2004 Annual Review for Portugal
Published: 20 July 2005
In 2004, three events dominated politics in Portugal. The first was the defeat of the governing coalition of the liberal-conservative Social Democratic Party (Partido Social Democrata, PSD) and the right-wing People's Party (Partido Popular, CDS/PP) in the elections to the European Parliament on 13 June. PSD and CDS together won 33.3% of the vote, and the Socialist Party (Partido Socialista, PS) alone won more votes than the governing coalition (44.5%).
This record reviews the main industrial relations developments in Portugal during 2004.
Political developments
In 2004, three events dominated politics in Portugal. The first was the defeat of the governing coalition of the liberal-conservative Social Democratic Party (Partido Social Democrata, PSD) and the right-wing People's Party (Partido Popular, CDS/PP) in the elections to the European Parliament on 13 June. PSD and CDS together won 33.3% of the vote, and the Socialist Party (Partido Socialista, PS) alone won more votes than the governing coalition (44.5%).
The second major event was Prime Minister José Manuel Barroso’s move to Brussels. On 17 July, the President, Jorge Sampaio, swore into office a new government, led by the former mayor of Lisbon, Pedro Santana Lopes (PSD). The new Prime Minister made some significant changes to the structure, composition and strategy of the cabinet. The Labour Ministry was integrated into the Ministry for Economic Affairs. Mr Barroso’s Minister of Finance left the executive and her explicit austerity policy was replaced by a more 'relaxed' approach to public spending.
From the beginning, the new Prime Minister and his ministers were under severe attack not only from the left but also from important liberal-conservative opinion-makers, who criticised Mr Santana Lopes for his 'populist' approach to politics and accused him of being incompetent and incoherent. Thus, public opinion was from the beginning very sensitised to government mistakes. A personal attack launched by a Minister against one of the most persistent critics of the government was seen as particularly harmful to its credibility. In November, the political situation reached a state of an open crisis.
In this context the President of the Republic took action resulting in the third most important political event of the year. On 30 November he informed the Prime Minister of his decision to dissolve parliament and on 13 December the government resigned. Elections will be held on 20 February 2005. The Socialist Party under its new leader José Socrates, a state secretary and Minister under former Prime Minister António Guterres (1995-2002), was the clear front-runner in the race.
The political crisis in 2004 took place in a negative economic context. Since 2001, economic growth in Portugal has been below the EU average level - see table 1 below. Investment has fallen dramatically and unemployment has increased by more than 50%. The severe austerity policy of the PSD-CDS coalition government under Prime Minister Barroso (2002-4) may, according to observers, have deepened the crisis that began in 2001, thus delaying a recovery.
| . | 2001 | 2002 | 2003 | 2004 | 2005 |
| GDP growth in real terms | 1.8 | 0.5 | -1.3 | 1.1 | 1.6 |
| Employment growth rate | 1.3 | 0.3 | -0.7 | 0.4 | 1.0 |
| Unemployment rate | 4.0 | 5.0 | 6.3 | 6.3 | 6.2 |
Sources: Bank of Portugal, European Commission.
Collective bargaining
During 2004, the labour Ministry registered a dramatic fall in collective bargaining - see table 2 below. The number of agreements published by the Ministry and the number of workers covered by these agreements fell to less than half the level recorded for 2003. This negative trend was particularly pronounced at branch level.
| . | 2000 | 2001 | 2002 | 2003 | 2004 |
| Number of agreements published | 371 | 361 | 338 | 342 | 162 |
| Number of employees covered (thousands) | 1,453 | 1,396 | 1,386 | 1,512 | 600 |
| Average duration (months) | 16.9 | 16.5 | 17.4 | 14.1 | 17.1 |
Source: Labour Ministry/DGERT and authors’ own calculations.
Trade unions and employers’ confederations agree that there is a crisis in collective bargaining and that its reasons are twofold. One is the economic crisis that limits employers’ margin for wage increases. The other is the Labour Code that came into force on 1 December 2003 (PT0312103F), which establishes that collective agreements will expire (after a transition period) if one of the signatories refuses to renew them. A considerable number of employers’ associations are therefore strongly interested in abolishing existing agreements and in order to achieve this aim they have stopped the collective bargaining process.
Pay
In 2004 nominal pay increases were close to those registered in 2003 - see table 3 below. Inflation decreased from 3.3% to 2.6%. In the private sector, the average nominal wage increase contained in collective agreements was 2.9%, corresponding to a growth of real wages of 0.3%. This positive trend was contrasted by the drastic decrease in the coverage of collective agreements signed in 2004, from 1,512,000 workers in 2003 to 600,000 workers. At the moment it is not possible to estimate the proportion of workers who have not received any wage increase, but the dramatic fall in the coverage of collectively agreed pay may have resulted in an average real wage loss for the total workforce in the private sector.
