Lisbon, Sept. 29, 2024 (Lusa) — Economists heard by Lusa warn that bringing the national minimum wage closer to the average wage has risks. It could increase the number of workers receiving the minimum wage and "progression becoming much more limited."
On Wednesday, the government handed the social partners a proposal for a new income agreement by the end of the legislature, revising the trajectory of the national minimum wage upwards.
According to the document to which Lusa had access, the government proposes increasing the minimum wage to €870 gross next year, an increase of 6.1% compared to the current €820. It also proposes reaching €920 in 2026 (an increase of 5.7%), €970 in 2027 (an increase of 5.4%) and €1,020 in 2028 (+5.2%).
As for the benchmark for the overall salary increase (discussed in collective bargaining), the government is maintaining the values set out in the current income agreement (4.7% in 2025 and 4.6% in 2026). For 2027 and 2028, since the new agreement is intended to cover the entire legislature (the current one only runs until 2026), it is 4.5% in each of these years. With this trajectory, the aim is for the average wage to reach €1,886.29 by 2028.
In practice, this means that, in percentage terms, the minimum wage will always rise above the average wage benchmark, which will contribute to flattening the curve between the two, warn the economists heard by Lusa.
"If the minimum [wage] rises at a higher rate than the average [wage], the difference between the minimum [wage] and the average [wage] will necessarily narrow," says Pedro Braz Teixeira.
Even so, the director of the Forum for Competitiveness's research office emphasises that this "differential" is lower "than it was in the past". "The rate of convergence between the minimum and the average exists," but it is a value that “is decreasing” and “in 2028 it will be 0.7%, it is no longer very expressive,” he notes. In comparative terms, in 2025 it's 1.4 percentage points.
João Duque believes that "everything depends on how private initiative ends up grasping this challenge", since he sees the rise in the minimum wage as a "stimulus" for companies to increase "productivity, innovation and added value capacity". But he acknowledged that this could be the consequence.
Economist João Cerejeira shares this position, pointing out that while the minimum wage is "set by decree", the figure in the income agreement for the average wage "is an indicative figure for companies".
"Last year, the average wage even grew more than what had been agreed," adds the professor from the University of Minho, noting that "it was a very favourable year, both from the point of view of increasing wages and from the point of view of increasing employment."
In 2023, the average gross monthly wage per worker increased to €1,505, a rise of 6.6% compared to last year (up €93).
On the other hand, economist Pedro Braz Teixeira warns that these increases "presuppose an increase in productivity that the economy hasn't had in recent years", so he foresees some risks.
In fact, this has been one of the criticisms of the employers' confederations, which warn that wage rises must be based on economic indicators.
João Cerejeira would also "prefer" the rise in the minimum wage to be partly "conditional on GDP growth".
In an indirect response to this criticism, at the end of the last Social Dialogue and after having presented this proposal, the Minister of Labour said that the proposed agreement is "also" geared towards "economic growth and competitiveness".
In this context, Pedro Braz Teixeira warns that, with the approximation between the minimum wage and the average wage, "progression will be much more limited", since the "chance of wage rises will be slim".
On the other hand, to meet the minimum wage, companies "end up giving less raises to other workers" who are "close to the minimum wage because there is no increase in productivity to pay for these raises," he adds.
"If companies spend more on workers earning the minimum wage, they have to spend less on others who earn little more," he points out. For the economist, this factor explains why "such a large rise in the minimum wage in recent years" has not translated into an increase in unemployment.
The impact, "if any", is "essentially on prices", adds João Cerejeira.
"When we look at the prices of the sectors that have the highest percentage of workers receiving the minimum wage, the prices of these sectors tend to increase more than the prices for the average of the economy". In other words, "a very significant part of this increase in the minimum wage is being passed on to consumers," he summarises.
Therefore, what could "condition the success" of the upward revision of the minimum wage is the growth trajectory of the Portuguese economy. If the country continues to grow above the European average, "there will be no consequences for employment," he anticipates. However, the economist warns that the slowdown is taking place in some European countries, particularly Germany, "which will ultimately have an impact in Portugal".
"If our companies aren't able to direct exports to other markets outside the eurozone, with stronger growth, then we will become more dependent on the European economy and, therefore, it will be more difficult to achieve this goal without a deterioration in the labour market," he says.
The professor and president of ISEG emphasises that bringing the minimum wage closer to the average wage "wouldn't do much harm" in a context where inflation was zero, as it would be possible to "maintain purchasing power". However, "the big problem is that what often happens is that “the number of workers covered by the national minimum wage increases” and, on the other hand, “it is sometimes eroded by inflation”.
"The losers end up being those who are earning slightly more than the minimum wage, who are earning the minimum wage and don't get a raise," says João Duque, giving the tourism and catering sectors as examples.
Even so, he believes that "in some sectors", such as health or technology, the average salary could rise, due to the "difficulty" in retaining "specialised talent".
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