By LAURO MATTEI*

The policy of increasing the minimum wage as an instrument of social justice: a critique of the rentier arguments that insist on blaming workers for the fiscal imbalance, ignoring the real privileges of the financial system

Introduction

The policy of increasing the minimum wage to promote its real growth, which was resumed in January 2023 at the beginning of the Lula III government, has recently been attacked again by the same old characters: the representatives of the country's financial rentiers. And with the same old arguments: real increases in this wage are the cause and the potential for fiscal imbalance.

Recently, an old acquaintance of this rentier clergy (Armínio Fraga) had the nerve to propose freezing the minimum wage, in real terms, for a period of six years.

Armínio Fraga’s position on this issue is not new. I return to an article I wrote in 2014 on the eve of the presidential elections. In it, I present a similar statement by this gentleman – who was tipped to become finance minister if the PSDB candidate at the time, Aécio Neves, won the presidential elections – stating that the minimum wage had grown a lot in recent years and was at a very high level due to the policy of appreciation that was underway and that – despite some positive results – the fiscal cost of such a policy was too high, signaling that it was necessary to slow down this process.

This position was immediately adopted by the PSDB presidential candidate. It is worth noting that in 2011, Senator Aécio Neves (PSDB) voted against the proposal approved by the National Congress that resulted in Law 12.382, of November 25.11.2011, 4801, as can be seen in the recordings of the sessions of the Federal Senate (www.legis.senado.leg/br, page 12.382). Not satisfied with this, the PSDB also tried to nullify the aforementioned law after its enactment, by filing an unconstitutionality action with the Supreme Federal Court, a request that was denied because the Supreme Court considered Law XNUMX valid and in accordance with constitutional precepts.

Mattei (2014) provides a brief retrospective of this process, which was questioned by the political and technical leaders of the PSDB. For example, in the last year of FHC's term – and under the management of Armínio Fraga at the Central Bank – the dollarized salary corresponded to US$ 86,21. In 2014, the last year of President Dilma Rousseff's first term, the real value of the minimum wage corresponded to US$ 304,80.

However, when considering the calculations made by DIEESE to obtain the real value according to the original minimum wage law, it is noted that in 2002 (the last year of the FHC government) the value should have been R$1.378,19, which corresponded to 6,89 times the value of that year (R$200,00). In 2014, the value should have been R$2.748,22, which corresponded to 3,79 times the value of R$724,00. This means that the policy of increasing the minimum wage during the Lula and Dilma governments significantly reduced the difference between the nominal value and the value required according to legal precepts.

Perhaps this is the main annoyance of the rentiers, since more money for the salaried worker means greater purchasing power for the people and fewer dollars for the speculative financial markets, where birds of prey live that like to always act contrary to the interests of the mass of the country's working population.

Thus, the objective of this study is to critically problematize the arguments of rentiers against the appreciation of the minimum wage. To this end, in addition to this brief introduction, the article is organized into three more sections. The first section seeks to provide a brief summary of the minimum wage appreciation policy, while the second section critically analyzes the rentiers' proposals, and the third section presents the final considerations of the work.

Brief review of the minimum wage appreciation policy

This section reproduces parts of the DIEESE (2023) study on the evolution of the minimum wage established in the country in 1940 through Decree-Law No. 1.642 of July 01.07.1940, 1946, having been incorporated into the Consolidation of Labor Laws (CLT), including receiving specific laws in the constitutions of 1967, 1988 and XNUMX, which transformed it into a constitutional right.

According to DIEESE (2023), “until the 1964 coup, the minimum wage policy was debated in a tripartite forum, the so-called Minimum Wage Joint Commissions, whose existence was incorporated into the original wording of the CLT. From its implementation in 1940 until March 1964, the minimum wage had its adjustments defined by the Minimum Wage Joint Commissions, although at irregular intervals”.

