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1. Labour market situation in the country

2. Definitions and concepts

Labour market situation in the country

In the last years, Portugal has undergone profound social and economic changes, which had a strong impact on the patterns and dynamics of the Portuguese labour market.

In June 2017, the country’s performance allowed it to exit the excessive deficit procedure, and in March 2018, in the scope of the European Semester, the European Commission recognized that Portugal had corrected its excessive macroeconomic imbalances. Indeed, in 2017 and 2018 Portugal had the best economic and financial performance in several decades, allowing the country’s labour market to recover most of the jobs lost during the financial crisis and to decrease its unemployment rate to pre-crisis levels. The economic growth presented by Portugal in the last four years has been consistently higher than the average growth of the European Union (EU), having been leveraged both by private consumption and by investment, and the contribution that, over the period, net external demand was contributing to the evolution of GDP. This growth made it possible to restore employment levels to levels higher than the commitments made in the context of the Europe 2020 Strategy (employment rate of the resident population aged between 20 and 64 in 2019 - 76.1%, higher than the target of Europe 2020, set at 75%) and, above all, has allowed unemployment to be reduced to historically low levels (unemployment rate in 2019 - 6.5%), in line with the levels presented in the pre-crisis economic cycle. The employed population reached 4913.1 thousand people in 2019, the highest figure since 2009, and the unemployment rate fell to 6.5%, the lowest figure since 2008 (National Reform Programme, 2020).

This job rich recovery has also brought an improvement of employment quality in Portugal, with most of the employment growth being due to the increase of open-ended employment contracts and with promising trends in wages and collective bargaining.

In 2020, the coronavirus pandemic had a sudden and massive impact on the economy, the labour market and, consequently, on the public finances. The return to the trajectory of economic growth and consolidation of public accounts will only be possible and sustainable when the health crisis is over.

Labour system

In terms of labour market regulation, the main law in Portugal is the Labour Code, Law no. 7/2009, of 12th February, which was amended several times in recent years in order to respond adequately to new needs and realities.

In addition to the Labour Code, collective bargaining plays an important role in labour market regulation. The most common collective bargaining instrument in Portugal is the collective agreement, a convention concluded between trade unions and employers' associations, whose purpose is to regulate the activities of production sectors. Given the persisting structural imbalances of the Portuguese labour market and the increasing adaptation challenges at the sectorial and firm levels, collective bargaining plays an increasingly critical role in the equilibrium of labour relations. However, although collective bargaining improved both in coverage and in dynamism over the last two years, it is still far from pre-crisis levels.

In this context, in June 2018, the Government and the majority of Social Partners reached a Tripartite Agreement aimed at reducing labour market segmentation and promoting collective bargaining which was reflected in the “Action Programme to Combat Precariousness and to Promote Collective Bargaining” ("Programa para Combater a Precariedade e promover a Negociação Coletiva"), approved by the Resolution of the Council of Ministers no. 72/2018, of 6th June. In September 2019 a law reflecting this Program – Law no. 93/2019, of 4th September - was approved published and  enter in force by October 2019.

The Law no. 93/2019, of 4th September, introduced a comprehensive set of changes to the Labour Code to limit the legal framework of temporary contracts, to ensure higher protection of temporary workers, to reduce the excessive use of temporary contracts and to promote open-ended based employment. The Law also amended the Labour Code in order to discourage informal or under-declared work and to promote open-ended hiring in seasonal economic sectors and to ensure greater protection to temporary agency workers. In the scope of collective bargaining, measures changes to labour law are meant to decrease the excessive individualization of labour relations and to promote the collective dimension of labour regulation, while preventing the emergence of legal vacuums in event of expiry of collective agreements.

Apart from changes to the Labour Code, the Action Programme to Combat Precariousness and to Promote Collective Bargaining also comprises a set of policy actions to strengthen the means and instruments of labour market regulation, including labour inspectorate, having the Authority for Working Conditions currently the highest number of inspectors in office since its establishment in 2006.

