Real wages have recovered from inflation crisis
However, the OECD warns that geopolitical instability and rising tariffs could reverse these gains, weakening labour markets and reigniting inflation.
Portugal is among a group of OECD countries where real wages have finally surpassed pre-inflation levels, according to the OECD Employment Outlook 2025, released this Wednesday.
From the first quarter of 2021 to the same period in 2025, Portugal’s average real wage rose by 1.8%.
Although this growth is below the OECD average of 2.4%, it marks a significant recovery, placing Portugal outside the group of 18 countries where real wages remain lower than before the inflation crisis.
Countries like Turkey (69.3%), Hungary (13.5%), and Costa Rica (12.6%) saw the highest increases. By contrast, in places like Australia, New Zealand, and Spain, real wages are still more than 3% below early 2021 levels.
Potential risks
However, the OECD warns that geopolitical instability and rising tariffs could reverse these gains, weakening labour markets and reigniting inflation.
Employment growth may also slow down, easing the post-pandemic labour shortages employers have faced.
In response, the OECD calls for robust social and employment policies, including unemployment insurance, social assistance, and active labour market programs, to cushion potential shocks.
The report also highlights the need for long-term structural reform.
With people living and working longer, policies must support older workers through inclusive hiring, age-friendly workplaces, and flexible job options.
Lifelong learning should become a central pillar of employment policy, especially as technology reshapes the labour market.
Low living standards
Despite this moderate wage recovery, a separate study by Gisma University of Applied Sciences paints a sobering picture of living standards.
In most EU countries, the minimum wage is not enough to meet basic living costs, and Portugal ranks among the worst.
In Portugal, the minimum monthly net wage is far below the cost of living.
A single adult needs an estimated €1,620.22 to cover rent and essentials, but the minimum wage leaves a shortfall of €717.22.
The situation is even more critical for families: in a household of four, the average income is insufficient in 16 EU countries, with Portugal in the top three for the largest deficits, trailing only Malta and Greece.
European perspective
Only Belgium provides a minimum wage that covers the monthly cost of living for a single adult.
Meanwhile, countries like Denmark, Sweden, and the Netherlands report income surpluses.
“This study highlights a frequently overlooked reality,” said Gisma University President Ramon O’Challaghan.
“In much of Europe, earning minimum wage is not enough to live. This is not just an economic issue, it’s a matter of access and opportunity, especially for young people starting out.”
The analysis is based on Eurostat and OECD data, as well as national statistics, considering net incomes from full-time jobs (40 hours per week) and local cost-of-living data.
Sources: Sapo, Lusa, OECD