Potential Portuguese growth does not match wage convergence

in News · 06-03-2020 01:00:00 · 0 Comments

The European Commission has said that, despite the potential Portuguese growth being above the average of the euro zone, “this has not translated into a convergence in income with more advanced member states”.

In an economic analysis report prepared as part of the winter package for the European semester, the European Commission stresses that “the strong economic performance in recent years has a positive impact on the estimated potential growth”.
“However, this did not translate into a convergence with the more advanced member states, as Portugal’s ‘per capita’ income in purchasing power parity (PPP) remains around 77 percent of the European Union average [EU ]”.
The report even notes that “this development differs significantly from other recovering economies”, since “per capita” income in PPC for the ten countries that joined the EU in 2004 is already at the same level as Portugal, overcoming a difference around 17 percentage points in 15 years”.

In Portugal, “wage growth is moderate, but has been increasing slowly, as labour market reserves have declined”, and wages per worker have gone from 1.2 percent growth in 2018 to 2.7 percent in 2019.
In terms of income inequality, Brussels notes that it “continues to decline”, but “some indicators remain below the EU average”.
“The proportion of people at risk of poverty or social exclusion also continued to decline, from 23.3 percent in 2017 to 21.6 percent in 2018. This led to it being slightly below the EU average of 21.9 percent for the first time. However, the risk of poverty for the elderly is still a cause for concern and the inequality of opportunities in education also remains high”, says the European Commission.
Wage inequality is now in line with the Union average, with the income ratio of the richest 20 percent to the poorest 20 percent at 5.2, “below the 6.4 peak in 2014”.
“This recent improvement was mainly due to an increase in the income share received by the lower part of the distribution, possibly related to the improvement in labour market conditions, the impact of the recent increases in the minimum wage on the lowest incomes and the improvement of the adequacy of some benefits”, highlights Brussels.


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