Simplicity and complexity in practice
Brazil – from regional, to national, to a combination of national and regional rates
When Brazil introduced the minimum wage in 1940, there were 14 different levels by region. These different rates attempted to take into account the significant differences in the cost of living among regions, as well as differences in the levels of economic development and the labour market. By 1963 the number of regional minimum wages had increased to 39.
After that, it was felt that every worker in Brazil should have the same minimum wage protection. As this perspective prevailed, the process went into reverse, with a progressive consolidation towards a smaller number of rates. By 1984 Brazil had only one national minimum wage. However, this level turned out to be low in the more developed south east of the country, while it was high in relation to average wages in north-eastern regions.
For this reason, since 2000, each state has been allowed to autonomously determine its own minimum wage above the national level, with the obligation to comply with the fiscal responsibility law. The fiscal responsibility law, introduced in 2000, aimed at guiding authorities (federal, regional and municipal) to apply cautious fiscal policies. While very few states adopted this alternative (only five in 2015), all those that did are located in the more developed south east, where the most dynamic industries and highest salaries are located. The difference between the lowest regional rate and the national minimum wage ranges from 12 per cent higher than the national minimum wage in Sao Paulo to 35 per cent higher in Paraná.
Regional minimum wages also establish various rates by category. For example, in Paraná there are four different rates for agricultural and livestock activities, services and trade, industrial production and semi-skilled technical workers; in Río de Janeiro there are nine levels; in Río Grande four; and in Sao Paulo three.
After that, it was felt that every worker in Brazil should have the same minimum wage protection. As this perspective prevailed, the process went into reverse, with a progressive consolidation towards a smaller number of rates. By 1984 Brazil had only one national minimum wage. However, this level turned out to be low in the more developed south east of the country, while it was high in relation to average wages in north-eastern regions.
For this reason, since 2000, each state has been allowed to autonomously determine its own minimum wage above the national level, with the obligation to comply with the fiscal responsibility law. The fiscal responsibility law, introduced in 2000, aimed at guiding authorities (federal, regional and municipal) to apply cautious fiscal policies. While very few states adopted this alternative (only five in 2015), all those that did are located in the more developed south east, where the most dynamic industries and highest salaries are located. The difference between the lowest regional rate and the national minimum wage ranges from 12 per cent higher than the national minimum wage in Sao Paulo to 35 per cent higher in Paraná.
Regional minimum wages also establish various rates by category. For example, in Paraná there are four different rates for agricultural and livestock activities, services and trade, industrial production and semi-skilled technical workers; in Río de Janeiro there are nine levels; in Río Grande four; and in Sao Paulo three.