Portuguese Labour Market Research Articles

Minimum Wage, Fringe Benefits, Overtime Payments and the Gender Wage Gap

This paper investigates the impact of an increase in the minimum wage on the gender gap at various levels of employee compansation, namely, base wage, fringe benefits, overtime payments and probability of getting these extra income components. Using the matched employer-employee database for the Portuguese labor market, we explore the 1998 amendment to the MW law that increased the minimum wage applied to employees younger than 18 years of age from 75% to 100% of the full minimum. Estimation results based on a difference-in-difference-differences strategy indicate a widening of the gender gap, caused by redistribution of fringe benefits and overtime payments following the amendment. We discuss three possible sources of redistribution: (i) discrimination, (ii) a change in the skill composition of the working males and females after the increase, and (iii) industrial differences in response to the changes in the wage floor. Estimations support the third channel as the main contributing factor while we cannot eliminate the possibility of the effect of discrimination.

Immigrants at New Destinations: How They Fare and Why

Using matched employer-employee data, we identify the determinants of immigrants’ earnings in the Portuguese labor market. Results previously reported for countries with a long tradition of hosting migrants are also valid in a new destination country. Two-thirds of the gap is attributable to match-specific and employer characteristics. Occupational downgrading and segregation into low-wage workplaces are two major causes behind the wage gap.

Portuguese Child Labour: an Enduring Tale of Exploitation

Child working remains a significant minority activity in semi-industrialized parts of the Portuguese labour market. This article outlines the scale and spatial extent of the phenomenon before debating the role of children employed in the textiles, clothing and footwear sectors.We consider key determinants governing supply and demand for these workers together with an evaluation of state-sponsored efforts to alleviate the situation. Analysis shows that some factories in mono-industrial parts of north-west and central-eastern interior Portugal are continuing to resist the globalization of competitive pressures.This is achieved by reducing real labour costs, utilizing informal work practices, exploiting the cheap productive capacity which minors bring and the legislative loopholes which prevent its eradication.

Gender Pay Differentials in Portugal: Contributions to the Employment Policy Debate in the European Union

Abstract Since the implementation of the European Employment Strategy in the 1990s, the issue of gender gaps in the European Union labour markets has been granted a high profile. The Portuguese labour market has performed well on various indicators relating to gender equality, namely, participation and employment rates. Nevertheless, a persistent pay gap remains despite the recent evolution of the labour market, especially concerning the average education level of workers. This article investigates the main factors explaining the gender pay gap across two decades and the way those factors perform along time. We also discuss the means of closing the gap in the context of the European Employment Strategy, considering the lessons from other member states. We used wage decomposition techniques to analyse the relative importance of differences in the productive characteristics of workers, differences in the way men and women are distributed among jobs and the relative importance of discrimination practices. Our findings suggest that most of the pay gap is due to discrimination practices. Individual action by economic agents is insufficient to solve the persistent pay gap. Social partners must incorporate this issue within collective bargaining in order to construct an adequate strategy for reducing the gap, which can only be done by engaging men and women, employees and employers.

Wage Dynamics and Promotions Inside and Between Firms

We focus on the dynamic relation between wage increases, promotions and job changes. We relate our empirical analyses to the theoretical model of Gibbons and Waldman (1999). In the empirical analyses we use the Portuguese matched employer-employee data Quadros de Pessoal. We conclude from finding significant serial correlation in wage increases and promotion rates that employer learning about the worker's ability might be important. Furthermore, we find that the Portuguese labor market is not competitive. Finally, we argue that employer-reported promotion relate to a large extent to wage increases rather than changes in job tasks and complexity.

Wage Dynamics and Promotions Inside and between Firms

We focus on the dynamic relation between wage increases, promotions and job changes. We relate our empirical analyses to the theoretical model of Gibbons and Waldman (1999). In the empirical analyses we use the Portuguese matched employer-employee data Quadros de Pessoal. We conclude from finding significant serial correlation in wage increases and promotion rates that employer learning about the worker's ability might be important. Furthermore, we find that the Portuguese labor market is not competitive. Finally, we argue that employer-reported promotion relate to a large extent to wage increases rather than changes in job tasks and complexity.

Gender segregation and the wage gap in Portugal: an analysis at the establishment level

Using a large linked employer-employee data set, this paper aims at quantifying the trend in worker segregation at the establishment level and its impact on wages in Portugal over a fifteen year period. We concentrate on the gender dimension, to answer the questions: What is the level of gender segregation across establishments in the Portuguese labor market and how has it evolved over time? What is the impact of segregation on wages? Is that impact different for men and women? Systematic and random components of segregation are computed. We use standard wage decomposition techniques to evaluate the impact of the composition of the labor force at the establishment level on wages. The results reveal a high degree of systematic gender segregation. A higher proportion of females in the establishment lowers females’ wages while, on the contrary, it raises males’ wages. The evidence gathered is consistent with the taste-based model of employer behavior and with the theory of sorting of workers across establishments based on their productivity.

