Wages War.THE PROBLEM WITH BRAZIL'S NEW MINIMUM wage minimum wage, lowest wage legally permitted in an industry or in a government or other organization. The goal in establishing minimum wages has been to assure wage earners a standard of living above the lowest permitted by health and decency. The minimum has been set by labor unions through collective bargaining, by arbitration, by board action, and, finally, by legislation. is that it will cost a heap of money. Caught between the rocklike inflexibility of a national labor-political coalition and the hard place of fiscal reality, Brazilian President Fernando Henrique Cardoso agreed to an 11% increase in the minimum monthly wage--even though it could upset the country's financial recovery. The hike brings the minimum pay rate to about US$86. Finance Minister Pedro Malan says that for each $2.50 above this year's budgeted minimum wage of about $77, the government has to spend an extra $500 million. In this case, the pay raise will cost the government some $1.8 billion. The higher minimum wage automatically increases the country's social security deficit because most benefits are indexed to the minimum wage level. More than half of the country's 165 million people earn below minimum wage. The hefty jump in the wage rate could fuel inflation while making it virtually impossible for Brazil to meet the economic goals it agreed to as a condition of a $45 billion bailout package put together by the International Monetary Fund. Still, one of the country's most powerful politicians, Senate President Antonio Carlos magalhaes, teamed with the Liberal Front Party and the Workers' Party in seeking an increase of almost 25%. "Brazil should try to meet its commitments to the IMF, but first it has to meet its commitment to the people," says Magalhaes. |
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