The State Budget for 2022 presented the Portuguese with a revision of the IRS levels, increasing the progressiveness of taxes for those earning higher salaries. Having caused general discontent with the maintenance of the tax burden borne by families, this controversy diverted attention from what is the real problem – the low level of Portuguese wages – and which illuminates a lot about the repudiation of income taxes.
According to INE, in 2020 the average monthly salary of a worker for another was around 1314 euros, corresponding to a gross annual salary of 15,768 euros. In the same year, measured in dollars and in purchasing power parities, Portugal has the 30th gross average salary among 35 OECD countries. In the European Union (EU), only Greece, Hungary and Slovakia ranked worse, while, for example, average Spanish and German wages exceeded Portuguese by 33% and 89% respectively.
Net earnings estimated by Eurostat for a single Portuguese adult without children who earned 50% of the country’s average salary stood at 8,668 euros in 2020. The same indicator amounted to 12,612 euros in Spain and 16631 euros in Germany.
Several factors have contributed to this wage debacle, which many see as a benchmark for the Portuguese economy. From the outset, the adjustment policies introduced by the troika which, following this idea, reduced Portuguese nominal wages to promote exports. Many of these maturities still fall short of pre-financial crisis levels. Then, the tiny amounts of Portuguese salaries, higher only than the most recent EU Member States and equivalent to 64% of average wages, one of the highest proportions in Europe (Eurostat).
But where Portugal comes out worse in photography and in the absence of policy measures aimed at reversing the situation. Policies to promote wage increases are not designed and, in areas where the State can set an example, it chooses to withdraw from its function. The OE2022 proposal to increase civil service salaries by 0.9% is a reflection of this, seeming to give in to social pressures to punish a sector that is repeated and wrongly treated as privileged.
Interestingly, despite the idea of favoritism, public opinion shares the view that working for the public sector is anathema, being unthinkable for any young graduate created by such a professional outlet, even if a public job is considered more stable.
Feeding this vision, by giving civil servants a salary increase lower than the information, is contributing to disregard the activity carried out by the public sector – the responsibility of governments – and to treat a sector that absorbs one of the highest percentages of qualified population, but is, mainly, send a signal to the private sector that it can persist in keeping the low prices that practice. And it’s also a contributing factor to an overall loss of macroeconomic efficiency.
Building a competitive and more egalitarian society requires adjusted economic policies. It implies having the audacity to assume responsibility for the real salaries of the civil service while creating incentives for companies to promote salary increases above the national average. Achieving this goal will allow you to dispense with juggling IRS levels while looking for a desired tax revenue.