LISBON (Reuters) — Portugal's government will force through an increase in the minimum monthly wage to 530 euros (C$810) from 505 euros, shrugging off objections from business leaders who say companies need incentives to accommodate the extra cost.
Jose Vieira da Silva, Labour Minister in the Socialist government that took office last month, said on Tuesday the minimum wage would rise on Jan. 1 by decree, even though employer groups and unions have failed to reach an agreement in their traditional bargaining process.
He said the government was open to further discussions with companies to help them absorb the increase, but for now there would be no reduction in their social security contributions, which business leaders had pressed for.
"Workers have to earn more, but companies cannot be overloaded with charges of this magnitude, which they cannot absorb overnight," said Antonio Saraiva, head of Portugal's main business lobby group.
Last month Saraiva's Portuguese Business Confederation warned the government, supported in parliament by two far left parties, that the increase could undermine productivity gains made during the country's 2011-2014 international bailout, when the minimum wage was frozen at 485 euros.
It rose to 505 euros in late 2014 and the new government aims to gradually increase it to 600 euros by 2019.
Portugal's economic recovery started last year when the country completed the bailout after three years of recession.
Some economists say the Socialists' plan to end austerity and boost household incomes could fail to fuel economic growth enough for Portugal to continue cutting its debt load.
Prime Minister Antonio Costa has promised to stick to European budget guidelines, and businesses fear that means they will face higher taxes.