“Between 1964 and 1974, the civil-military dictatorship made wage policy the main mechanism for controlling inflation, and the minimum wage was its centerpiece. This policy resulted in a brutal concentration of income, especially during the period of the so-called economic miracle (1968 and 1974), when the economy grew at rates above 10% per year” (DIEESE, 2023).

In the 1988 Federal Constitution, the subject was covered in article 7, which defined: concepts and objectives, in addition to also defining that the minimum wage would act as a floor for the payment of social security and social security benefits, as well as the remuneration of domestic employees.

From then on, the minimum wage adjustment policy began to be defined by the Executive Branch, through Provisional Measures sent to the National Congress, and “between 1996 and 2002, minimum wage adjustments were random and not based on objective criteria. Therefore, during this period, its real value was reduced to just 30,28% of the value in force in July 1940, when it was created” (DIEESE, 2023).

According to DIEESE (2023), “in 2004, during Luiz Inácio Lula da Silva's first presidential term, the Trade Union Centers began a national mobilization known as the March of the Working Class to Brasília with the aim, among others, of recovering the purchasing power of the minimum wage. In December 2006, a Protocol of Intentions was signed between the Centers and the Federal Government. This Protocol provided for the readjustment of the minimum wage in April 2007 based on the accumulated inflation in the previous twelve months and the GDP growth in 2005. Until January 2011, at the beginning of former President Dilma Rousseff's first term, the readjustment of the minimum wage was based on the criteria defined in the aforementioned Protocol signed in 2006, through a series of Provisional Measures”.

In February 2011, the National Congress approved the Minimum Wage Enhancement Law (Law No. 12.382) for a period of four more years, considering this policy an essential part of the country's development. At the beginning of President Dilma's second term (January 4), the National Congress extended this policy for another four years under Law No. 2015, which expired in January 4.

In 2018, the government in power (Michel Temer) should have submitted to the National Congress a new bill to increase the minimum wage for a period of four more years. As this action did not occur, the government of Jair Bolsonaro (2019-2022) did not implement its policy of updating the minimum wage according to the criteria that had been adopted since 2011. As a result, a long period of increasing workers' income was interrupted, a fundamental action to positively contribute to policies to combat poverty and social inequalities.

Shortly after taking office in January 2023, the Lula III government began to resume the policy of increasing the minimum wage by creating a working group with the participation of the Trade Unions and DIEESE. Thus, during the May Day celebrations of 2023, President Lula announced the new policy agreed upon between the Federal Government and the Trade Unions.

This policy came into effect in January 2024, when the minimum wage became R$1.412,00, corresponding to a 6,9% increase compared to the 2023 value (R$1.320,00). As of January 2025, the minimum wage became R$1.518,00, corresponding to a 7,5% increase compared to the previous year's value. In other words, the nominal increase of R$106,00 meant a real gain of 2,5%, considering that inflation in 2024 was close to 5%.

With this, it is clear that the Lula III Government is fulfilling one of its specific promises made during the 2022 election campaign: during the four years of government, the minimum wage would have real annual increases, that is, the adjustments would always be above inflation with the aim of improving income distribution in the country.

This aspect is relevant when considering the social scenario of the country, where approximately 55% of workers have income linked to the minimum wage, while around 25 million retirees and pensioners out of the total of 38 million in the country receive a minimum wage. Added to this is the fact that the Continuous Benefit Payment (BPC) and Unemployment Insurance are based on the minimum wage.

It is important to note that Brazilian workers went almost seven years (2016-2022) without real gains in the minimum wage, in addition to the lack of adjustments to the income tax table. This certainly had a huge negative impact on the purchasing power of the working class, which, combined with the effects of the pandemic, may have increased the social contingent of those excluded.

The mistakes of the rentier critique and the current reality

In essence, the rentiers' proposal to freeze the minimum wage for six years is based on the idea that this action would reduce the public deficit and help prevent the growth of public debt. This would make it possible to lower interest rates, while at the same time making it possible to cut public spending by around three percentage points of GDP. Furthermore, according to the rentiers, freezing the real minimum wage would help reduce pressure on social security due to the linking of its spending to the minimum wage.[I].

