Minimum wage to increase by 5.7% in 2008

At the end of December 2007, the Portuguese government and social partners signed an agreement to increase the statutory minimum wage by 5.7% in 2008, the highest annual increase since 1992. The agreement also provides for a 5.6% increase in 2009. The increases set out to meet the objectives of a 2006 tripartite agreement, which aims to increase the minimum wage to €500 per month in 2011.

The statutory minimum wage (retribuição mínima mensal garantida, RMMG) has been increased by 5.7% in 2008, under the terms of a national tripartite agreement between the government and the social partners represented on the Standing Commission for Social Concertation (Comissão Permanente de Concertação Social, CPCS), reached in December 2007. This is the highest annual increase since 1992. The RMMG minimum wage, which affects directly about 5% of the workforce, has risen to €426 per month in 2008, which is €23 more than in 2007. The tripartite agreement also provides that in 2009 the RMMG will increase by a further 5.6% to €450.

This agreement is in line with a five-year agreement on annual minimum wage increases, signed in 2006, which provided that the RMMG should increase by an average annual rate of 5.3% until 2011, in order to reach €500 per month in 2011 (PT0612029I). In 2007, the minimum wage was increased by 4.4%, which was above the inflation rate.

Social partner views

All social partners signed the agreement. The trade union confederations – the General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) and the General Workers’ Union (União Geral de Trabalhadores, UGT) – welcomed the agreement insofar as the increase corresponded to their main demands and because increases in the RMMG have been one of the most important topics on their agendas in recent years.

The employers’ confederations were initially very reserved, in particular the Confederation of Portuguese Industry (Confederação da Indústria Portuguesa, CIP), which argued that a significant increase in the RMMG should be linked to programmes to enhance competitiveness, and to changes in labour legislation. They highlighted that the tripartite agreement signed in 2006 proposed support measures for companies, but that these have not yet been launched. However, the Minister of Labour, Vieira da Silva, stressed that the statutory minimum wage increase was not dependent upon any changes in labour legislation.

After signing the agreement, the president of CIP, Francisco Van Zeller, stated that Portugal’s very low minimum wage, in relative terms, is the result of the wage policy conducted in industry over the past 20 years, but that ‘the past has to be managed slowly, in order to guarantee a positive evolution’. In addition, he argued that ‘because of the minimum wage increase, wages at higher levels might rise as well, which can have dangerous results’. This has been interpreted as a message to employer associations in manufacturing industry that they should be prudent in forthcoming collective bargaining rounds.

Implications for collective bargaining

As the agreed annual increase in the minimum wage for 2008 is higher than the current growth rate of overall pay, it may prove significant in collective bargaining in low-wage sectors. In particular, the impact might be significant in the sectors where the lowest wage rates set by collective agreements are equivalent to the minimum wage.

Evolution of the statutory minimum wage increase and the average global wage increase set by collective agreements

Year Average collectively-agreed pay increase Statutory minimum wage increase
2008   5.7
2007 2.9 4.4
2006 2.7 3.0
2005 2.7 2.5
2004 2.9 2.5
2003 2.8 2.5
2002 3.6 4.1
2001 3.9 5.0
2000 3.5 4.1

Notes: Figures do not include public administration.

Source: National Statistical Institute (INE); MTSS/DGERT; *CGTP-IN

The RMMG increase’s direct effect on the lowest wages will influence the whole wage scale, but it is not clear by how much, as this depends on the strategies of trade unions and employers. Employers could favour much lower pay increases for other groups of workers, limiting additional costs and benefiting those workers with low wages. The impact of the RMMG increase will be most keenly felt in sectors, such as manufacturing of textiles and clothing, with a high proportion of female workers, and other sectors such as retail, cleaning and security, social care and catering.

Maria da Paz Campos Lima, Dinâmia

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