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ILO report says additional measures needed to tackle Portugal jobs crisis

With unprecedented levels of unemployment and declining investment, a new ILO report describes the socio-economic situation of the country as “critical”.

News | 04 November 2013

GENEVA (ILO News) – One in seven jobs has been lost in Portugal since the start of the global crisis in 2008, says a new report, "Tackling the jobs crisis in Portugal", by the International Labour Organization (ILO.

A large part of this deterioration has occurred since the start of the financial assistance programme in 2011, with young workers and families with small children disproportionately affected.

The report describes the socio-economic situation in the country as “critical,” marked by unprecedented levels of unemployment, a drastic decline of productive investment and an economic recovery that is likely to be too weak to make a significant dent in the jobless figures.

“Much of the policy action so far has focused on reducing fiscal deficits and boosting competitiveness,” says Raymond Torres, head of the ILO’s Research Department.

According to the report, new policies are needed to tackle the negative trends. Its findings will be discussed at a high-level ILO conference in Lisbon on 4 November.

“Cuts in wages and welfare programmes, combined with tax increases, have eroded family incomes and domestic demand. Small- and medium-sized enterprises struggle to find credit, which means lost opportunities for job creation,” Torres explains.

Facts & figures
  • Unemployment is at a historic peak of over 17 per cent and has stabilized recently.
  • One in seven jobs has been lost since 2008, two thirds of them over the past two years alone.
  • 56 per cent of job seekers, without work for more than a year, are losing skills and motivation.
  • Many workers have been pushed into emigrating – including some of the most talented and qualified young people.
  • The cost of borrowing for Portuguese enterprises is 5.5 per cent, compared with two per cent in Germany.
  • Exports to non-European countries grew by over 30 per cent in 2012.
  • Portuguese enterprises can quickly respond to higher internal demand and exports, should credit conditions be restored.
  • There is a fruitful tradition of social dialogue in the country.
“The report shows that it is possible to reduce fiscal deficits and curb unemployment at the same time, instead of favouring one target at the expense of the other.”

New approach

There has been some renewed economic activity recently– supporting IMF projections of an economic recovery in 2014 – but a series of new measures are needed because of the weakness of that recovery.

It is not a matter of going back to pre-crisis policies. The economy was already showing signs of stagnation since the end of the 1990s. A new, job-centred approach to the crisis could include a number of key measures, such as:
  • Improved credit conditions for viable small firms. The establishment of a Eurozone “banking union” would trigger a move towards sustainable investments and job recovery.
  • Measures should be put in place to help small firms grow into medium-sized enterprises that would be able to compete in new export markets. A major investment programme, possibly including participation of the European Investment Bank, would be instrumental in achieving this.
  • Well-designed labour market institutions should be established which would support job-seekers, workers and enterprises.
  • Special programmes for disadvantaged groups such as young people and jobless households should be launched - including youth guarantee schemes to help young people enter the labour market. These policies can be aided by existing institutions in Portugal.
  • Apprenticeships, work experience and internships should be promoted and new partnerships established between educational institutions, enterprises, worker representatives and young people themselves.
  • Social partners need to be key actors in the world of work so balanced solutions can be found. This can build on the long tradition of fruitful social dialogue in Portugal.
“Some of these policies will cost the public purse, but they would be short-term and would kick-start the job recovery process,” Torres says.

“The ILO can provide technical expertise to help the Portuguese government and its social partners put in place programmes that are suitable to their specific needs.”

The high-level conference, “Tackling the jobs crisis in Portugal: Which ways forward?” takes place in Lisbon on 4 November and will be attended, among others, by Portugal’s Minister of Solidarity, Employment and Social Security, Pedro Mota Soares, the ILO Director-General, Guy Ryder, and representatives from employers’ and workers’ groups.

Tags: labour economics, employment

Regions and countries covered: Europe and Central Asia, Portugal

Unit responsible: Department of Communication (DCOMM)

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© Patricia de Melo Moreira / AFP 2014
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