In the late 1970s Souza and Baltar (1979) wrote an article arguing that in the case of Brazil, the minimum wage had a “lighthouse effect” over wage determination that went well beyond the natural scope for this policy. According to this argument, the minimum wage guided wage fixing for workers in small enterprises, which were rarely inspected, as well as in the informal sector. Even self-employed workers used the minimum wage as a reference to determine the price to be paid for their products or services.

Many studies discussed this concept, developing empirical evaluations. Neri et al. (2001) estimated the percentage of workers receiving exactly the minimum wage in September 1996, adjusting the working time to a week of 40 hours. They wanted to assess the relevance of minimum wages in the formal economy (both public and private), as well as for the informal economy and the self-employed. Formal workers were defined as workers “con carteira” (with identity cards), while informal workers are those “sem carteira” (without identity cards).

Neri et al. found that although non-compliance among informal workers was high (27 per cent), no less than 14 per cent of informal workers earned exactly the minimum wage, showing the relevance of this instrument in this segment of the labour market. Among the self-employed, the figures reveal a weaker link with the minimum wage than the other segments.

See: Souza, P. R. and P.E. Baltar (1979). “Salário mínimo e taxa de salários no Brasil”. Pesquisa e Planejamento Econômico, Vol.9, No.3, pp.629-60
Neri, M.; Gonzaga G.; and J.M. Camargo (2001). Salario Mínimo, Efeito-Farol e Pobreza. Revista de Economía Política 21(2): 78-90.