In fact, this proposal also appears to be targeting other links between the minimum wage and social programs, especially the Continuous Benefit Payment (BPC) and Bolsa Família (BF), both of which have high public spending and are on the rise.

This argument can be easily challenged with data on the recent growth of public debt. For example, in the period between 2017-2022 (Temer and Bolsonaro governments) the minimum wage did not increase in real terms; on the contrary, in some years not even annual inflation was incorporated into its nominal value. Even so, the gross public debt grew from 74% of GDP (2017) to 77% in 2021. In the first two years of the Lula III government, when real increases in the minimum wage occurred, the public debt remained at the same level of 77% of GDP. It follows that, in isolation, freezing the real increase in the minimum wage is not a measure capable of balancing the deficit in public accounts.

Below we will present a set of information related to the labor market to challenge the rentiers' propositions. According to data from the Continuous PNAD, in the fourth quarter of 2024 the labor force in the country was composed of 110.640 thousand people. Of these, 103.818 thousand were employed and 6.823 thousand were unemployed, implying one of the lowest unemployment rates ever recorded: 6,2%.

It is important to note that of the 53.446 thousand people employed in the private sector, only 39.237 people had a formal work record. This implies that 14.209 thousand people did not contribute to social security. In addition, another 40.405 thousand people were employed informally, a portion that probably also did not contribute to social security. Therefore, in the particular case of social security, the problem is not that payments are linked to the minimum wage, but rather the high number of workers outside the formal labor market.

Other specific aspects related to social security need to be considered in this debate. On the one hand, it is estimated that approximately 60% of beneficiaries have a monthly income of up to 1 minimum wage, implying a loss of purchasing power if the minimum wage remains frozen. On the other hand, it is precisely the older age groups that are affected by increases in the cost of living, especially in health care expenses, considering the general public health situation in the country.

Another relevant point concerns the income inequality that has historically existed in Brazilian society, as well as the income inequalities observed in the labor market. Even though the average income in 2024 was around R$2.896,00, this level was driven by the average income of the public sector and the income of employers, which stood at R$7.704,00.

This indicates that the average income level of the Brazilian working class continues to be extremely unequal, since in some cases the average value was below the minimum wage, as was recorded among domestic workers and informal workers.

Finally, it is observed that in recent years there has been a significant expansion of the formal labor market. For example, in February 2025, 432 thousand new formal employment contracts were created. However, the income level of approximately 312 thousand contracts did not exceed 1,5 minimum monthly wages, characterizing a situation in which there is expansion of employment, but at low wages.

When analyzing the behavior of the basic food basket in February 2025, DIEESE (2025) found that spending on purchasing this basket in the Center-South of the country varied between R$791,00 and R$880,00 compared to a current minimum wage of R$1.518,00. Therefore, in order to comply with the constitutional legal provision of the minimum wage function (food, health, education, housing, transportation and leisure), a family of four people would need to have a salary corresponding to R$7.398,94 in that month. In other words, there is a huge difference between the law and reality, but it seems that for the rentiers this does not matter.

According to Oreiro (2025), this proposal by rentiers to freeze the minimum wage prevents Brazilian workers from benefiting from economic growth, since the fruits of this growth should be exclusive to capitalists, especially financial capital. For this author, the cause of the fiscal imbalance lies in the scandalous payment of interest on the public debt, which by 2025 is expected to reach R$1 trillion.

In the same direction, ABED (2025) issued a note in which it “strongly repudiates the speech of economist Armínio Fraga, former president of the Central Bank, during the Brazil Conference, held on April 12, 2025 at Harvard and MIT universities, in the United States, defending the freezing of real increases in the minimum wage for six years, under the argument that the Brazilian social security system would be in an “explosive” situation.

