Minimum Wage in Brazil: A Useful Policy Tool to Reduce Wage Inequality?
What role did a rising minimum wage play in reducing wage inequality in Brazil in the first decade of the 21st century? Is it reasonable to expect that the policy of tying minimum wage to economic growth will continue to act as a key driver of inequality reduction in the near future?
This report was featured as a chapter in “GLOBAL WAGE DEBATES: POLITICS OR ECONOMICS?” a joint report co-authored by the global partners of JustJobs Network.
What role did a rising minimum wage play in reducing wage inequality in Brazil in the first decade of the 21st century? Is it reasonable to expect that the policy of tying minimum wage to economic growth will continue to act as a key driver of inequality reduction in the near future?
In order to answer these questions, this report is structured as follows: The first part presents the broad macroeconomic situation, with a focus on productivity and labor market outcomes, pointing out the main features of the Brazilian growth modeli as well as its main challenges.
The second part looks at how the country’s active minimum wage policy fueled the rise in the real value of Brazil’s minimum wage over time. This section further discusses the importance of this policy for different types of wage workers – registered and non-registered, urban and rural – and the changing relationship between minimum wage and average wages.ii
Third, the report shows how income inequality decreased across sectors, regions and social groups – including sex, race/color and levels of education. The authors use the Theil indexiii to look at the reduction in inequality across these different variables, while also examining how the average wage ratios between non-registered and registered wage earners changed.
Finally, the last section discusses how trends in wage inequality are likely to evolve in the near future, especially considering that Brazil has been confronting an economic downturn over the last two years.
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