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NOPOOR Policy Brief No.10: Minimum Wage, Income Distribution and Poverty in Brazil

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Since the 2000s, the minimum wage in Brazil has been going through an intense process of growth. Although no well-defined rule for its periodical adjustment existed until recently, the political and economic situation of the country favoured the granting of real increases. The result is that the minimum wage grew by 74% in real terms between 2003 and 2013. Currently the minimum wage receives each year the correction of inflation by the national index of consumer prices, as well as a real increase according to the Gross Domestic Product (GDP) growth rate recorded two years earlier. This rule was created in 2011 through Law 12/382, it was renewed in 2015 and should remain valid until 2019. Brazil is known for its great social inequalities that are reflected in the unequal distribution of income and wealth. Since the 2000’s, however, the main income distribution indicators experienced a great improvement. The Gini index of the household per capita income distribution, for example, fell from 0.583 in 2003 to 0.527 in 2013. Similarly, poverty rates also fell sharply. The proportion of poor households was reduced from 28% to 12% over the same period. Figure 1 illustrates these results.

Image: Rio de Janeiro, Bresil ©IRD - Philippe Haeringer