This proposal is elitist, cruel and unacceptable. Once again, sectors of the Brazilian financial elite are trying to shift the burden of fiscal adjustment onto the backs of workers, sparing themselves any responsibility. It’s the same old logic: the people pay the bill, while the rentiers continue to bleed the country dry with scorching interest rates and record profits. Armínio Fraga and his peers avoid addressing the real Brazilian fiscal problem: the high interest rate system, the monetary policy that favors bankers, and the tax privileges enjoyed by large fortunes and corporations. Instead of confronting these interests, they prefer to target the minimum wage – the main instrument for income distribution and combating inequality in Brazil.”

Final considerations

It is important to observe the behavior of the real appreciation of the minimum wage when the Ministry of Economy was occupied by a rentier, that is, the period between 2019 and 2022. In the first year, the minimum wage increased by 4,61% while inflation was 4,31%, meaning that there was practically no real gain. In 2020, there was an increase of 4,60% compared to inflation of 4,52%, again repeating the scenario of the previous year.

In 2021, with inflation at 10,06%, there was an increase of only 5,26% in the minimum wage, which led to a drop in workers' income levels. Finally, in 2022, there was an increase of 10,18% with inflation at 5,79%, a percentage gain that did not even compensate for the loss of the previous year. This means that over this four-year period there was practically no real gain in the minimum wage and, even so, both the fiscal deficit and the public debt increased.

In the 2023/2024 period, this scenario changed course, since in the first two years of the Lula III government there was a significant appreciation of the minimum wage. Thus, in 2023 there was an increase of 7,42% compared to inflation of 4,62%, which meant a real gain of 2,8%, while in 2024 there was an increase of 8,4% compared to inflation of 4,83%, resulting in a real gain of approximately 3,5%.

For the next two years (2025 and 2026), the current government is forecasting a real increase in the minimum wage of around 2,5% each year. Even with these real gains, these percentages are far from the minimum necessary estimated by DIEESE and, even so, the rentiers claim the right to propose a freeze on the real wage.

It is impressive how at no point do these gentlemen seriously discuss the true cause of the fiscal imbalances, whose epicenter is located in the scandalous payment of interest, whose forecast for the coming months indicates an annual value of 1 trillion reais, an amount that only serves the interests of a minority of the Brazilian population.

Therefore, given the historic income inequality due to the high concentration in a small portion of the population and the still high expansion of poverty and misery in the country, we can consider that this proposition is bizarre and uncommitted to the nation's destiny and, particularly, to those who really produce wealth: the working class.

* Laura Mattei He is a professor at the Department of Economics and International Relations and at the postgraduate program in Business Administration, both at UFSC..

References

DIEESE (2025). Cost of basic food basket increases in 14 capitals in February. São Paulo (SP): DIEESE, Press release, 10.03.2025/XNUMX/XNUMX. https://www.dieese.org.br/analisecestabasica/2025/202502cestabasica.pdf

DIEESE, 2023. Special note. Minimum wage: an instrument for valuing work, combating poverty and inequality. Available at: https://dieese.org.br/outraspublicacoes/2023/notaEspecialISM042023.html

FRAGA, A. Speech at the Brazil Conference held at Harvard University (USA) on April 12, 2025 available at https://youtube.com/watch?v=H8uj579X9H8

MATTEI, L. (2014). The PSDB and the Minimum Wage (2014). Article published on 21.10.2014/XNUMX/XNUMX on the website https://jornalggn.com.br/artigos/o-psdb-e-o-salario-minimo

MATTEI. L. (2020). The blindness of Brazilian business elites: reducing wages is not the solution. Published on 20.03.2020/XNUMX/XNUMX on the website https://jornalggn.com.br/artigos/a-cegueira-das-elites-empresariais-brasileiras-reduzir-salarios-não-e-a-solução

OREIRO, JL (2025). Interview with the newspaper Brasil de fato, Conexão BdF Program, 16.04.2025.https://brasildefato.com.br/2025/04/16/congelar-salario-minimo-e-transferir-ganho-dos-trabalhadores-para-os-rentistas-diz-economista

Note

[I] It should be noted that the expansion of social security spending also results from other factors, especially the aging of the population, the formalization of the labor market and the general contribution level.

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