Portugal: Latest developments in working life Q4 2019

A government proposal for a new common wage-setting policy and the results of the 2019 EU-SILC that show that while the poverty rate decreasing the working poor rate is increasing in Portugal are the main topics of interest in this article. This country update reports on the latest developments in working life in Portugal in the fourth quarter of 2019.

Government proposes common reference for wage bargaining

On 13 November 2019, the newly elected socialist government (which took power on 26 October 2019) made a commitment to initiate a debate on a medium-term agreement with a focus on wages, income and competitiveness. The government proposed a common reference for wage bargaining to increase ‘average wage levels’. The proposal takes into account two principles: expected productivity and inflation developments; and convergence with the EU labour share (in 2018, Portugal’s labour share was 3.2 percentage points below the EU average). According to government calculations, that would mean a wage growth above the sum of productivity and inflation indicating increases of 2.7% for 2020, 2.9% for 2021 and 2022, and 3.2% for 2023. ^[1]

The four employer confederations were not in favour of a common reference for the increase of ‘average wage levels’ irrespective of sectoral differences. ^[2] The General Confederation of Portuguese Workers (CGTP) and the General Workers’ Union (UGT) had mixed reactions, the first being more cautious than the second about the idea of a cross-sector reference for an average wage increase. CGTP fears that a common reference might represent a disguised form of wage moderation, as the proposal for 2020 is below the average wage increase observed in 2019. ^[3]

Experts set out different scenarios for a wage increase rate, warning about the implications for real wage recovery and wage moderation. ^[4]

The government also proposed a 0.3% wage increase in the public sector (where wages have been frozen since the last decade), which generated clear opposition from the trade unions affiliated with CGTP and UGT. ^[5]

• Portuguese Government: Programa do XXII Governo Constitucional 2019–2023

Poverty rate goes down while working poor rate rises

According to the results of the 2019 Survey on Income and Living Conditions (EU-SILC), based on incomes of the previous year, the trend towards a reduction in the at-risk of poverty rate has continued in Portugal. This rate was 17.2% in 2018, 0.1 percentage points less than in 2017 and 3.2 percentage points less than in 2003. The at-risk of poverty rate remained stable for men (at 16.6%) and decreased by 0.1 percentage points for women (from 17.9% in 2017 to 17.8% in 2018). In spite of this slight decrease, women are still more vulnerable to poverty than men are.

The decrease in the at-risk of poverty rate was most significant for those under 18 years of age (from 19% in 2017 to 18.5% in 2018) and those aged 65 or over (from 17.7% in 2017 to 17.3% in 2018). Conversely, the at-risk of poverty rate rose by 1.1 percentage points for the population in employment. In 2018, this rate was 10.8%.

• Statistics Portugal: Rendimento e Condições de Vida 2019 (Dados provisórios)

Commentary

The initial reactions from the social partners to the government’s proposal for a common reference for wage bargaining highlights the complexity of future negotiations for a medium-term agreement on wages in the private sector. The two rounds of negotiations at the Standing Committee for Social Concertation (CPCS) on 27 November and 9 December were not conclusive. Nevertheless, the plan is to continue the debate in order to conclude a tripartite agreement in the first quarter of 2020.

Regarding the proposal for a wage increase in the public sector, it is likely that the conflict will escalate as trade unions vowed to organise a national protest in January 2020 unless the government reconsidered the rate.

What seems clear from the 2019 EU-SILC data for Portugal is that the growth of the working poor in Portugal, parallel to a slight decrease in the at-risk of poverty rate in general, raises concerns about wages and work-related income levels. The data indicate that having a job does not protect people from being at-risk of poverty and, furthermore, that the employment capability to preclude poverty is decreasing.