Real wages determined by the government stagnated or decreased in 2004. As in 2003, the statutory minimum wage was increased by 2.5%. In public services, the government imposed a 2.0% increase that applied exclusively to those workers who earned less than EUR 1,000 per month. Thus, public servants suffered real wage losses of 0.6% and 2.6%, respectively.
| . | 2000 | 2001 | 2002 | 2003 | 2004 | |
| Collective agreements in private sector | Average nominal wage increases (annualised, in %) | 3.4 | 4.0 | 3.8 | 2.9 | 2.9 |
| Average real wage increases (annualised, in %) | 0.5 | -0.4 | 0.2 | -0.4 | 0.3 | |
| Nominal increase in statutory minimum wage (in %) | 4.1 | 5.0 | 4.1 | 2.5 (EUR 356.60) | 2.5 (EUR 365.60) | |
| Nominal increase in public administration (basic rates, in %) | 2.5 | 3.71 | 2.75 | (1.5)* | (2.0)* | |
* Applies exclusively to salaries of EUR 1,000 maximum a month.
Sources: Labour Ministry/DGERT, authors’ own calculations; public services unions STFPSA/CGTP and SINTAP/UGT
Working time
During the first half of 2004, new working time arrangements were included in the collective agreements for journalists (working time of seven hours per day) and for the trade and retail sector (a reduction in weekly working time from 44 to 40 hours). Two agreements introduced the regulation of flexible weekly working time, and three increased the amount of annual leave. Concerns emerged over the duration of part-time work in two collective agreements.
Job security
The unemployment rate has grown from 3.9% to 6.3% in 2003 and 2004 and long-term unemployment has increased considerably. In terms of collective bargaining, in 2004 job security was an issue related to the duration of part-time work and the regulation of fixed-term contracts.
At the level of legislation, a new law on temporary work and the legal provisions on individual contracts in the public administration may have a major, and probably negative, impact on job security.
Equal opportunities and diversity issues
Despite the recommendations of the National Action Plan for equality and the provisions of the Labour Code, gender mainstreaming was not on the agenda of those engaged in collective bargaining in the first half of 2004.
In terms of legislation, the new Law 35/2004 protects the father’s right to parental leave and increases the rights of women during pregnancy. It also contains rules on gender pay equality.
Training and skills development
During the first half of 2004, only three agreements contained provisions relating to training. They introduce clauses on training plans, training during working time, the selection of workers to be involved in training and the recognition of qualifications. One of the agreements (covering journalists) contains clauses linking continuous training to upward occupational mobility.
Legislative developments
The main legislative developments that took place in 2004 derived largely from laws and projects launched in 2003. In May 2004, parliament approved the new Labour Code. The Code brings together in one document a large number of aspects of labour law, while amending a number of them - Portugal previously had no such codified set of labour legislation. Employers supported the Code, but sought more profound and far-reaching changes. However, the parliamentary opposition and the two main union confederations - the General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) and the General Workers' Union (União Geral de Trabalhadores, UGT) - were unanimous in their harsh criticism of the Code. The most controversial parts of the law were those in conflict with the Portuguese Constitution. This concerned lock-outs, which are forbidden by the Article 57 of the Constitution, limitation of the rights of workers' commissions (as defined in the Article 54 of the Constitution), and limits on time-off hours credits for trade union leaders (Article 55). Other controversial issues were the broadening of the concept of homeworking, limits on the rights of working students according to their academic performance, and the absence of any regulation on initial training for young workers. Despite the protests, the President of the Portuguese Republic promulgated the law in July 2004 (as Law 35/2004).
The government was involved in two further important legislative measures during 2004. Firstly, a legislative project on unemployment protection (PT0311101N) that aims to reduce, in an attempt to combat fraud, the duration and the amount of unemployment benefit. The government also issued a law on pensions for civil servants (PT0312103F) that penalises early retirement.
The organisation and role of the social partners
In 2004 the trade union confederations CGTP-IN and UGT held their congresses and assessed their efforts in rationalising their organisations. Since its previous congress in 2000, CGTP-IN has reduced the number of its member unions from 107 to 97. In 1995, CGTP-IN began a restructuring programme, having had 152 member organisations in 1993. At its congress in January 2004, CGTP-IN declared that it was ready to create its own unions in financial services, thus entering a sector where it had until this point respected the predominance of UGT’s branch unions. The other union confederation, UGT, experienced during the period from 2000 to 2004 a minor number of mergers and entries and one expulsion. Since 1992, the number of its member unions has oscillated at around 60.
In 2004, two trade associations, the Portuguese Business Association (Associação Empresarial de Portugal, AEP) and the Portuguese Industrial Association (Associação Industrial Portuguesa, AIP), made a further attempt to gain more influence among business associations and within institutionalised social dialogue. After the failure of a planned Entrepreneurial Council of Portugal (Conselho Empresarial de Portugal), an umbrella for trade and employers’ associations, AEP and AIP created its own coordinating body, the Entrepreneurial Confederation of Portugal (Confederação Empresarial de Portugal, CEP). Thus, AEP and AIP demonstrated their claim for a stronger (or even leading) role in interest representation. However, the employers’ confederations that are represented in the Standing Committee for Social Concertation (Comissão Permanente de Concertação Social, CPCS) - the tripartite body with a consultative role on economic, social and labour relations issues - have not welcomed this initiative. Nevertheless, at present AEP’s and AIP’s confederation does not represent a challenge to the employer confederations' membership.
