Brazilians’ wages are rising — for now

For months, real wages in Brazil were shrinking, even as the job market recovered from the hit of the Covid pandemic. But recent figures now show a reversal in this trend, with August data close to last year’s levels (at least in nominal terms). 

Whether this improvement can be sustained is an open question, particularly given the more pessimistic outlook for the economy in 2023.

Per Brazil’s latest unemployment figures, the rate of people out of a job dropped to the lowest level in seven years in the rolling quarter through August, to 8.9 percent. At the same time, workers’ average monthly income grew 3 percent compared with the end of last year, reaching BRL 2,713 (USD 514). This is the fourth consecutive month of quarterly wage growth.

Amid the new formal jobs created, the average entry-level wage saw a 1.5-percent bump between June and August, reaching BRL 1,950 (Brazil’s minimum wage is set at BRL 1,212).

Although these figures remain low, Brazil’s Labor Ministry notes that they are improving after a difficult scenario at the start of the year. This trend can be explained by two main factors: the improvement of the labor market and the recent slowdown in inflation.

“The pandemic was a period of very high uncertainty in the job market,” says Bruno Imaizumi, an economist at LCA Consultores.

“Because of the coronavirus-related restrictions, many people lost their jobs and those who remained in the market ended up accepting lower-paying jobs or were unable to get pay rises during the pandemic,” he tells The Brazilian Report.

Still, in the first year of the pandemic in July 2020, the average monthly salary was higher than it is today, at BRL 3,020. This is due to the composition effect, that is to say how the...