Towards a more competitive labour market in Portugal : Insights from a firm-level survey

Abstract

This article reports the findings of a survey conducted in 2014/2015 on a sample of Portuguese firms with the main purpose of identifying the major shocks faced by firms during the recent crisis and detecting their response in terms of wage-setting and labour force composition. Not surprisingly, given the extreme level nominal downward wage rigidity in Portugal, reducing employment was the main instrument to accommodate negative shocks, in particular through the freeze or reduction of new hires, non-renewal of temporary contracts at expiration or individual dismissals. The harsh adjustment observed in the labour market between 2010 and 2013 processed mainly through increases in unemployment and reductions in employment should lead us to question the functionality of the current architecture of the wage bargaining system in Portugal. In this context, this paper ends by presenting some suggestions for the reform of wage bargaining in Portugal. (JEL: J23, J30, J50)