The Observatory of the Centre for Social Studies (CES) says that the political decision to increase the national minimum wage was accompanied by a "significant increase" in employment.
The increase in the minimum wage between 2014 and 2018 was accompanied by the creation of around 400,000 jobs, leading to a drop in the unemployment rate from 13.9% to 7%, revealed the new Notebook of the Observatory on Alternative Crises.
“The definition of the minimum wage was the most emblematic resource used by the Portuguese government to intervene in labour relations in the years of economic recovery. After freezing its nominal value between January 2011 and September 2014, the minimum wage grew sharply. Its value rose from 485 euros, before September 2014, to 600 euros, as of January 2019”, reads the report of the Observatory of the Centre for Social Studies (CES) of the University of Coimbra, published today.
This increase was thus accompanied by a “significant increase” in employment, which translated into the creation of around 400 thousand jobs between the end of 2014 and the end of 2018. Consequently, the unemployment rate fell from 13.9% in 2014 to 7% in 2018.
According to the study “When the public decision shapes the market: the relevance of the minimum wage in times of wage stagnation”, the increase in the minimum wage was not, however, accompanied by equivalent increases in aggregate average wage levels, “with nominal to real average wages showing a much less pronounced progression”.
During the reference period, the nominal average wage increased by 5.87% (1.44% on average per year), while the real average wage increased by 2.24% (0.56% on average per year).
On the other hand, the average wage showed a “low elasticity” in relation to the evolution of the Gross Domestic Product (GDP), “especially in the first years of the economic recovery”.
With the rise in average wages slower than the rise in the minimum wage, there was an increase in the percentage of workers receiving the national minimum wage, from 12% at the end of 2013 to 22.1% at the end of 2018.
“But this evolution was not homogeneous over time: after rising sharply from 12% in 2013 to 23.3% in 2016, the percentage of workers receiving the minimum wage entered a stabilizing trend and decreased slightly to 22.1% in 2018”, the observatory noted.