Low-wage mobility in the Portuguese labour market

Low-wage employment has become a matter of concern in many countries, Portugal being among them. In particular, the extent to which low-wage employment is a permanent or transitory situation is an important issue. This paper examines low-wage mobility in the Portuguese labour market using the bivariate probit model proposed by van de Ven and van Praag (1981), in order to account for the potential endogeneity of the initial state. For this purpose, we use a matched employer-employee panel data for 1996 and 2000. Raw figures show that a significant number of workers are trapped into low-wage employment. We also find that males and the better-educated are more likely to escape from such a situation. Furthermore, initial firm characteristics, such as firm size, age and industry influence mobility. In particular, low-wage workers in larger or in newer firms have better mobility prospects.

Employment adjustment in two countries with poor reputations: Analysis of aggregate, firm, and flow data for Portugal and Germany

This paper supplements aggregate time-series analysis of the speed of employment adjustment with evidence from firm panel and flow data for two countries – Portugal and Germany – sharing unenviable labor market reputations. The Portuguese labor market is often portrayed as terminally inert, while that of Germany as badly ailing. We report broad consistency in the results across data sets in favor of Portugal. In benchmarking Portugal against Germany, the adverse reputation of the former – if not necessarily that of the latter country – may have been exaggerated in contemporary policy debate.

EU Enlargement and the Portuguese Economy

The main focus of the present paper is on the emerging and likely future trade effects of enlargement. Though our particular concern is with Portugal, we set the scene by comparing the trade structures of the 10 countries of Central and Eastern Europe (i.e. the eight CEE accession states plus Bulgaria and Romania) – including an analysis of the individual cases of the Czech Republic, Hungary and Poland – with those of the EU15 as a whole, and with those of the 4 EU cohesion countries.The elimination of trade barriers between incumbents and accession states will have two trade‐related effects on EU incumbents: an increase in bilateral flows with the CEEC and a shift effect as the CEEC displace some incumbent exports to EU markets. The first effect is likely to be strongest for those incumbents for which there is a strong overlap between their export structure and the import structure of the CEEC. Portugal emerges as one of the economies with the least overlap.The displacement effect, we conclude, is likely to be particularly strong in the case of Portugal, given the high degree of similarity between Portuguese exports and those of the CEEC. Portugal appears to be ‘being squeezed from below’ in that, for the majority of its traditional export sectors, the CEEC became progressively more competitive during the second half of the 1990's.Portuguese specialisation was increasingly confined to low‐technology, low‐added‐value sectors with declining demand, as strong FDI inflows to the CEEC led to an increasing preponderance of more dynamic sectors in their export structures. Thus, Portugal is also being squeezed from above. This suggests that there may be substantial industrial disruption, in response to which labour‐market flexibility and dynamic entrepreneurial response is crucial. Intersectoral mobility is generally easier the more highly educated the workforce – an indicator on which Portugal scores poorly. The Portuguese labour market, however, displays a high degree of flexibility, consistent with its long lasting low rate of unemployment. Continued flexibility will help minimise these likely adjustment costs.Besides the trade and industry effects, other topics considered in the paper include the implications of enlargement for Portugal's ability to attract FDI, the likely consequences for Portugal of inward migration from the CEEC to the EU, and the implications of enlargement for Portugal's budgetary relations with the rest of the EU.

On the Returns to Training in Portugal

This paper investigates the earnings effects of training in the Portuguese labour market. We use the Portuguese Labour Force Survey to classify training according to multiple criteria, including providing institution, purpose, duration, and content of the training activity. First, we establish some stylised facts about the extent and determinants of different types of training. We find that there are major differences in training participation across groups, with elder, low educated workers participating substantially less. Second, we measure the wage effects of training. We find that in Portugal returns to training are large and significant. The estimated coefficients are about 12% in the case of men and 37% in the case of women. We show that discriminating between gender, education level, experience, the public and the private sector, and industrial activity reveals important differences across categories of workers. Workers with low qualifications and long professional experience earn larger returns. On average, women receive larger returns than men, though they are subject to greater variation across education and experience groups. The average effect of training is similar in the private sector and in the public sector. Experience in the private sector and education in the public sector are key determinants of the returns to training. Further, training to improve current skills and training in a firm attract largest returns. Third, the paper investigates whether and to what extent training participation affects the probability of entering and leaving unemployment. We find that being trained does not affect significantly the transition probabilities.

The Role of the State in the Labour Market: Its Impact on Employment and Wages in Portugal as Compared with Spain

During the last two decades, unemployment rates in Portugal were significantly lower than the average of the European Union. The contrast in the evolution of unemployment between Portugal and Spain has been a source of perplexity for many analysts. This study presents some possible explanations for that contrast. It argues that in spite of labour regulations that are among the tightest in Europe, unemployment has been comparatively low in Portugal because there is a very large proportion of workers who are not adequately protected by those regulations, increasing the flexibility of the Portuguese labour market. Lower unemployment rates result also from the combination of faster GDP growth and lower growth of the labour force than in the average of EU countries. High unemployment rates in Spain are due, to a large extent, to slower growth of GDP than in Portugal combined with a much more rapid expansion in the labour force.

