Observation (CEACR) - adopted 2012, published 102nd ILC session (2013)

Minimum Wage Fixing Convention, 1970 (No. 131) - Portugal (Ratification: 1983)

Articles 3 and 4(2) of the Convention. Elements to be taken into consideration in determining the level of minimum wages – Consultations with the social partners. The Committee notes the observations made by the General Confederation of Portuguese Workers (CGTP) and the General Workers’ Union (UGT) concerning the application of the Convention, which were attached to the Government’s report.

The CGTP indicates that the purchasing power of the minimum wage evolved positively between 2007 and 2010, following the implementation of a tripartite agreement concluded in December 2006 concerning the mid-term evolution of the minimum wage. However, according to the CGTP, the economic crisis was cited in 2011 to justify non-compliance with this agreement, and the minimum wage was not adjusted in 2012, resulting in a significant drop in its purchasing power and the loss of a proportion of the accumulated gains made between 2007 and 2010. The CGTP considers that this development is particularly important because of the high number of workers being paid low wages, because the amount of the minimum wage is close to the poverty line, and because of the gap between the minimum wage amount and the average wage in the private sector. The CGTP refers to Legislative Decree No. 143/2010 of 31 December 2010, which set the amount of the minimum wage for 2011 at €485 per month, while setting the objective of increasing the minimum wage to €500 following two evaluations which were due to take place in May and September 2011. The CGTP alleges that the planned evaluations did not take place and that the social partners were not consulted in May and September 2011. According to the union, it was only in May 2012 that the matter was discussed within the Standing Committee on Social Dialogue (CPDS), without any decision being taken regarding the adjustment of the minimum wage. The CGTP considers that the difficult economic context does not make revision of the minimum wage any less necessary. On the contrary, in addition to meeting the requirement of protection of the least paid workers, an increase of the minimum wage would constitute a means of fostering economic growth by supporting internal demand.

In its observations, the UGT also refers to the Government’s decision to set the minimum wage at €485 for 2011, emphasizing that the Government based its decision on the economic policy conditions established in the Memorandum of Understanding (MoU) concluded with the troika (European Commission, European Central Bank (ECB) and the International Monetary Fund (IMF)). The UGT affirms that the evaluations planned under Legislative Decree No. 143/2010 were not conducted within the CPDS and that the amount of the minimum wage has been maintained at €485. It recalls that the Labour Code provides that the amount of the minimum wage shall be fixed annually by legislative means, after consultation of the CPDS, and alleges that it was only following pressure exerted by union representatives that the Government placed this matter on the work agenda of the CPDS, during a meeting which was only held in May 2012. Furthermore, according to the UGT, the Government merely informed the social partners at this meeting that the amount of the minimum wage would not be adjusted and would therefore be maintained at €485. The union considers that factors such as the needs of workers and the increase in the cost of living, and not just economic objectives, must be taken into account when fixing the minimum wage, as provided for by the Convention. The UGT considers that, in the current context of crisis, marked by the increase of poverty and exclusion, it is very important to take account of these factors. Like the CGTP, it considers that an increase in the minimum wage would have a positive impact on the internal market, this being a key element in a period of recession for reviving growth and developing or maintaining employment.

In its reply, the Government indicates that the high unemployment rate that currently exists in the country constitutes the main obstacle to increasing the minimum wage. The Government refers to a study published in September 2011 by the Universities of Porto and Minho, the conclusions of which report a negative impact on employment of the increases in the minimum wage since 2006, particularly for the most vulnerable categories of workers, and which emphasizes that immediately increasing the minimum wage to €500 would result in a reduction in the employment rate of between 0.01 and 0.34 per cent.

The Committee also notes a study published in January 2012 by the Bank of Portugal on the impact of the minimum wage on the lowest paid workers, which also underlines the negative impact on employment of the recent increases in the minimum wage and, because of the greater staff turnover in companies, their detrimental effect on productivity, training and corporate progress in the internal labour market. The Government further refers to the extreme fragility of the Portuguese labour market, which features a high rate of unemployment and a significant percentage of newcomers to the labour market who are earning the minimum wage. The Government indicates that the decision relating to the fixing of the minimum wage is preceded by a hearing held with the social partners within the CPDS. It explains that the amount of the minimum wage was frozen in 2012 in the context of the financial assistance programme which was the subject of the agreement between the Portuguese Government, the European Commission, the ECB and the IMF. However, the Government asserts that the above considerations do not mean that it considers this subject any less relevant and it has proposed to the CPDS, as follow-up, to conduct a study on the evolution of the minimum wage for 2013.

