Will Minimum Wage Increase in January 2025? Understand the Current Calculation and the Government's New Proposal

Will Minimum Wage Increase in January 2025? Understand the Current Calculation and the Government’s New Proposal

Written by Fabio Lucas Carvalho

Published on 09/12/2024 at 10:16

Updated on 09/12/2024 at 10:17

Foto: Reprodução

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The Government Presented a New Proposal for the Minimum Wage in 2025. Understand How the Current Calculation and the New Salary Policy May Impact the Increase Starting in January.

The minimum wage in Brazil may undergo an important change in 2025 if the government is able to approve a new calculation formula for the adjustment. The proposal, which has already been sent to Congress, may result in a lower amount than initially expected.

Currently, the formula for adjusting the minimum wage considers inflation and the growth of the Gross Domestic Product (GDP) from the two previous years. However, the new proposal sent by the government alters this calculation, which could reduce the increase that workers were expecting for next year.

How Will the New Calculation Affect the Minimum Wage?

In 2024, the minimum wage is R$ 1,412, and the adjustment predicted by the current formula would be R$ 118, or 8.36%, bringing the amount to R$ 1,530. However, if the new rule is approved, the increase will be smaller: R$ 107, or 7.58%, resulting in an amount of R$ 1,519.

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What Is the Difference Between the Rules?

Currently, the minimum wage is adjusted based on two indices: the National Consumer Price Index (INPC), which measures inflation, and the growth of GDP from the two previous years. For the 2025 calculation, this would include the inflation of 2024 and the GDP of 2023.

The new proposal from the government suggests that the adjustment be calculated only based on the inflation of the INPC and the variation of the GDP from the second previous year.

Furthermore, the economic team proposes a “brake” of 2.5% on the GDP, limiting the growth of public spending, in accordance with the new fiscal framework approved in 2023.

The Financial Impact

The change in the calculation of the minimum wage also has implications for public finances.

The government estimates that this change could generate savings of up to R$ 110 billion by 2030, with savings of R$ 2 billion in 2025 alone. This is considered an important step toward reducing the country’s public debt.

The impact of this change is not limited to workers, but also affects social benefits, such as pensions and the Continuous Cash Benefit (BPC), which are adjusted according to the minimum wage.

When Will It Come into Effect?

If the proposal is approved by Congress, the new calculation formula will take effect from January 1, 2025. Until then, the government needs to take the necessary measures to ensure that the new minimum wage amount is official.

The History of the Minimum Wage in Brazil

The minimum wage in Brazil was created in 1936, during the government of Getúlio Vargas, and has undergone various changes over the years.

It is the minimum amount that must be paid to workers, regardless of the area of activity. Since then, the minimum wage has been adjusted annually, based on inflation and, more recently, the growth of GDP.

From 1994 to 2023, the minimum wage amounts had various increases, notably the adjustment in 1995, which was 42.86%. In recent years, the increase has been around 7% to 8%. The amount for 2024, for example, had an increase of 7.7% compared to the previous year, rising from R$ 1,302 to R$ 1,412.

The Proposal Is in Congress

Now, the ball is with Congress, which will have to analyze and approve the proposal to change the calculation of the minimum wage. If this occurs, Brazilian workers will face a smaller increase than initially expected.

Despite this, the government’s proposal seeks to balance public accounts by controlling spending and the country’s debt. The approval of the new calculation formula will also depend on the government’s political maneuvering, which is already making negotiations to ensure that the change happens.

What to Expect?

If Congress approves the change, the minimum wage in 2025 will be adjusted based on the inflation of 2024 and the growth of the GDP in 2023, with the “cap” of 2.5% imposed by the government.

This means that, although the increase will not be as large as expected, the amount will still be higher than the current one, and the public savings could be significant.

The scenario is uncertain, but one thing is certain: the proposal to change the calculation of the minimum wage is generating debate about the impact on workers and the country’s finances.

Will Minimum Wage Increase in January 2025? Understand the Current Calculation and the Government’s New Proposal

The Government Presented a New Proposal for the Minimum Wage in 2025. Understand How the Current Calculation and the New Salary Policy May Impact the Increase Starting in January.

How Will the New Calculation Affect the Minimum Wage?

What Is the Difference Between the Rules?

The Financial Impact

When Will It Come into Effect?

The History of the Minimum Wage in Brazil

The Proposal Is in Congress

What to Expect?

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Will Minimum Wage Increase in January 2025? Understand the Current Calculation and the Government’s New Proposal

The Government Presented a New Proposal for the Minimum Wage in 2025. Understand How the Current Calculation and the New Salary Policy May Impact the Increase Starting in January.

How Will the New Calculation Affect the Minimum Wage?

What Is the Difference Between the Rules?

The Financial Impact

When Will It Come into Effect?

The History of the Minimum Wage in Brazil

The Proposal Is in Congress

What to Expect?

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Ethiopia has banned gasoline and diesel cars, placed over a hundred silent electric buses on the streets of Addis Ababa, and now aims for half a million electric vehicles by 2030, all powered by Africa’s largest dam and a courage that few countries have shown.

Egypt wants to draw 10 million cubic meters of water from the Nile per day into the desert, irrigate a new agricultural frontier, and build a city where there is currently only sand.

BRICS is preparing a payment system inspired by the Brazilian PIX that will allow direct transactions between countries using national digital currencies without relying on the dollar or Western banks as intermediaries.

Norway is drilling 27 kilometers of rock 392 meters below the bottom of a fjord to build the world’s largest and deepest underwater road tunnel — when completed, a 21-hour journey will be reduced to 10.

Chinese engineers begin filling a 217-meter dam at an altitude of 3,000 meters and prepare a 2,240 MW hydroelectric power plant to integrate hydropower, solar, and wind energy in the upper Jinsha.

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