 1,320, which was in effect from May to December 2023.

The adjustment to BRL 1,412—approved in the 2024 Federal Budget—is based on the 3.85 percent inflation rate, as measured by the National Consumer Price Index (INPC) over the 12 months ending in November, and an additional 3 percent growth in the Gross Domestic Product (GDP) in 2022. This method of adjustment was established by a new minimum wage increase policy proposed by the government and approved by Congress in August. The national minimum wage is to be adjusted again in January next year.

At the current exchange rate—as of January 2—the new minimum wage corresponds to US$ 291.61. The Inter-Union Department of Statistics and Socio-Economic Studies (Dieese) estimates that this adjustment will benefit 59.3 million workers and increase the annual income of all workers by BRL 69.9 billion. Moreover, due to the higher minimum wage, the government (including federal, state, and municipal levels) is expected to collect an additional BRL 37.7 billion in taxes, resulting from increased consumption.

The increase in the minimum wage will also impact federal spending, with an estimated increase of BRL 35 billion this year alone, primarily due to Social Security benefits linked to the minimum wage. According to the Budget Guidelines Law (LDO), every BRL 1 increase in the minimum wage leads to a BRL 389 million increase in government spending. However, these calculations do not account for potential gains in revenue resulting from increased consumption.