The Committee notes that the Government, faced with the worsening financial situation of the country, requested and obtained financial assistance from the European Union and the IMF, and that the MoU establishing an economic adjustment programme for the 2011–14 period was concluded on 17 May 2011. It notes that, under the terms of the MoU, the Government undertook, in return for the financial aid granted, to only make increases in the minimum wage if the latter were justified by changes that had occurred in economic and labour market terms, and only after the conclusion of an agreement to this end as part of a review of the financial assistance programme. The Committee notes that the Government, as part of the implementation of the MoU, decided to increase the amount of the minimum wage to €485 for 2011 – and not to €500, as had been agreed in a tripartite agreement concluded in 2006 – and to freeze this amount for 2012.

The Committee is fully aware of the significant economic difficulties currently faced by the Government and notes the conclusions of the economic studies attached to its report describing the negative impact on employment caused by the latest increases in the minimum wage. However, the Committee wishes to recall that “minimum wage fixing should constitute one element in a policy designed to overcome poverty and to ensure the satisfaction of the needs of all workers and their families”, as emphasized in the Minimum Wage Fixing Recommendation, 1970 (No. 135), which complements Convention No. 131. It notes from the information sent by the Government in its report that the percentage of full-time workers who are paid the minimum wage increased from 6 per cent in 2007 to 11.3 per cent in 2011, and that decisions taken with regard to the minimum wage therefore have an impact on a large number of workers.

The Committee recalls that Article 3 of the Convention requires that the elements to be taken into consideration in determining the level of minimum wages must include not only economic factors, such as employment policy objectives, but also the needs of workers and their families, taking into account the general level of wages in the country, the cost of living, social security benefits, and the relative living standards of other social groups. The Committee further recalls that the Global Jobs Pact, adopted by the International Labour Conference in June 2009 in response to the global economic crisis, underlines the relevance of ILO instruments relating to wages, in order to prevent a downward spiral in labour conditions and build the recovery (paragraph 14), suggests that governments should consider options such as minimum wages that can reduce poverty and inequity, increase demand and contribute to economic stability (paragraph 23), and asserts that, in order to avoid deflationary wage spirals, minimum wages should be regularly reviewed and adapted (paragraph 12).

The Committee considers that the fixing of fair minimum wages, in concertation with the social partners, constitutes a key element of the Decent Work Agenda and contributes to achieving the objectives of social justice and peace and the prevention of unfair competition, which the ILO has pursued since its creation. Moreover, as underlined by the Global Jobs Pact, the regular adjustment of minimum wages in the context of economic crisis can avoid deflationary wage spirals and promote economic recovery as a result of stimulation of demand. In any case, the Committee stresses the fundamental nature of the principle of full consultation and direct participation, on an equal footing, of the social partners in the application of the minimum wage fixing machinery. This principle should be observed under all conditions, since the implementation of an economic adjustment programme or, in more general terms, an austerity policy in response to a crisis situation cannot release governments from their responsibilities in this field. On the contrary, the principle of full consultation and direct participation of the social partners assumes particular importance in periods of economic and social crisis, owing to the considerable repercussions that decisions relating to the fixing and periodic adjustment of minimum wages are likely to have on economic policy, including employment policy, and the purchasing power of workers. Open and constructive social dialogue facilitates the adoption of balanced measures to ensure a fair division of the efforts to be made to overcome the crisis, thereby promoting support for reforms and the maintenance of social cohesion. The Committee therefore hopes that the Government will conduct useful and effective consultations with employers’ and workers’ organizations represented within the Standing Committee on Social Dialogue before taking any decisions regarding the possible readjustment of the amount of the minimum wage, and that it will take full account in its decision-making as much of the needs of workers and their families as of economic policy objectives.

Article 2(1). Binding force of the minimum wage. The Committee refers to its previous comment, in which it noted that the penalties established by Act No. 35/2004 issuing implementing regulations for the Labour Code of 2003 did not apply to infringements of the provisions of this Act establishing minimum wage rates for apprentices, trainees and workers with reduced working capacity. It notes that the UGT asserts in its observations that Act No. 7/2009 of 12 February 2009 issuing the new Labour Code still makes no provision for penalties in the event of failure to apply the minimum wage applicable to apprentices, trainees and interns, which is 20 per cent lower than the minimum wage applicable to other workers. The UGT considers that section 275 of the Labour Code of 2009 should be amended in order to provide for specific penalties for failure to observe the minimum wage applicable to these categories of workers. The Committee requests the Government to specify what penalties are applicable for failure to comply with section 275(1) of the Labour Code. If such penalties are not provided for by the Labour Code, the Government is requested to indicate the measures that it is contemplating in order to ensure that the workers concerned are not paid wages lower than the minimum fixed by this provision.

[The Government is asked to reply in detail to the present comments in 2013.]