Setting and asjusting minimum wage levels


In Brazil, a law has established that minimum wage adjustments be determined by a formula that considers past inflation and GDP growth. In the case of inflation, the formula considers the inflation accumulated during the previous year (t-1), while for GDP, due to the lag in receiving final results, they apply the rate of increase of year t-2.

Brazil’s formula for determining adjustments (where MW is minimum wage) is as follows:

∆ MW t = ∆ CPI t-1 + ∆ GDP t-2

The law establishes that this formula should be revised every four years. It was first adopted in 2008, and renewed in 2012 and 2016.