Main trends in the Portuguese labour market

According to data from the EU’s labour force survey (EU LFS), in 2019, Portugal had an activity rate (75.5%) higher than the EU28 average (74.1%), with a female participation rate of 72.9%, also higher than the European average (68.7%).

The employment rate (15-64 years) had reached its highest value in 2008, with 68%, and then declined until 2013, when it was 60.6%, increasing to 67.8% in 2017 and – exceeding 2008 - to 69.7% in 2018. The employment rate reached 76.1% in 2019, above the European average of 73.9%.

Over the last years, the proportion of women in the Portuguese labour market has increased, thus reducing the gap between employment rates by sex: in 2008, it was 11.3 pp., while in 2019 it declined to 7.2 pp.

Regarding the labour market, the last few years have been characterized by a continuous decline of the unemployment rate since 2013, from 16,4% (2013) to 6.5% in 2019 approaching the rates of the European Union (EU28) – 6.3% in 2019 (Eurostat_TPS00203). Unemployment particularly affects young people and low-skilled workers.

Long-term unemployment (12 or more months) increased significantly until in 2014 (59.6%) and, since then, long-term unemployment has been consistently decreasing, representing 55.4%, 49.9% and 43.7% of the total unemployment in 2016, 2017 and 2018, respectively. In 2019, it affected 42.1% of the unemployed population.

Young people and the labour market

Unemployment particularly affects young and older workers. In 2019, the unemployment rate of young people from 15 to 24 years stood at 14.4% in the EU28, reaching, in Portugal, a value of 18,3%. Regarding the unemployment rate of the age class from 25 to 29 years, Portugal presents similar values to those of the EU28 - 8.3% in 2019 (Eurostat_ TEPSR_WC170).

The conditions for the insertion of young people into the labour market have been characterised by precariousness, particularly by the increase of part-time and temporary work. The recent coronavirus pandemic has emphasised the difficult start in the labour market of young people and Portugal is aligned with the EU recovery plan for young people – A Bridge to Jobs: Reinforcing the Youth Guarantee.

Despite the difficulty of integration into the labour market, Portugal has made an appreciable improvement since 2013 regarding the percentage of young people who are not working, studying, or training (NEET). In 2019, 9.2% of young people aged between 15 and 29 years were in a NEET situation in Portugal, below the average percentage in the EU28 – 12.5%.

The least qualified young people are the most vulnerable to the NEET situation. (Rowland et al, 2014) and the NEET situation increases considerably with age, being that young people aged between 15 and 19 in a NEET situation are only 3.4%, this rate increasing to 12.7% when young people are aged between 20 and 24 (Eurostat_edat_lfse_21).

The level of education is a distinguishing factor in the analysis of youth unemployment levels. The higher the education level is, the lower the unemployment rate tends to be: in 2019, the unemployment rate for the low-skilled was 17.2% (youth aged 15-29 with ISCED levels 0-2), while the UR for the highly skilled was 11.5% (youth aged 15-29 with ISCED levels 5-8), a 5.7 pp. difference.

The number of students attending higher education increased 4% between 2015 and 2018, growing from 87 thousand first timers in higher education institutions in 2014/2015 to more than 103 thousand in the 2018/2019 year school. The public expanses for higher education institutions grew around 10% between 2016 and 2019 and the amount of students covered by social scholarships went from around 64 thousand in 2014/2015 to 80 thousand in 2018/2019.

In view of the difficulties of integration in the labour market, there has been a migratory flow of highly skilled young people in recent years, mainly to other European countries (Lopes, 2014; Gomes et al, 2015).

