Lula government raises minimum wage forecast to R$1,741 in 2027

The new forecast will be included in next year's PLOA (Annual Budget Bill), which will be sent to Congress by August 31st.

The new minimum wage will come into effect on January 1, 2027 and, until then, it may still undergo variations. If confirmed, the value will represent an increase of 7.4% compared to the current floor, of R$1,621.

The estimate follows the correction formula provided for in the valuation policy, which includes adjustment for inflation accumulated in 12 months until November of the previous year, plus the variation in GDP (Gross Domestic Product) from two years before, in this case, 2025.

The current projection of the SPE (Economic Policy Secretariat) of the Ministry of Finance is that inflation in the 12 months until November will be 4.93%, above what was initially calculated by technicians. The estimate rose due to the possible negative impacts of the El Niño phenomenon on food prices.

Economic activity grew 2.3% last year, according to IBGE (Brazilian Institute of Geography and Statistics).

The minimum wage serves as a reference for a series of mandatory expenses of the Executive Branch, such as pensions from the INSS (National Social Security Institute) and the BPC (Continuous Payment Benefit). Its correction directly affects some of the most relevant expenses in the Federal Budget.

According to government estimates made in April, each additional R$1 in the minimum wage generates an extra expense of R$413.2 million. This means that just revising the floor will generate additional pressure of R$9.9 billion in mandatory expenses in the 2027 Budget.

Because of the influence that the minimum wage has on public expenditure, the government decided, at the end of 2024, to limit the real gain from the minimum wage to the same rate of expansion of the fiscal framework, which is between 0.6% and 2.5% above inflation per year.

The measure, approved by Congress, seeks to prevent the accelerated growth of mandatory spending indexed to the floor from reducing the space for discretionary expenses, such as funding and investments, putting the sustainability of the fiscal rule at risk.

The real gain predicted for 2027 is within the 2.5% limit that will apply to the increase in expenses above inflation next year.

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