Speaking on the Portuguese television news show SIC Notícias, Alvaro Santos Pereira said that it was important to “realise that we will not gain sustainable productivity for as long as we have low wages”.
During his interview Alvaro Santos Pereira also said that he was postponing his announcement on the reindustrialisation of Portugal until 2013.
When it comes to low wages Portugal has to follow the rules set out by the European bank and these terms of the bailout include a reduction in the level of wages paid to people throughout the country and within all sectors.
Cutting wages may be a way to save money for the government but the minister for the economy has said that he sees this measure as being one of the problems that is contributing to the poor Portuguese economy.
He said that it was “impossible to gain” in productivity and to create an environment for new businesses for as long as people were on low wages and this was hindering Portugal from competing on a global level with other countries.
“I think the wages in Portugal are too low,” said Alvaro Santos Pereira during the televised interview.
He added: “I think it is important for us to realise once and for all that we will not gain in productivity as long as we have low wages.
“Wages are too low because Portugal has failed to increase productivity levels and the wages we have maintained are too low.”
Portugal now finds itself trapped in a vicious cycle where to increase productivity in the country we need to first raise wages that are being paid but to be able to afford these wages we need to have higher levels of productivity.
The wages paid to workers in Portugal are some of the lowest in Europe and many people are earning the same or less than they did 10 years ago.
A lack of disposable income is hugely damaging to the economy of Portugal as consumers not only do not have the confidence to go out and spend money because they are unsure if they will still have their job next month, but they are also struggling to actually be able to afford anything.
During his interview Alvaro Santos Pereira did not offer any solution to this problem, one which is felt particularly in the Algarve region of Portugal where seasonal work lowers yearly income significantly and short term contracts with low wages are common.