In real terms, the mean wage in the private sector in Portugal observed an average annual growth of 1.0% in the period 2006-2020 – slightly lower than the median wage (1.2%). In this period, there was also a reduction in wage inequality, with a significant increase in the lower percentiles. The 10th percentile of the real wage distribution recorded an average annual growth higher than the 90th percentile (2.3% and 0.5%, respectively), translating into greater wage compression.

The significant increase in the national minimum wage contributed to the compression of the wage distribution in this period. As a result, wage inequality, as measured by conventional indicators, declined between 2006 and 2020. The ratio between the 90th and 10th percentiles of the real wage distribution fell significantly, from 4.1 in 2006 to 3.2 in 2020. This reduction was more marked on the left tail, with the 10th percentile as a percentage of the median increasing from 61% to 71%.

For more details see the Special Issue “The wage distribution in Portugal in the period 2006-2020”, published in the Economic Bulletin of Banco de Portugal, March 2023.

Prepared by Fernando Martins, Domingos Seward and Marta Silva. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.

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