Strong market, weak state: the case of recent foreign immigration in Portugal

This paper examines the relationship between labour migration and national migration policies, taking the case of recent foreign immigration to Portugal. Two distinct types of flow are observed. Firstly, the low-skilled workers who have come into the Portuguese labour market since the late 1970s. These were initially mostly Africans and more recently Eastern Europeans. The difficulties of controlling these flows led to an inflection of Portuguese migration policy since the early 1990s, reflected in two regularisations of illegal immigrants and, recently, in the establishment of temporary labour permits. Secondly, the highly skilled segment of the labour force will be studied. Here we observe independent flows, coming mainly from Brazil, and others occurring within the framework of the internal labour markets of multinational corporations. These flows were hardly controlled, particularly as regards the recognition of foreign qualifications. The conclusion points to the relative strength of labour markets, at both national and organisational level, in originating flows, and to the relative weakness of states in regulating them. A first justification for this discrepancy is the increase of regulation problems resulting from globalisation. A second justification is the action of social networks: in fact, labour markets do not act strictly by themselves, but are activated by powerful social ties.

Unemployment and the Political Economy of the Portuguese Labour Market

In this paper the author deals with the specific structures of the Portuguese labour market in order to account for the impact of unemployment on electoral behaviour. The low weight of wages in family incomes, the regional disparities in wage labour and the multi-job tradition in Portuguese society are examined to explain social attitudes towards unemployment. These features are shown to constrain the resistance that the working classes might have otherwise opposed to unemployment. In conclusion, the author argues that unemployment had a limited impact on the electorate's behaviour as part and parcel of the recessive economic climate' prevailing at the time of the 1985 and 1995 general elections

Development and Equality between Women and Men in the Portuguese Labour Market

The rapid economic development of Portugal over the past decade has brought with it a considerable degree of social exclusion and a deepening of social cleavages. The vulnerabilities of the female population are serious handicaps in their success and professional progress. At certain points and under certain circumstances in the past three decades, conditions were created for an important promotion of female employment. Economic modernization led to relative political liberalization and an increase and enlargement in scholarization, both contributing to greater equality of opportunities. With the revolution of April 1974, the general improvement in labour conditions was much more favourable to men than to women: a major increase in female unemployment in the second half of the 1970s was accompanied by a stabilization of male unemployment at very low levels. Equality between men and women in the labour market increased, although it was an equalization based on negative terms. In the 1980s, both groups became subject to greater instability, an increasing precariousness of contracts and decreases in real wages

Immigration, Clandestine Work and Labour Market Strategies: The Construction Sector in the Metropolitan Region of Lisbon

This article discusses the role of foreign workers in the Portuguese labour market, relating the recent changes in the labour market with the need for foreign workers to satisfy the demand in some sectors. Focusing on the secondary labour market, namely in the sectors that require temporary and flexible work (such as construction and public works), an overview is presented of the strategies supporting clandestine work. Using the example of the construction sector in the Metropolitan Area of Lisbon, the role of diverse agents (firms, sub-contractors, workers, state institutions and trade unions) in this network of informal labour is discussed – as well as the different forms of vulnerability to which the foreign clandestine workers are exposed.

The Impact of 1970s Repatriates from Africa on the Portuguese Labor Market

The Impact of 1970s Repatriates from Africa on the Portuguese Labor Market

The Impact of 1970s Repatriates from Africa on the Portuguese Labor Market

This paper examines the labor market effect of the retornados who immigrated to Portugal from Angola and Mozambique in the mid-1970s following Portugal's loss of its African colonies. The retornados increased the Portuguese labor force by roughly 10% in just three years. Two analyses suggest contrasting conclusions. First, comparisons of Portugal with Spain and France indicate that any adverse effect of the retornados was quantitatively swamped by the Europe-wide downturn in labor market conditions in the 1970s. Second, comparisons between districts within Portugal indicate that the retornados may have had a strong adverse effect on Portuguese wages, suggesting that immigration may be considerably more harmful than previous case studies have concluded. The authors, however, regard the results of the within-Portugal analysis as less reliable than those of the comparison across countries.

Hysteresis and sluggishness in Portuguese unemployment, 1977–88

The phenomenon of unemployment persistence led to the development of alternative theories of unemployment. Among these the ‘hysteresis’ concept by Blanchard and Summers (1987) received a wide interest. Based on this notion we developed a generalized model that nests Blanchards and Summers' theory. Using this framework we conducted an empirical investigation for the Portuguese labour market (1977–88). The results obtained point towards the existence of labour demand sluggishness, wage inertia and unemployment hysteresis. The model also suggests the existence of a rather inelastic labour demand curve.