Industrial action
According to official figures on industrial action in the private sector - see table 4 below - strike activity was low during the first half of 2004. In the course of political mobilisation against the Labour Code, industrial action reached a peak in 2002 (in particular due to CGTP’s general strike in December of that year). Since then, strikes in the private sector have decreased.
| . | 2000 | 2001 | 2002 | 2003 | 2004 |
| Number of strikes | 250 (185) | 208 (121) | 250 (165) | 170 (89) | (73) |
| Number of employees involved (000s) | 38.8 (32.0) | 26.1 (13.6) | 80.2 (24.1) | 30.3 (18.4) | (13.3) |
| Number of working days lost due to strikes (000s) | 40.5 (29.3) | 41.6 (16.4) | 108.1 (42.0) | 53.4 (32.1) | (21.4) |
Numbers in brackets refer to the first half-year.
Source: Labour Ministry.
Strike activity in the public sector, on the other hand, has been intense over the past few years. CGTP and UGT’s member unions have staged major mobilisations in an attempt to put an end to the government’s restrictive wage policy in the public administration.
Employee participation
The new Labour Code introduced considerable limitations on workers commissions’ participation rights, at the same time abolishing legal protection for their members (which existed before). Their right to elect representatives to the governing bodies of companies was explicitly restricted to public companies (entidades publicas empresariais), independently of the will of both parties. The workers commissions’ right to be involved in enterprise restructuring was withdrawn. Further, the amount of time granted to members of workers commissions to exercise their duties was drastically reduced, as well as being redistributed among members.
The new Labour Code also set out rules governing the election and tasks of commissions for health and security at work. Thus, the two tripartite agreements on this subject, both signed by all social partners (in 1990 and 2001), were finally transposed into legislation.
There were no significant developments regarding the European Company Statute (EU0206202F) but the Directive on national information and consultation rights (EU0204207F) was transposed in the new Labour Code.
Absence from work
Absence from work has been an important issue in Portugal for several years. A new law on sickness benefit that came into force in 2004 abolished the fixed percentage of sickness benefits, reducing it for periods of leave of less than 120 days and increasing it slightly for absence of 120 and more days.
Since 1996, absence has been substantially reduced by legislative and administrative measures. This successful strategy consisted of major efforts to combat fraud. The proportion of sickness benefit as a percentage of overall social security expenditure dropped from 6.4% in 1995 to 4% in 2001.
Psychological harassment
In 2004, the Labour Code brought into force provisions on the prevention of violence and 'moral harassment' at the workplace. The Code defines the different forms of harassment (including intimidation, humiliation, hostility, and instability) and considers it a serious crime that may be punished, in its worst form, with a prison sentence of up to eight years. These provisions had been part of a bill that was passed unanimously by parliament in December 2000.
Collective agreements generally do not contain explicit rules against harassment, but provisions on working conditions, discipline and health and safety can be used to protect employees from psychological harassment.
New forms of work
According to the National Statistic Office’s Labour Force Survey, in the first half of 2004, employment levels were stable, achieved by means of net job creation, mainly among self-employed people without employees and workers on temporary contracts. This offset the net loss of jobs seen among employees on open-ended contracts.
The new Labour Code increases the permitted duration of fixed-term contracts and broadens the definition of homeworking.
Outlook
During 2004 industrial relations in Portugal entered a critical phase. The profound legal changes introduced by the Labour Code in 2003 started to have an effect. Major tensions emerged between trade unions on the one hand and the government and employers on the other.
The fall of the government at the end of 2004 may have initiated a reversion of these growing tensions in industrial relations. Immediately after the outgoing government had pulled out of tripartite social concertation, unions and employers began to negotiate on how to revive collective bargaining. On 7 January 2005, all social partner confederations - the Confederation of Portuguese Agriculture (Confederação dos Agricultores de Portugal, CAP), the Portuguese Trade and Services Confederation (Confederação do Comércio e Serviços de Portugal, CCP), the Portuguese Confederation of Industry (Confederação da Indústria Portuguesa, CIP), CGTP, and UGT - signed a bilateral agreement setting out a shared understanding of the crisis in collective bargaining and committed themselves to concrete measures designed to overcome the deadlocked situation in which in a large number of collective bargaining processes find themselves. The future of this agreement depends to a large extent on the outcome of the legislative elections on 20 February 2005. (Maria da Paz Campos Lima and Reinhard Naumann, DINÂMIA - Centro de Estudos sobre a Mudança Socioeconómica)
Eurofound recommends citing this publication in the following way.
Eurofound (2005), 2004 Annual Review for Portugal, article.
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