Portugal’s Socialist government has only been in power for a month, but it has already shown it will pursue its agenda despite a national consensus. On Tuesday, Labor Minister Jose Vieira da Silva announced that by governmental decree, the minimum wage will rise on January 1 from €505 to €530 ($580) per month. The decision comes after bargaining between the unions and business representatives earlier this month ended in failure.
The country’s business community is up in arms over the announcement, claiming it will jeopardize the country’s recovery from recession. “Workers have to earn more, but companies cannot be overloaded with charges of this magnitude, which they cannot absorb overnight,” said Antonio Saraiva, head of Portugal’s main business lobby group.
However, da Silva said the government is willing to discuss ways to help companies absorb the increase. But while Portuguese businesses have pushed for a cut in their social security contributions, as of yet that request has fallen on deaf ears.
More precise details will be ironed out over the next few days, but the public will support the populist wage increase. Most Portuguese are sick of austerity, having endured three years of it as part of a tough bailout package that ended in May 2014. As part of that fiscal tightening, the minimum wage was frozen at €485 per month, and it remained there until late 2014, when the previous center-right governing coalition raised it to the current €505.
Under the government’s original negotiating proposal, the minimum wage would be further increased in 2017 to €557, followed by €580 in 2018, and finally €600 in 2019. During the negotiations, unions said they wanted bigger increases, while businesses said raising the minimum wage could cause redundancies and slow down employment opportunities. But the government’s proposal is likely to remain the roadmap unless unions and businesses reach a different agreement, which seems unlikely anytime soon.
And some businesses are even jumping out ahead of the curve, soaking up the good P.R. that it brings. Last week the Portuguese division of German supermarket chain Lidl announced that as of January 1 it will raise its minimum full-time starting wage to €600 from the current €570. (The firm has operated for 20 years in Portugal, where it has 240 stores and 4,800 employees.) Lidl said the raise is part of “the strong social responsibility policy that is an integral part of the company strategy.”
But while austerity may bring abstract longer-term benefits, Portugal’s lowest-paid workers will surely celebrate news of the tangible wage increase, just in time for the holidays.