How about a minimum wage of R$7,000?

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It is in the Constitution, article 7, point IV, that every worker has the right to a minimum wage “capable of satisfying his basic vital needs and those of his family in terms of housing, food, education, health, leisure, clothing, hygiene, transport and social security”.

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The standard family is a couple with two children. And it is obvious that the R$1,621 does not meet these needs. The Inter-Union Department of Statistics and Socio-Economic Studies (Dieese) is the source of the calculation which sets the minimum at R$7,067. The reader may wonder: how come no one had the idea of ​​calling on the STF?

Many have already had this idea. It didn’t work. The Court rejects all requests that the minimum value be set by the judiciary, even if it considers that the official value does not meet the requirements listed in the Constitution. For the Supreme Court, the minimum must be defined by law and therefore falls under the political responsibility of the government and Congress. And, in the exercise of this public order, the constitutional norm is considered limited. Limited to what? Obviously, the reality of the national economy.

There is more. When an entity claims the “constitutional minimum” for civil servants, the STF considers another limit, the tax limit, the government’s ability to pay more. That makes sense. Let’s take the example of inland town halls, which are not even able to pay the current official minimum. A first conclusion follows: for civil servants who earn the minimum, the STF imposes tax limitations. But not when it comes to the super salaries paid to the civil service elite.

Suppose Congress approves the Dieese minimum and the government imposes the standard on all employers. Many businesses would not be able to pay. The cost of producing or providing the service would make the business unviable. Result: mass unemployment. What about the companies that have managed to pass on the minimum of R$7,000 to the consumer? They would cause enormous inflation, so high that it would lead to a devaluation of the currency and, therefore, the real wage. The worker would be worse off, theoretically earning more, but buying even less than before the inflationary outbreak. As for the public sector, it is enough to recall that the current minimum correction rule, with a real gain, has caused consecutive deficits in the public accounts.

There you have it: well-intentioned social policies can indeed cause disasters. The same applies to the reduction of working hours, according to several proposals currently being examined in Congress. The wealth of a country comes from capital and labor. Here, production depends on the number of hours worked and the productivity of the worker.

The productivity of Brazilian workers is very low. This is essentially a consequence of the low quality of teaching. Reducing working hours by law, without taking into account economic reality and differences between companies, will lead to effects similar to those that would occur if a “constitutional” minimum wage were adopted.

Companies that managed to hire more workers would have higher costs passed on to the consumer. Inflation. If they can’t hire, they will produce less. The business becomes more expensive and ultimately unsustainable. Unemployment. Finally, there remains the problem of automation: robots replacing humans.