March 12, 2019 / 10:51 AM / in 14 days

Job insecurity weighs on Portuguese growth prospects

LISBON (Reuters) - Portugal’s jobless rate has tumbled from record highs as it recovers from an economic crisis, but with more than one in five workers on temporary contracts, insecurity of employment is increasingly acting as a drag on growth.

A person is seen in Orient Station terminal, in Lisbon, Portugal, February 28, 2019. Picture taken February 28, 2019. REUTERS/Pedro Nunes

The situation has led Prime Minister Antonio Costa’s government to promise restrictions on the use of non-permanent contracts, which are most prevalent in the services sector that represents some 65 percent of Portugal’s gross domestic product.

“The main limitation to the growth of Portuguese companies now is not financial but constraints on human capital,” said Joao Cerejeira, a labor market researcher at Minho University.

Nuno, an IT expert, was hired on a temporary contract in 2011, working up to 12 hours a day at a call center on a salary of 660 euros ($746) per month — just above the minimum wage, and with no health insurance or benefits.

“We were treated like numbers,” said the 30-year-old, who did not want to give his full name.

He was one of about 890,000 Portuguese whose employment status last year was officially described as precarious, a term used to refer to non-standard forms of employment, including temporary work and fixed-term contracts.

According to Eurostat, some 22 percent of Portuguese jobs are classed as temporary, well above the European Union average of 14.3 percent and second in western Europe only to neighboring Spain’s 26.7 percent.

Economists see such job insecurity as a key flaw of the economy, which recorded its strongest expansion in almost two decades in 2017 as Portugal recovered from a debt crisis that required an international bailout, but is now cooling.

The crisis wiped out 700,000 jobs between 2008 and 2013, when the jobless rate peaked at more than 17 percent. Unemployment has since been slashed, to just under 7 percent last year, a 14-year low.

Costa’s Socialist government takes pride in the fact that 321,000 new jobs have been created since it came to power in late 2015 pledging to reverse many austerity measures imposed under the 2011-14 bailout.

But the number of non-permanent contracts has grown by almost 10 percent in the same period, to 890,000 in 2018, the same data from the National Statistics Institute show.

“We are increasingly precarious, we have less rights and we are poorer,” said Alexandra Martins. The 44-year-old says she is suffering from physical and emotional burnout after five years working at a call center.

The International Labour Organisation (ILO) said in a report in October that the quality of jobs in Portugal remained low while the labor market is heavily segmented, with stable and secure jobs rationed, especially for the young.

Maurizio Bussi, ILO regional director, said that over 60 percent of those under 25 in the country are employed on temporary jobs, which do not provide the same benefits and protections as regular jobs. He also pointed to a “persistence of temporary employment contracts characterized by precarious conditions”.

Experts say the labor situation is discouraging hundreds of thousands of Portuguese who emigrated during the crisis from returning home.

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The minimum wage of 600 euros a month, compared with 1,050 euros in Spain, also makes the country unattractive to workers from most European countries, says Cerejeira.

The government is aware of the problem and plans to reduce “excessive” use of non-permanent contracts, and make it illegal for companies to hire first-time job-seekers on fixed-term contracts when they in fact need to fill a permanent position.

“For us precariousness is a structural issue in our job market and it is our priority to tackle it,” Secretary of State for Employment Miguel Cabrita told Reuters.

Reporting by Catarina Demony; Editing by Andrei Khalip and Catherine Evans

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