Statutory minimum wage increases by 5.6% in 2009

Despite the initial reactions of employer organisations – citing the current global economic crisis – the Portuguese government decided to follow in 2009 the plan defined by a 2006 tripartite agreement on increasing the statutory minimum wage. The ordinance that came into force in January 2009 thus increases the statutory minimum wage by 5.6%. It takes a further step towards narrowing the gap of wage inequality, which is prevalent in Portugal.

Background

According to the tripartite landmark agreement signed in 2006 (PT0612029I), the statutory minimum wage (retribuição mínima mensal garantida, RMMG) in Portugal should increase at an annual rate of about 5.3% during the period 2007–2011. The agreement allowed for a substantial RMMG increase of 5.6% in 2009 to reach €450 a month. In October 2008, the Prime Minister, José Sócrates, confirmed that the government was going to respect this plan for 2009.

Employer and trade union reactions

Employer organisations reacted by demanding further discussion on the grounds of the current global economic crisis and its impact for Portugal. The President of the Confederation of Portuguese Industry (Confederação da Indústria Portuguesa, CIP), Francisco Van Zeller, emphasised that, although the agreement was not at stake, it was necessary to assess it, to be aware of the costs for the country and to define new measures. Mr Van Zeller remarked that macroeconomic conditions in 2006 were significantly different from the current situation, where ‘companies are confronted with the international financial crises and the perspective of stagnation of the Portuguese economy in 2009’. According to the CIP president, the timing of the RMMG increase should be reassessed as ‘there is nothing written down in the agreement saying that it has to come into force in January’; he added ironically that ‘if one wants to commit suicide why not start immediately in January?’

Furthermore, Mr Van Zeller demanded that the impact of the RMMG increase should be softened by compensation measures to help companies, a point also raised by the Portuguese Trade and Services Confederation (Confederação do Comércio e Serviços de Portugal, CCP) and the Confederation of Portuguese Tourism (Confederação do Turismo Português, CTP). CCP focused on initiatives to prevent companies from collapsing, including fiscal measures, and asked for a revision of both the level of the RMMG increase and its timing, in line with the changes concerning the macroeconomic scenario and international crisis. Meanwhile, CTP expressed another view, underlining that its priority was to discuss ways to ‘give the industry the financial means to continue its activity’ and not to question the implementation of the 2006 agreement.

The National Association of Small and Medium Companies (Associação Nacional das Pequenas e Médias Empresas, ANPMES) also put pressure on the government, announcing that it would advise its members not to renew fixed-term employment contracts if the government proceeded with the implementation of the RMMG increase.

However, the country’s main trade union confederations reacted strongly against the employers’ pressure and against any change to the planned RMMG increase. The two trade union confederations concerned are the General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) and the General Workers’ Union (União Geral de Trabalhadores, UGT). They insisted on the implementation of the agreement, including in relation to the objectives defined for 2010 and 2011.

Government proceeds with statutory minimum wage increase

The Minister of Labour and Social Solidarity, José Vieira da Silva, highlighted that the level of the increase was a decision taken with the social partners and pointed out that in absolute terms it amounted to just €34 a month. Furthermore, Minister Vieira da Silva stated that the previous increase of 5.7% did not provide any evidence of negative effects for companies (PT0804039I). Moreover, Prime Minister Socrates argued that ‘the situation of economic crisis is a stimulus for the accomplishment of the agreement’.

The ordinance launching the statutory minimum wage increase came into force on 1 January 2009. It follows the 2006 tripartite agreement, by stipulating a 5.6% increase in the RMMG for 2009 – thereby reaching a total of €450 a month. In addition, the ordinance envisages initiatives to support economic sectors, regions and companies for which the impact statutory minimum wage is relevant. According to official sources, the statutory minimum wage currently applies to about 4.5% of the labour force.

Commentary

It is worth mentioning that the debate on income disparity and the pay gap has been raising considerable concern in Portugal. According to the report Growing unequal by the Organisation for Economic Co-operation and Development (OECD), the distribution of income in Portugal is the third most unequal among OECD countries. The report puts Portugal ahead of the US in terms of income disparity. Therefore, the RMMG wage increase might be interpreted in this light, as it seeks to raise the lowest incomes.

Maria da Paz Campos Lima, Dinâmia

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