Written by PSTU – Brasil
Friday, 07 August 2015 20:21
Total value of wages paid to workers falls at a much higher rate than the GDP
You can already feel in your pocket and at your job. The economic crisis is already wreaking havoc in Brazil. According to the Focus Bulletin released this Monday, 27 by the Central Bank, 2015 will be marked by the contraction in the economy and higher inflation. The newsletter is an overview of the estimates made by over 100 financial institutions, i.e. banks, experts, brokers, etc. For them, the GDP will drop by 1.76%. And the year inflation, according to those same estimates, will be 9.23%, which would be the highest inflation since 2003.
Some analysts are even more pessimistic and say that the GDP will fall by 2%. In any case, this would be the worst drop in 25 years when the country went through a deep recession that made the GDP decrease 4.35%. But while a drop of up to 2% is expected in GDP, the reduction in worker wages will be even higher. An estimate made byTendências Consultoria reports that the Household Purchasing Power has decreased 6.2% from January to May this year, and likely will close the year at that level. This figure measures the total household income (wages plus social security benefits) discounting inflation, credit and the expenses with debts.
A significant portion of this is due to corrosion of wages by inflation. But there is also the fact that wages are shrinking, whether due to inflation or to smaller pay rises, unemployment (which reached 8.1% in May) or replacing high-wage jobs with lower-wage ones.
The fact is that the total wages paid between January and April this year decreased, which did not occur over the past ten years. There was a reduction of 0.32% in wage income. This number is based on data from the Caixa Econômica’s FGTS (State job security), the main savings bank in Brazil. That is, it considers only the salaries of the formal job positions, so the drop of income can be even higher if one remembers that almost half of employees are informally employed [that is, not recorded in the FGTS system] and therefore more susceptible to loss of wages and rights.
Another staggering figure is the reduction of total wages paid in recent months. Between November 2014 and May this year, the whole salary income decreased no less than 10%, according to the PME (Monthly Employment Survey) of the Brazilian Geography and Statistics Institute (IBGE). In other words, in just six months, the total wages paid to workers plummeted 10%.
Workers are paying for the crisis
This scenario is a result of the economic crisis, of the wave of layoffs by companies, of the shifting to low-wage jobs and of an economic policy that combines fiscal adjustment with the resulting squeezing on public employees’ wages and cuts in rights, as decreed by the MP’s 664 and 665 [Executive Provisional Acts]. The so-called Employment Protection Program, the PPE agreed between the leadership of the CUT, companies and government, and set up via Provisional Act, institutionalizes the salary reduction to allow companies to decrease the wages by up to 15%.
In contrast, banks continue profiting. And too much! Only in the 1st quarter of 2015, the Itaú Bank had US$ 1.71 billion profit, 26.8% higher than last year. The Bradesco Bank profited US$ 1.22 billion, or 23.3% more than in 2015 while Santander earned US$ 198.4 million, or 32% more. Bradesco has just bought HSBC shares and became the biggest private bank in Brazil. In May, the banks’ profit-making due to credit was the highest since 2009 due to the so-called “net interest rate spread,” which is the difference between interest earned on loans and the interest paid on deposits and other interest-bearing liabilities.
Wages fall at a much higher rate than the GDP, inflation eats the household income and unemployment is rising. This happens because companies and Dilma’s government, taking advantage of the fiscal adjustment and the destruction of rights, protect the profits of banks and businesses, further increasing the exploitation of workers.