Essay on Inequality and Poverty in Portugal

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Harvey Mudd College
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Portugal minimum wage policy

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Poverty and inequality are significant social problems that Portugal has been trying to address using policies. The European economic crisis has increased the number of poor households in Portugal with the greatest affected being the youth due to high unemployment cases (Schulten, Thorsten 85). The current economic crisis experienced across the globe is the leading cause of income inequalities which lead to poor market demand in an economy and lower economic growth in Portugal (Cardoso and Pedro Portugal 875). The minimum wage policy is aimed at reducing abject poverty and income inequalities in Portugal which will increase demand and lead to economic stability in the long-term. In 2014 after a four-year freeze Portugal increased the country minimum wage by 4%. The minimum wage policy which came after negotiations with labor organizations and employers was only possible after substantial recovery of the economy and will increase the sustainability of the economy and reduce poverty (Carneiro, Anabela et al. 444-446).

Taxes and transfer payments in Portugal

Portugal uses tax and transfer payments to increase equality between high-income earners and the low-income earners in the country (Matsaganis, Manos, et al. 639). There are significant progressive characteristics of income taxes in Portugal. Garcia, Jose Luis, et al. notes that the government tax policy ensures that the high-income earners are more taxed than the low-income earners which have enabled the low-income earners to be able to stimulate demand for goods and services in the country economy. The high-income earners are accounts for the highest percentage of the overall taxes with the highest income earners paying three times the amount paid by the low-income earners (Arnold and Carlos Farinha 13). This approach has been significant in reducing income inequality.

Portuguese GMI

The Act no. 19-A/96, 29 June created the guaranteed minimum income for the Portuguese people. The guaranteed minimum income has been in effect for a decade now, and it guarantees a minimum income for the people (Petmesidou, Maria, and Christos Papatheodorou 131). The GMI is a right to the Portuguese people, and it is not dependent on any discretionary decisions by employers. Pereirinha, Jose Antonio, and Maria argues that the program aims at providing the low-income earners who are above 18 years social and economic autonomy to encourage them to participate in the economic growth of the country. In 2001 reports show that 32 percent of those that were previously approved to benefit from the GMI have been discontinued after attaining an income above the minimum threshold. This report shows that the MGI has been effective in eradicating poverty and increasing income equality in Portugal (Borosch et al. 768).

Work Cited

Arnold, Jens, and Carlos Farinha Rodrigues. "Reducing inequality and poverty in Portugal." (2015). Pp 13

Borosch, Nikola, Johanna Kuhlmann, and Sonja Blum. "Opening up opportunities and risks? Retrenchment, activation and targeting as main trends of recent welfare state reforms across Europe." Challenges to European welfare systems. Springer International Publishing, 2016. 769-791.

Cardoso, Ana Rute, and Pedro Portugal. "Contractual wages and the wage cushion under different bargaining settings." Journal of Labor economics 23.4 (2005): 875-902.

Carneiro, Anabela, Pedro Portugal, and Jose Varejao. "Catastrophic job destruction during the Portuguese economic crisis." Journal of Macroeconomics 39 (2014): 444-457.

Garcia, Jose Luis, et al. "Mapping cultural policy in Portugal: From incentives to crisis." International Journal of Cultural Policy (2016): 1-17.

Matsaganis, Manos, et al. "Mending Nets in the South: Antipoverty Policies in Greece, Italy, Portugal and Spain." Social Policy & Administration 37.6 (2003): 639-655.

Pereirinha, Jose Antonio, and Maria Clara Murteira. "The Portuguese welfare system in a time of crisis and fiscal austerity." Challenges to European welfare systems. Springer International Publishing, 2016. 587-613.

Petmesidou, Maria, and Christos Papatheodorou. Poverty and Social Deprivation in the Mediterranean: Trends, Policies and Welfare Prospects in the New Millennium. Zed Books, 2006. 131 133

Schulten, Thorsten. "European minimum wage policy: A concept for wage-led growth and fair wages in Europe." International Journal of Labour Research 4.1 (2012): 85.

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