Employers dispute statutory minimum wage increase

In December 2009, Portugal’s Prime Minister announced a statutory monthly minimum wage increase of €25 for 2010, following guidelines defined in the 2006 tripartite agreement between the government and social partners. Trade unions welcomed the announcement. However, it sparked controversy among employers, who claimed that companies could not deal with such an increase due to the economic crisis. They thus presented a counter proposal of a €10 increase, which the government rejected.

According to the tripartite landmark agreement signed in 2006 (PT0612029I), between the socialist government and the social partners represented on the Standing Commission for Social Concertation (Comissão Permanente de Concertação Social, CPCS), 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 implementation of this agreement envisaged that the RMMG should reach €500 a month in 2011. It thus allowed for substantial increases in the RMMG between 2007 and 2009 – up to 4.4% in 2007, 5.7% in 2008 and 5.6% in 2009, reaching €450 a month in 2009 (PT0804039I).

During the electoral campaign on September 2009, the Socialist Party (Partido Socialista, PS) highlighted the commitment to respect the tripartite agreement of 2006 and therefore to increase the RMMG over the next two years. On 28 October, two days after the minority government of the PS took power, the two main trade union organisations – the General Workers’ Union (União Geral de Trabalhadores, UGT) and the General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) – presented a demand for an increase of €25 in the monthly minimum wage for 2010, which would increase the minimum wage to €475 a month. On the same day, the President of the Confederation of Portuguese Industry (Confederação da Indústria Portuguesa, CIP), Francisco Van Zeller, declared in an interview to Radio Renascença that ‘the low wages are necessary for 25% of our exportations’ and thus ‘it is not opportune, this year, to increase the national minimum wage, at least not for another year’.

Prime Minister proposal to increase RMMG

On 6 December 2009, Portugal’s Prime Minister, José Socrates, announced at the parliament meeting the government’s intent to raise the statutory minimum wage for 2010 up to €475 a month. At the same time, he assumed the commitment to offer compensatory measures as an incentive for businesses. In particular, such measures would include a reduction of the single social tax (taxa social única) on the minimum wage by one percentage point, the equivalent of €4.75 per worker. This means that the Portuguese state will cover 15% of the increase of the cost of the minimum wage in 2010. Furthermore, this commitment includes an extended deadline for companies for the payment of social security debts from 60 to 120 months.

The technical services of the Ministry of Labour and Social Solidarity (Ministério do Trabalho e da Solidariedade Social, MTSS) estimate that the increase in the minimum wage will affect a significant number of workers. In October 2008, the ministry’s database included 260,000 minimum wage earners in total; however, due to the generally low level of wages in the Portuguese labour market, this number will increase in 2010. If in 2010 wage levels in general do not increase, as many as 470,000 workers will receive the minimum wage. Thus, almost half a million workers will receive the new minimum wage of €475 a month, according to the impact study presented by MTSS to the social partners.

The northern region of the country has the highest percentage of workers (46.3%) with wages lower than the minimum level considered for 2010. Therefore, it is in this region that the increase in the statutory minimum wage will have a greater impact. With regard to company size, the impact of the RMMG increase for 2010 will be lowest for the largest companies, but more significant for smaller ones. It is in these micro and small companies with fewer than 10 workers that the highest proportion of people is concentrated who receive less than the €475 minimum wage envisaged for 2010.

Social partner reactions

UGT and CGTP welcomed the proposal to increase the statutory monthly minimum wage to €475 in 2010. However, the Secretary General of CGTP, Manuel Carvalho da Silva, contested the measures of support offered to companies, namely the reduction of the single social tax by one percentage point. According to CGTP, this reduction will have a negative impact in that it will reduce the revenue of the social security system by €30 million. CGTP considers it totally unacceptable and immoral that the government has to support employers with their contributions to the welfare system.

On the contrary, the employer confederations argued that the incentives promised by the government were insufficient and that many companies would not be able to cope with a minimum wage increase of €25 a month in the context of the ongoing economic and financial crisis. Although the government has already assumed 15% of the costs of the increase of the minimum wage, the employer confederations demanded more ‘compensatory’ measures, namely those of a fiscal nature. With the exception of the Confederation of Portuguese Farmers (Confederação dos Agricultores de Portugal, CAP), the employer confederations – CIP, 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) – presented together at the meeting of the CPCS a counterproposal to increase the RMMG up to €460 for 2010. This proposal followed the government recommendation to increase social pensions by 2.05%. The Vice-President of CIP, António Saraiva, highlighted that the government proposal to increase the RMMG might have consequences in terms of raising the present level of unemployment from 10% to 12%.

After the meetings at the CPCS, the Minister of Labour and Social Solidarity, Maria-Helena André, declared that the RMMG for 2010 will be €475, effective from 1 January, in line with the implementation of the 2006 tripartite agreement. Eventually, on 23 December 2009, the government approved the decree setting the statutory minimum wage at €475 for 2010, a measure that according to the government ‘will not undermine the competitiveness of enterprises, or contribute to any increase in unemployment’. Minister André stated in a press conference that the government considers it necessary to raise low wages and that the increase in the minimum wage ‘is a measure of social justice’.

Commentary

If the statutory minimum wage increase had been following inflation trends over the past 35 years (since it was created), its value would be €562 by now, which is €97 more than the government’s proposal. At EU level, it has been defined that the minimum wage should represent at least 60% of a country’s average wage. However, in 2008, it represented only 40% of the average wage in Portugal. In comparison with the 20countries that have a statutory minimum wage, Portugal stands in an intermediate position. Nevertheless, Portugal is ranked in last position among western European countries in relation to the level of the statutory minimum wage.

Maria da Paz Campos Lima, Dinâmia

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