Future trends

The Programme of the XXXI Constitutional Government (2019-2023)  represents a cycle of consolidation of the economic recovery, guaranteeing long-term sustainability and developing the conditions for Portugal to overcome the strategic challenges of the next decade. It is for this purpose that the four strategic challenges present in the Government Program contribute:

• Combat climate change;

• Responding to the demographic challenge;

• Build the digital society;

• Reduce inequalities

For 2020, the Major Options of the Plan identified the key priority challenges regarding the labour market:

• Promote a proper regulation, with a view to safeguarding the right to decent and quality employment for all people;

• Ensure that our education and training system responds effectively to changes in the standard of qualifications required by the labour market in order not to generate new forms of social exclusion

• Ensure a fair transition, inclusive and sustainable, so that the future of work provides well-being and cohesion reinforced social security, especially for young people and millennials;

• Regulate the Gig Economy, inspecting and promoting the application of fair work, to ensure that workers' rights are safeguarded and that the conditions inherent to decent work are respected;

• Promote the preparation of a Green Paper on the Future of Work and, based on work and public debate based on it, including social consultation, move forward with concrete proposals for regulating the provision of work in the digital economy;

• Advance with solutions to regulate new forms of work associated with the expansion of digital platforms and the collaborative economy, and own instrument the working conditions that must be demanded in that scope;

• Ensure equal conditions in access to social protection and conditions of safe and healthy workplaces for digital platform workers, the economy collaboration, distance workers and other types of the digital economy, ensuring the implementation of the decent work goals stated at the level of the United Nations;

• Guarantee the access of workers in the digital economy to the structures of collective representation of work and encourage collective bargaining and regulation in emerging sectors, also in order to avoid the isolation and individualization of labour relations in these fields;

• Defend the harmonization of the regulatory framework that regulates industrial relations in digital platforms in different jurisdictions, inside and outside Europe

• Introduce regulatory mechanisms to ensure safety and security workers' privacy when interacting with machines and artificial intelligence;

• Ensure protection and security in the use of personal data by entities employers, ensuring full application of the General Regulation on Personal Data and stimulating its implementation in collective bargaining;

• Stimulate an appropriate balance between autonomy at work and the right to termination, promoting a balanced management of working time and conciliation between professional, family and personal life in the context of respect for people's sovereignty in time management.

Definitions and concepts

The legal and minimum working age is 16 years: young people under 16 years that had completed compulsory education or who are enrolled and attending upper-secondary education may provide light work consisting of simple and defined tasks which, by their nature, by the required physical or mental specific conditions under which they are carried out, are not liable to harm them as regards physical integrity, safety and health, attendance at school, participation in orientation or training programs, ability to benefit from the instruction given or their physical, psychic, moral, intellectual and cultural development (Labour Code – number 3 of article 68).

The normal age for access to old-age pension: the minimum age, under the general social security system in 2020, is 66 years and 5 months (in the same that in 2019). Since this age is adjusted annually by the Government, depending on the sustainability factor based on the evolution of the average life expectancy,

Compulsory education ends at the age of 18 years old: compulsory education ends when the student gets his/her diploma graduating from high school (upper-secondary education) or at the time of the school year when he/she reaches 18 years old, regardless of the cycle or level of education.

Major Options of the Plan ("Grandes Opções do Plano" - GOP) – are government economic policy instruments that set out the grounds for the strategic guidelines for economic and social development policy.

Social support index (IAS) – this is the basic amount that serves as reference to calculate and update contributions, pensions and other social benefits given by Social Security. For 2020, the value of the IAS was set at €438,81.

Labour regulation:

Fixed-term contract: the duration and regime of the fixed-term employment contract. From October 2019 on, the maximum duration of fixed-term contracts is two years, including renewals (with the maximum of 6), and the maximum accumulated duration of renewals cannot exceed the initial contract period.

Minimum wage: the Portuguese Constitution defines the establishment of a monthly minimum wage, which is regulated by the Labour Code. The updating of the minimum wage is made by the government, after consulting the social partners in the Standing Committee on Social Dialogue (CPCS). For 2020, the monthly minimum wage was updated to € 635.

Part-time work: part-time work corresponds to a normal weekly working period lower than the full-time work provided in similar conditions.