White Paper on labour relations highlights adaptability and security issues

At the end of December 2007, the Portuguese Minister of labour presented a White Paper on labour relations. Based on the White Paper’s recommendations, at the end of the first quarter of 2008, the government will present a draft bill on the revision of labour law, taking into account ongoing discussions with the social partners. The White Paper presents a detailed and extensive examination of the Portuguese labour market, followed by a number of recommendations for the revision of the Labour Code. This article focuses on the first part of the Paper.

On 20 December 2007, six months after the presentation of the first draft of a White Paper on labour relations (Relatório Preliminar da Comissão do Livro Branco das Relações Laborais) (PT0706059I), and a year and a half after the presentation of the 2006 Green Paper on labour relations (Livro Verde sobre as Relações Laborais) (PT0606019I), the Portuguese Minister of labour, Vieira da Silv,a finally presented the 2007 White Paper on labour relations (Livro Branco das Relações Laborais). Based on the White Paper’s recommendations, at the end of the first quarter 2008, the government will present a draft bill on the revision of labour law, taking into account ongoing discussion with the social partners.

The White Paper on labour relations has two parts. The first part includes a detailed and extensive examination of the Portuguese labour market, which complements the information provided in the Green Paper on labour relations. The second part includes a number of recommendations for the revision of the Labour Code that take into consideration the recommendations in the first draft of the White Paper on labour relations, which generated a strong controversy among the social partners (PT0706059I; PT0708029I). Here we highlight some of the main conclusions of the first part, which address the characteristics of the labour market and the regulation of adaptability. The recommendations, as well as the reactions of the social partners, are dealt with in a further EIRO article (PT0802039I).

Characteristics of the labour market

Job Creation and Destruction

According to the White Paper, in 2005, around 555,600 jobs were lost, or ‘destroyed’, and 550,820 jobs were created; and in 2006 the number of jobs destroyed was 552,400 and the number of jobs created was 539,660. In both years around a million workers changed their employment situation. The annual average rate of job destruction varied from 11, 4% to 11,8% between 1995-2006. The job destruction rate for short-term contracts is around 2.6 times above that for open-ended contracts – see Table 1 below.

Table 1. Job destruction and creation rates in relation to the type of contract
Job destruction and job creation rates (%) in relation to short-term and open-ended contracts 2004-2005
Year Job destruction rate Job creation rate Job creation net rate
Short-term Open-ended Total Short-term Open-ended Total Short-term Open-ended Total
2004 32.0 12.3 16.3 43.8 8.6 15.6 11.8 -3.7 -0.7
2005 33.4 12.9 16.9 46.7 9.3 16.7 13.3 -3.6 -0.2

Source: White Paper on labour relations 2007 (Livro Branco das Relações Laborais)

Wage Inequality

According to the information provided in the Paper, although average monthly earnings are 2.5 times above the minimum monthly wage (Retribuição Mínima Mensal Garantida, RMMG), a large percentage of workers still receive very low wages. Defining the low-wage threshold as two-thirds of median earnings, the White Paper states that 13% of workers were below that level in 2005. Women (19% below the low-wage threshold) are in a worse position than men (9%) regarding low wages.

Men receive an average wage 30% above the average wage for women. This difference is even larger in older age groups: among those aged 55 to 64 years, the average wage of men is 47% above that of women.

The differential between the highest and lowest wages in Portugal is far larger than the European average. In 2005, the average monthly wage of the 10% of workers with the lowest wages was around €385, which was around €1000 less than that of the 10% of workers with the highest wages.

Unemployment protection coverage

The White Paper provides data on unemployment insurance protection coverage in relation to both registered unemployment and estimated unemployment – see Table 2 below. In relation to registered unemployment (unemployed people registered with IEFP Employment Centres), the percentage of unemployed people covered by unemployment benefit increased in 2004 to 62.0% from a very low level in 2003 (53.6%) and in 2007 varied between 65.7% and 67.2%.

In relation to unemployment as estimated by the National Statistics Institute (Instituto Nacional de Estatística, INE) the picture is quite different. According to INE, between the first quarter 2004 and the third quarter 2007, the number of unemployed people increased by 29%, from 347,200 to 444,400, while the number of people unemployed and receiving unemployment benefit decreased by 9%, from 290,200 to 264,200. The percentage of unemployed people receiving unemployment benefit fell from 83.6% in the third quarter 2004 to 59.5% in the third quarter 2007.

The White Paper underlines that a significant proportion of unemployed people (those seeking a new job and, in particular, seeking a first job) are not covered by unemployment protection.

Table 2. Unemployment and unemployment benefit coverage
Unemployment and number of unemployed receiving unemployment benefit 2004-2007
  Registered unemployment (IEFP) Estimated unemployment (INE) With unemployment benefit With unemployment benefit/ Registered unemployment (IEFP) % With unemployment benefit/ Estimated unemployment (INE) %
1st Quarter 2003 412,200 347,200 221,000 53.6 63.6
1st Quarter 2004 467,700 347,200 290,200 62.0 83.6
1st Quarter 2005 485,200 412,600 298,900 61.6 72.4
1st Quarter 2006 486.400 429,600 316,600 65.1 73.7
1st Quarter 2007 449,900 469,900 295,700 65.7 62.9
2nd Quarter 2007 402,300 440,500 276,700 68.8 62.8
3rd Quarter 2007 393,200 444,400 264,200 67.2 59.4

Source: White Paper on labour relations 2007 (Livro Branco das Relações Laborais)

Regulation of adaptability

Under this heading, the White Paper mainly addresses the duration and organisation of working time, and work organisation.

Together with other sources, data on Portugal from the Foundation’s European Working Conditions Survey 2005, are examined. The Portuguese sample for this survey included 1,000 people, of whom 47.5% were men and 52.5% women; while 14.8% were independent workers, 79.7% were employees and 5.4% employers. Of the 797 employees, 70.6% had an open-ended contract, 15.7% had a short-term contract and 8.5 % were temporary agency workers.

The White Paper states that, in relation to working time and organisation of work, Portugal has a very low level of innovation and adaptability, which contrasts with the developments in the more competitive and socially advanced countries.

Working time duration and organisation

The White Paper states that, according to Eurostat, the average weekly working time in Portugal (41.6 hours in 2006), is below the average in the euro zone (41.7), the EU 15 (41.8) and the EU 25 (41.9). However, according to the Working Conditions Survey 2005, Portuguese workers work some of the longest hours in Europe. According to this source, Portugal is one of the EU countries where there is the most stability of working days and daily fixed working time. Only 10.0% of Portuguese respondents stated that they worked on variable days of the week or had flexible daily working time.

Work organisation

The White Paper’s main conclusions in this area, in line with the Working Conditions Survey, are that, compared with other European countries, Portugal has: low levels of use of information technology; an intermediate position in terms of autonomy at work; a low level of functional flexibility; and a low level of ‘rotation’ demanding different professional competences. Also, the Portuguese are among those who are less involved in teamwork.

Commentary

While the concept of ‘flexicurity’ – a combination of flexibility and security on the labour market - was explicitly addressed in the Green Paper, the White Paper does not use this concept as an approach in its analysis or recommendations. Instead, it highlights the concept of ‘adaptability’ in both its analysis and recommendations.

The controversy over flexicurity in Portugal, in particular the scepticism or open opposition from the trade unions, might have influenced this terminological shift. Nevertheless, it can be argued that an approach combining internal flexibility and security has guided the analysis of labour market developments presented by the 2007 White Paper on labour relations.

Maria da Paz Campos Lima, Dinâmia

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