Minimum wage has the highest purchasing power in 50 years.

From Agência Brasil

Currently at R$ 788, the minimum wage reached its highest purchasing power in January since August 1965, reveals a survey released by the Central Bank (BC). According to the BC's Regional Bulletin, presented in Porto Alegre, only in the period between July 1964 and July 1965 did the minimum wage buy more than it does today, in values ​​adjusted for inflation.

According to the Central Bank, the increase in the minimum wage has partly determined the rise in the real income of workers in recent years, especially those with lower incomes and Social Security beneficiaries. From 2003 to 2014, the average income of the employed population earning up to one minimum wage grew 52% more than the minimum wage. This trend can be explained by the formalization of the labor market, which attracted professionals who earned less than the minimum wage.

For the population earning between 1 and 1,5 minimum wages, the average real worker's income rose 1% more than the minimum wage from 2003 to 2014. In the 1,5 to 3 minimum wage bracket, the indicator increased 23% less than the minimum wage adjustment. For the population earning more than 3 minimum wages, the average real income rose 53% less than the minimum wage.

According to the Central Bank, 28,2% of Brazilian workers receive the minimum wage and 54,4% earn between one and three minimum wages. According to the institution, the policy of increasing the minimum wage is largely responsible for the recovery of the purchasing power of this income bracket. Since 2008, the minimum wage has been adjusted annually based on the growth of the Gross Domestic Product (GDP) from two years prior and inflation as measured by the National Consumer Price Index (INPC) from the previous year.

The INPC measures inflation for lower-income families, those earning up to six minimum wages. The formula guarantees inflation adjustment each year. If the economy grew two years prior, the calculation guarantees a real increase – above inflation – for the minimum wage. This policy of wage increases ends this year. In early January, President Dilma Rousseff assured that the formula will be maintained for the next four years, but Congress needs to approve a bill on the subject.

Despite improvements in workers' income, the Central Bank warns that the minimum wage increase policy is raising the average cost of labor. In industry, income increases are not being matched by increased employment. From 2012 to 2014, the number of people employed in industry fell, even though average income rose. This indicates that fewer people are working in industry today, earning, on average, more than in 2012.

The increase in the minimum wage is also noted by other organizations, such as the Inter-Union Department of Statistics and Socioeconomic Studies (Dieese). According to a survey released last month, the minimum wage of R$ 788 buys 2,22 basic food baskets, the best ratio since 1979. According to the document, the minimum wage has risen 76,54% above the INPC (National Consumer Price Index) since 2003, but it is far from ideal. For Dieese, the minimum wage that would cover the basic needs of a family of four would correspond to R$ 3.118,62.