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Cablegate: Portugal Labor Market Stagnates, Unemployment Soars

VZCZCXYZ0009
PP RUEHWEB

DE RUEHLI #3195/01 3541608
ZNR UUUUU ZZH
P 201608Z DEC 07
FM AMEMBASSY LISBON
TO RUEHC/SECSTATE WASHDC PRIORITY 6523
INFO RUEHC/DEPT OF LABOR WASHDC

UNCLAS LISBON 003195

SIPDIS

SIPDIS

Labor for Brumfield

E.O. 12958: NA
TAGS: ELAB SMIG PO
SUBJECT: Portugal Labor Market Stagnates, Unemployment Soars


1. (U) Summary: Portuguese labor union and employers' organizations
agree that three main considerations affected Portugal's labor
markets: immigration, labor laws, and training/education
opportunities. Labor union representatives stress that the
Portuguese government's push towards "flexicurity" is at the center
of current labor concerns and poses a threat for the future
well-being of workers. That this is true even though the Socialist
Party is currently in power makes organized labor feel politically
isolated. The employers' association countered that the current
regulations left employers ham-strung and unable to adapt to the
demands of globalization. End summary.

2. Over the last several years, Portugal has faced a large spike in
unemployment (from 4.1 to 8.5 percent in six years according to
Eurostat figures) and has struggled to keep up with other EU member
States. Portuguese labor union and employers' organizations agree
that three main considerations affect Portugal's labor markets:
immigration, labor laws, and training/education opportunities.

Immigration
-----------

3. (U) In response to questions about the makeup of the Portuguese
workforce, General Worker's Union (UGT) Director Secretary General
Joao Proenca said that immigrants played an increasing role and now
accounted for roughly 10 percent of Portugal's active workforce. He
viewed the trend as positive overall, both for the immigrants and
for the Portuguese who had already moved away from the domestic
service and construction industries. Portuguese Industry
Confederation (CIP) President Francisco Van Zeller mentioned that
Portugal's immigrant community tended to be fairly well educated and
able to integrate quickly. Van Zeller noted that CIP was pressing
the Portuguese government to consider adding temporary or seasonal
visas to allow for the growing demand for immigrant labor. He
predicted that immigrant labor would become increasingly important
given Portugal's low birth rate.

Labor Laws
----------

4. (U) The General Confederation of Portuguese Workers (CGTP)
National Council Director Armando Farias stressed that Portuguese
workers faced worse conditions, higher unemployment, and greater
instability than in recent history. Farias offered the unemployment
rate, currently 8.5 percent, up from 4 percent in 2001, as an
example. He said the pressure was to maintain low wages, but that
Portugal could not win a "rush to the bottom." He proposed
increased government investment in public infrastructure and an
attempt to establish a national solution to problems rather than an
EU-wide approach.

5. (U) Proenca agreed that the labor laws needed adjustment, but
suggested that a realistic approach to reduce the informal economy
was the place to begin. He stated that roughly 20 to 30 percent of
Portugal's workforce do not pay taxes and avoid government
institutions. Given the lack of transparency in the informal
sector, Proenca claimed that workers' rights were undermined by the
clandestine labor force.

6. (U) Van Zeller said that employees think the labor laws were not
flexible enough to allow Portuguese companies to be competitive in
the global market. Praising "flexicurity," the Portuguese policy to
make labor laws more adaptable, Van Zeller proposed adaptations to
allow flexible work scheduling, geographic placement, and more
liberal termination terms. He commented that the Portuguese economy
was made up of Small and Medium Enterprises (SMEs) and could best
legislate by sector rather than using the same rules across the
economy. He conceded, however, that if the labor laws allowed too
much flexibility then the small enterprises might band together and
set the terms, locking the labor unions out of negotiations.

Training/Education
------------------

7. (U) Van Zeller asserted that corporate training usually tried to
reach everyone and therefore failed to reward excellence and improve
competitively. Another barrier to training was that SMEs could not
afford to have their workforce in training for long periods of time
the way larger companies could. He judged that Portugal had fallen
about 10 years behind other EU nations and said even some new EU
members enjoyed a better trained workforce.

8. (U) UGT's Proenca expressed the most concern about the lack of
training among Portugal's workforce. He stated that the average
Portuguese worker was trained on the job rather than in the
classroom. Although the on-the-job training offered usable skills,
it was more difficult for workers to transfer without more formal
education. The European Union agreed to fund a technical training
program for Portugal since the vocational skill set of Portuguese
workers was, on average, 75 percent lower than the rest of the EU,
according to Proenca. CGTP acknowledged that the gap between
Portugal and other EU nations was worrying, but stressed that the
labor law was the most pressing concern.

Aging Workforce
---------------
9. (U) Both UGT and CIP officials raised concerns about Portugal's
aging workforce. CIP's Van Zeller said it was important to keep
older workers in the workforce and suggested an increase in the
retirement age from the current 62 to 65. He also discussed social
security reform and noted that the current system would collapse
within a decade if not adjusted. Portugal has one of the lowest
birth rates in Europe, according to Van Zeller, and immigration was
not enough to compensate. Both Proenca and Van Zeller stressed that
the current system was not sustainable, and confirmed the need for
additional reforms.

Agree to Disagree
-----------------

10. (SBU) Comment: Although each of the three groups hoped for
improvements in the current labor outlook, and agreed on the
importance of the immigrant presence, they remained in conflict on
other issues. "Flexicurity" was a particularly sensitive issue for
the interlocutors and they did not agree on what the plan aimed to
accomplish or even how the process would work. Portugal is unlikely
to face the kind of turmoil that France faces over labor issues, but
is similarly divided on the best way forward given current demands
on the budget and the isolation of organized labor as a political
force.

STEPHENSON

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