Productivity further away from the European average and salary only rising for the least qualified

The picture is not pretty and has gotten worse over the past ten years. Portugal is one of the lowest-income countries in the European Union and has seen real wage losses at virtually all levels, except among the least qualified countries. And the average productivity deviates more and more from European standards. Between 2011 and 2019, the average salary of the Portuguese increased only for workers with basic training, in the order of 5%, as a result of the increase in the minimum wage by decree-law and through collective bargaining. And all of this stems from a historic productivity problem in the country. Without it wages cannot rise sustainably; and there is no productivity without qualifications, so it is essential to invest in lifelong training, conversion and skill acquisition.

These are some of the main conclusions of the State of the Nation on Education, Employment and Skills in Portugal, presented today at the annual event of the José Neves Foundation, which establishes the correlation between education levels and the productivity of the country.

Read the full report here

“There are different returns that can be obtained from education: the best salary from the start, but also social and welfare benefits, etc. And we need different education bets for different generations, we need to accelerate qualifications,” summarizes Carlos Oliveira to the DN . For the President of the José Neves Foundation (FJN), the effect of requalification, of training in the past year is positive, but still comes from the most qualified. “Those who have fewer skills don’t increase them and that’s worrying.” This is why the FJN outlines a set of ambitious goals for 2040, including education incentives that “can ensure a more prosperous future for Portugal and for the Portuguese”.

The goals are ambitious: to place Portugal in the top 10 of the EU countries with the most jobs in technology and knowledge; at least 25% of adults participate in lifelong education and training; have a maximum of 15% adults (25 to 64 years) with a low education (currently 40.5%) and a minimum of 60% young adults with a higher education (47.5%); and to help 90% of young graduates find a job.

“It’s about putting training topics on the agenda from the right angle,” explains Carlos Oliveira, anticipating the need to discuss what needs to be done, which programs and models are most appropriate. “Education in 2022 is the same as it was in 1950, it has evolved little; change is not about bringing computers into the equation, it is about deep discussions about models and competencies that are fundamental, namely soft skills, communication, more practices, together with the acceleration of digitization for the work of the future.This starts individually, with the demand, to bring those who never went to university to university, to get a dual education, more technical and closer to the labor market. And targets that are achievable, that focus on investing in qualifications in the needs of the labor market, for the best use of qualifications.”

At a time when there are no occupations to live on and it is more important to provide a range of skills that give access to career clusters, the aim of this State of the Nation is not only to detect the diagnosis, but also to pointing out a path that can improve the prospects of the Portuguese and contribute to increasing the country’s prosperity and growth. For which the FJN itself has set up a scholarship program that is aimed at improving and increasing skills and that is already bearing fruit.

“We’re Almost One” unfoundedwe have launched grants such as Brighter Future and the Mental Health Program, among others, and we believe there is a need to launch a more integrated vision to see where it is necessary to bet,” explains DN, the chairman from the foundation, from. we do and we are happy to make this contribution to come to conclusions that, although not all new, are based on data and help in setting goals. It is a work that we think is necessary and involving the University of Minho and Aveiro, and that allows us to look further, for example by finding a relationship between the return on education and well-being.”

More qualifications, a better life and productivity

Carlos Oliveira points out some of the parameters in which Portugal has to work and wages, which are directly related to productivity levels, are one of the most urgent. Especially if we look at what has happened in the last decade: since 2011, real income loss has risen to 11% among workers with higher education and was 3% for those with secondary education, with the scenario worsening for the youngest , with -15% for graduates, -12% for masters and -22% for doctorates.

“There are five EU countries where less skilled workers earn less than highly skilled workers in Portugal and in another 13 workers with secondary education are ‘richer’ than our graduates”, the official emphasizes, stressing that, despite everything, one higher average qualification level is always better rewarded.

What is happening is a reflection of the increase in the National Minimum Wage (SMN) without the other levels following the evolution, given the successive crises and cyclical portraits, leading to the narrowing of the gap between the highest paid and the least qualified . “It’s good that the SMN has gone up, and it needs to go up even more – if a company can’t afford a decent wage, it may not have the conditions to exist,” says Carlos Oliveira. And remember: not offering good working conditions to workers also leads to emigration and when this becomes systemic rather than cyclical, the country loses talent. There is an urgent need to work on the productivity of the economy in order to raise the bar. And productivity is directly related to qualifications.

Despite the average salary in 2019 being below 2011 for most levels of education, the salary gains of the most qualified Portuguese compared to the less qualified are notorious: a diploma translates into a salary gain of 50% compared to secondary and master, the difference rises to 59%. “Salary bonuses are also seen in young adults (aged 25 to 34) and it is the master’s degrees that provide a higher salary return, with gains of 43% compared to secondary education and 15% compared to degrees,” it reveals. research by FJN, in addition to improving job prospects (16%) and in better positions. “The opportunity to belong to the 40% of the population with the highest income increases by 50%” for graduates.

If better qualifications are a guarantee for better employment and wages, there is also this positive link between wages and the productivity of countries. Only a sustained increase in productivity will lead to increases. “Productivity in Portugal has lost ground compared to the European average, and even the rise in the qualifications of the younger generations has not reversed the trend. In 2019 we were the 6th country with the lowest productivity – only above Romania, Poland, Latvia, Greece and Bulgaria – and since 2000 it has never exceeded 70% of the European average (the last time was in 2013)”, reaching the pandemic at 66%.

Income is among the lowest and young people suffer the most

In 2019, the annual income of the Portuguese in purchasing power parity was €13,727, the 7th lowest in the EU, and did not reach €11,000 per year for the Portuguese who stuck to the basics (10th lowest of 27). “With a superior, the average income did not exceed €19,755 (the 8th lowest in the EU).”

How to reverse this trend and improve the prospects of the Portuguese people? Starting from conclusions such as the fact that companies with more qualified personnel are more productive, but at the same time it is necessary to “adjust qualifications and professions”. Companies’ commitment to educating employees “may increase productivity by 5%, but only 16% of them do.”

It appears that young people are increasingly qualified, but that is only reflected in productivity when they “have a weight of more than 40% in the total number of employees”, it is concluded. However, this integration of higher-educated young people has suffered enormous damage during a pandemic: “In 2021, only 74% of young people aged 20 to 34 had completed an education in the past three years.”

There is also the problem of managerial qualifications, in which almost no investment has been made, with the country having the highest percentage of employers who have not completed secondary education. “In 2021 this was the case for 47.5% of employers, practically three times the European average (16.4%)”