Wage Inequality in Portugal

Wage inequality in Portugal

Ministry of Labour, Solidarity and Social SecurityJuly 2016

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InequalityInsufficient impact of past labour market reforms:

SkillsSegmentationWage structure

PolicySkillsSegmentationMinimum wageCollective bargaining

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Inequality

Source: SILC/Eurostat

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Income inequality - from 2011 to 2015, there was almost no change inthe inequality indicators in Portugal, which remain very high.

Inequality

Wages, productivity and poverty – Unemployed and other inactive personsare more at-risk-of-poverty than employed and retired persons.

5Source: Statistics Portugal, ICOR (2015)

At-risk-of-poverty rate by poverty threshold and most frequent activity in the previous year (%)




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Insufficient impact of past reforms

Source: DGEEC/MEdu7

Skills – Decrease of adult education

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 0002000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Secundário

3.º Ciclo

2.º Ciclo

1.º Ciclo


Source: Eurostat8

Skills – Reduced participation in lifelong learning

0% 5% 10% 15%

PT

EU

9%

11%


Source: Quadros de Pessoal9

Segmentation – Important wage difference between low and high skilllevels

0 500 1000 1500 2000 2500

Nenhum

1.º ciclo

2.º ciclo

3.º ciclo

Secundário

Pós-secundário

Bacharelato

Licenciatura

Mestrado

Doutoramento



Wages inequality - Lower proportion of workers and higher skill levels insectors with higher wages

Segmentation

The incidence of temporary employment was much higher for youth (67,4% in2015Q4) than for employees aged 25 to 64 years old (19%).

Temporary employees as a percentage of the total number of employees, by age


Source: Statistics Portugal (INE), LFS11

46,2

67,5

31,0

42,7

16,018,8

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

UE28 15 a 24 anos UE29 25 a 29 anos UE28 25 a 64 anos

Portugal 15 a 24 anos Portugal 25 a 29 anos Portugal 25 a 64 anos

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Segmentation – The incidence of temporary contracts in new admissions to the

“Fundo de Compensação do Trabalho” (i.e. workers’ compensation fund) is alsosignificant. In the first semester of 2016, temporary contracts accounted (on average)for 81,3% of total admissions.

Source: GFCT – Gestão do Fundo de Compensação do Trabalho

Note: admissions in the categories of “service commission regime”, “telework” and “intermittent work” were excluded from the analysis, since there is no information available concerning contract type (overall, these employment forms account for less 1% of total admissions).

21,9% 20,8% 21,4%

78,1%79,2% 78,6%

84,3%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

jan

feb

mar

apr

may jun jul

aug

sep

oct

no

v

dec jan

feb

mar

apr

may

may jun jul

aug

sep

oct

dec jan

feb

mar

apr

jun

Admissions, by type of contract (%)

Permanent Temporary



Wage drift – The wage drift has been increasing, which shows that wagesare increasingly set at the individual level

125,6

133,3139,2 139,0

142,5

152,3

160,7167,6 167,3

172,8

1998 2003 2008 2011 2014

Remuneração base Remuneração ganho

Remuneração convencional =100

30,428,428,4

27,526,7

25,6 33,3 39,2 39,0 42,5

26,727,5

28,4 28,4 30,4

0

20

40

60

80

100

120

140

160

180

200

1998 2003 2008 2011 2014

convencional (=100) base ganho




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Policy

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Skills – Programme Qualifica

• Need to build a new agenda for vocational education, based onthe quality of responses and on a better adjustment to the labormarket

• Revitalize adult education and training as a central pillar of thequalifications system by launching an integrated programme foradult education and training

• Programme Qualifica

Policy

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Programme Qualifica - main measures:

• Enlargement of the network and reinforcement of activity of the "CentrosQualifica"

• Implementation of a credit system applied to the vocational education andtraining programmes, recognized by the training providers that operate in thecontext of the National Qualification System

• Creation of the "Passaporte Qualifica" as an instrument designed to be anelectronic registration available online for consultation

• Reinforcement of the recognition, validation and certification of professionalskills

• Strengthening of the quality of the VET systems by the promotion of trainingfor teachers and trainers, especially in the area of adult education

Policy

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Minimum wage (MW)

• Reference in the Portuguese labour market, both from the perspective of firms (competitiveness and sustainability) and of workers (decent work and social cohesion)

• Correlated with poverty: 1 in 10 workers in Portugal are at risk of poverty and the percentage of poor workers has increased (9.9% in 2011 to 11% in 2014)

• MW policy: carried out by the Government in partnership with the Social Partners, taking into consideration several factors, such as productivity, competitiveness, unemployment

• MW: increased from €505 to €530 on January 1st, which led to an increase in the % of workers earning the MW, to around 20% in March 2016

• Extraordinary measure to decrease by 0,75pp the social contributions rate (from 23,75% to 23%) between February 2016 and January 2017, to mitigate the impact on firms of the increase in the MW (decrease in competitiveness)

• First report on the evaluation of the impacts of the increase in the MW

WagesContractual wages, minimum wage and earnings

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Contractual wages Minimum wage Earnings

Sources: Republic Journals; Statistics Portugal, CPI (base 2012); Stability Programme 2016-2020

Policy

Quarterly report on the impacts related to minimumwage update (1st report: May 2016)http://www.portugal.gov.pt/pt/ministerios/mtsss/docs/20160512-mtsss-rmmg-rel.aspx

Main findings: The share of workers with remuneration equal to the MW increased from

16% to 19%, remaining unchanged the percentage of wages below theMW(9%).

During 2016Q1, the net balance between initiated and terminated contractswas 108,800 employees (114,500 in 2015Q1).

Next reports – main issues to assess: Study of transitions for MW earners, following them in two moments in time,

in order to understand wage transitions: persistence in lower wages and salary progressions.

Assessment in further detail of the decrease of 0.75 p.p. in employers social contributions for employees with a monthly base salary equal to the MW.

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http://www.portugal.gov.pt/pt/ministerios/mtsss/docs/20160512-mtsss-rmmg-rel.aspx

Policy

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Collective bargaining

• Government: committed to reinforcing the dynamism of social dialogue at all its levels, from tripartite negotiation to collective bargaining at the sectoraland company levels

• Although the dynamism of collective bargaining strongly depends on the engagement of social partners, it is understood that the Government can (and should, given the current situation of stagnation of collective bargaining) act in order to stimulate it, to make negotiations more appealing both to trade unions and enterprises

• Referring some major topics (like working time and associated compensations) exclusively to the domain of collective bargaining will lead the parties to find greater interest in gathering at the negotiation table

• Collective bargaining: major role in assuring certain levels of labour market integration and social cohesion

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Policy

Social dialogue – collective agreements slightly increased, as well as the numberof workers covered in 2016 in relation to the same period of 2015.

Collective agreements and workers covered

Source: DGERT (MTSSS) (a) data until 8th June.

Wage Inequality in Portugal

Economy & Finance

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