Portugal: Latest working life developments – Q4 2016

The approval of the State budget for 2017, a tripartite commitment on the minimum wage and the debate on the revitalisation of collective bargaining 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 2016.

State budget 2017

The state budget for 2017 was approved on 29 November 2016. It was backed by the left-wing parties and opposed by the centre right ones. The budget law (Law no. 42/2016) includes a reversal of austerity measures, which will have a positive effect on the public sector. This includes re-establishing career progression in the public sector (frozen since 2011) and also brings back collective bargaining on the payment of annuities, allowances and salary supplements. However, no wage increases are expected in 2017. The budget law also re-establishes collective agreements and bargaining rights in public companies, freeing the limits set on them in 2013 and in 2014. In addition, it includes a strategy to combat the use of precarious work and subcontracting in the public sector, including a programme to regularise precarious employment relationships in public administration.

Developments in minimum wage

The government’s programme (PDF) defined the progression of the minimum wage increase, which is expected to reach €600 per month in 2019, after the left-wing parties agreed to support this in November 2015. A tripartite commitment was reached on 22 December 2016, setting the level of the monthly minimum wage at €557, an increase of 5% for 2016. The increase is linked to helping employers by reducing their social security contributions by 1.25 percentage points, a condition demanded by the employer confederations and accepted by the government (despite criticism from the left-wing parties). The General Confederation of Portuguese Workers (CGTP-IN) did not accept this condition and did not support the tripartite commitment. The law setting the level of the minimum wage (Decree Law no. 86-B/2016) came into force on 1 January 2017.

The tripartite commitment provides for a mid-term concertation agreement including other issues such as:

  • revitalisation of collective bargaining;
  • evaluating extension procedures;
  • combating excessive labour market segmentation;
  • assessing unemployment benefits.

It also provides for a bipartite agreement between the social partners to suspend any unilateral requests for temporary collective agreements during a period of 18 months.

CGTP is launching a national campaign for more profound changes in the legal framework of collective bargaining, including reversing the possibility of unilateral caducity (failure) and re-establishing the principle of ‘favor laboratoris’ (in favour of the employee).

Continuing decrease in unemployment but growth in precarious work 

In the first quarter of 2013, the unemployment rate fell by 40% from the maximum level registered since the outset of the crisis. However, in the last quarter of 2016 (PDF), the unemployment rate in Portugal was still 10.5% (10.3% for men; 10.8% for women). Furthermore, according to Eurostat data, Portugal has one of the lowest rates for job vacancies (0.7%) in the EU28. Provisional data from the Survey on Income and Living Conditions (EU-SILC) 2016 show that the poverty rate remains very high among the unemployed population (42%, compared with 10.9% among the employed population).

Young people are the most affected by unemployment (in the third quarter of 2016, 26.1% of young people aged 15–24 were unemployed). At the same time, job precariousness is growing, affecting 22.4% of workers, particularly young ones. In the third quarter of 2016 there were 856,200 workers with fixed-term contracts or other forms of precarious work; a 2.9% increase from the same period last year. Similar conclusions were found in a thematic dossier issued by the Observatory of Inequalities, an independent body formed by the Centre for Research and Studies in Sociology at Lisbon University Institute. This study highlights that the number of young Portuguese workers with temporary or part-time jobs has increased. In 2015, more than half of young workers aged 15–24, had temporary contracts (67.5%, 4.5 percentage points more than in 2014). This was particularly true for young women (69.7% of women; 65.6% of men). A similar trend is identified among those who work on a part-time basis: in 2015, 22.6% of young workers aged 15–24 worked part-time; nearly half of these (49.3%) involuntarily.

Commentary

The government effort to reverse austerity and improve pay was translated into measures that will have some impact in restoring confidence and combating poverty and inequality. Previous measures in this direction during the year have had a positive impact. Nevertheless, the government is confronted with strong limitations – due to the goal of reducing the public deficit – in fully re-establishing ‘normal’ procedures. Wages in the public sector will remain frozen this year, as they have been since 2010. The debate on the minimum wage has intensified and the tripartite commitment reflected a cautious approach by the government, stressing the importance of implementing future changes through tripartite concertation. After the strong imbalance provoked by austerity policies, however, it will be difficult to find a common denominator between employer and trade union confederations in the domains of labour law and collective bargaining regulations, both of which will be discussed during 2017.

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