This chapter explores key trends in the Portuguese labour market in recent years, including prevailing labour market challenges and disparities faced by some groups. This chapter also considers the system of active labour market policies (ALMPs) in Portugal, including the institutional set-up of ALMP provision, role of social partners and trends in public expenditure allocation in recent years. Finally, the chapter explores knowledge generation surrounding ALMPs in Portugal, which to date does not feature a systematic approach.
Impact Evaluation of Active Labour Market Policies in Portugal
Connecting People with Jobs
Abstract
This chapter examines key trends in the Portuguese labour market and provides an overview of the functioning of active labour market policy (ALMP) provision in Portugal. In doing so, it provides context for the chapters that follow on the counterfactual impact evaluation of the Estágios ATIVAR.PT internship programme implemented by the Portuguese Government in the context of the COVID‑19 crisis.
Overall, in recent years, the Portuguese labour market has faced various advances, including reductions in the unemployment rate and improvements in the employment and participation rates, which both now sit above the OECD average. In response to the COVID‑19 pandemic, the labour market proved resilient and faced one of the fast recoveries. However, the impact of this crisis was uneven, with some groups of workers, particularly young and temporary workers, feeling its effects for longer. Furthermore, various challenges still exist on the Portuguese labour market, including elevated youth unemployment, an ageing workforce and the prevalence of precarious or temporary work.
The Portuguese public employment service (PES) is an independent body under the supervision of the Ministry of Labour, Solidarity and Social Security and has responsibility for both employment services and vocational training provision within ALMP. Spending on ALMPs in Portugal is now above the OECD average. However, over the last two decades, ALMP expenditure has fluctuated considerably and currently sits below previous highs. Within the ALMP provision, training, PES and administration and employment incentives represent the three categories receiving the highest share of spending. In addition, evidence surrounding the effectiveness of Portuguese ALMPs is lacking, with measures largely not subject to routine or systematic impact evaluation.
Section 2.2 of this chapter provides an overview of the key trends in the Portuguese labour market in recent years, including the impact of the COVID‑19 pandemic and various prevailing challenges. Section 2.3 then examines the system of ALMP provision in Portugal, associated resourcing and the generation of evidence surrounding the effectiveness of Portuguese ALMPs.
This section provides an overview of the labour market situation in Portugal in recent years, including in comparison to other OECD countries. In addition, it examines the impact of the COVID‑19 pandemic on the Portuguese labour market and the various disparities that prevail, including across age groups and between genders. This is necessary to better understand the context in which the Estágios ATIVAR.PT internship programme was introduced.
2.2.1. The Portuguese labour market situation has improved across a number of dimensions in the past decade
The last decade in the Portuguese labour market has been characterised by improvements among various key labour market indicators. Following the global financial crisis, unemployment in Portugal remained elevated for several years, peaking at 17% in 2013 compared to an average of 8.3% across OECD countries and 11.6% in the EU in the same year (Figure 2.1). Since then, year-on-year reductions in the Portuguese unemployment rate were seen, bringing it closer in line with the OECD average, until the emergence of the COVID‑19 pandemic in 2020. As of 2023, the Portuguese unemployment rate was 6.7%, just above the OECD and EU averages of 5.0% and 6.1%.
The last decade has also seen marked improvements in both the employment and labour force participation rates, a trend observed across both men and women. In 2023, the Portuguese employment rate was 72.5%, an increase of over 11 percentage points over the last 10 years and above the OECD and EU averages (70.1% and 70.6% respectively in 2023). Similarly, thanks to recent improvements, the labour force participation rate in Portugal now also sits at 77.6%; above both the EU and OECD averages (75.2% and 73.8% respectively in 2023). For Portuguese women, both employment and participation rates are significantly higher than the OECD average (Figure 2.2) – with the labour force participation of Portuguese women in particular sitting 9 percentage points above the average across OECD countries in 2023 (75.6% compared to an average of 66.7% across the OECD and 70.4% in the EU). However, the employment and participation rates for Portuguese men are both just below the OECD average.
Annual unemployment rates, 2010‑23
Note: OECD and EU27 are weighted averages. Persons aged 15‑64.
Source: OECD Data Explorer • Employment and unemployment by five-year age group and sex - indicators and Eurostat dataset: Employment and activity by sex and age - annual data for Portugal.
Employment and labour force participation rates by gender, 2023
Note: OECD and EU27 are weighted averages. Persons aged 15‑64.
Source: OECD Data Explorer • Employment and unemployment by five-year age group and sex - indicators and Eurostat dataset: Employment and activity by sex and age - annual data for Portugal.
2.2.2. Portugal experienced one of the fastest unemployment recoveries from the COVID‑19 crisis in the OECD
Prior to the onset of the COVID‑19 pandemic, the monthly unemployment rate in Portugal sat above that of the OECD average (7.2% and 5.7% respectively in January 2020, Figure 2.3). Overall, the Portuguese labour market proved resilient, seeing monthly unemployment peak at 8.2% in August 2020 and taking only 11 months to recover to its pre‑COVID unemployment rate (measured from January 2020); one of the fastest recoveries seen across OECD counties (OECD, 2023[1]). However, the impact of the crisis and in turn the pace of recovery was not felt evenly across all categories of workers. Youth (see Section 2.2.3), part-time or temporary workers (often in contracts requiring more human contact) and those with lower educational attainment faced a disproportionate share of the job losses and a more sustained impact of the crisis (OECD, 2021[2]).
Compared to the impact on economic activity, the impact on the Portuguese labour market was relatively modest; aided by the various government supports implemented during this time. This included job retention schemes in particular, which greatly contributed to the safeguarding of employment relationships (OECD, 2021[2]). In this area, Portugal was one of 19 EU Member States to benefit from SURE (The European instrument for temporary Support to mitigate Unemployment Risks in an Emergency) financial support during the crisis period to assist the delivery measures such as short-time work schemes (European Commission, 2023[3]).
Monthly unemployment rate, January 2019‑June 2024
Note: OECD is a weighted average. Persons aged 15 years and over.
Source: OECD Data Explorer • Infra-annual labour statistics (accessed 25 September, 2024).
2.2.3. Despite recent improvements, several labour market challenges still persist
Despite various improvements, several labour market disparities and challenges still remain prevalent in the Portuguese context. These challenges include gender disparities across key labour market indicators, population ageing, elevated unemployment among young people, imbalances across workers depending on type of employment contract and variation in educational attainment across age groups.
For young people in Portugal the labour market situation has improved somewhat in recent decades, but still has its challenges. The post-global financial crisis high in youth unemployment (aged 15‑24) was just over 38.1% in 2012. While this rate improved significantly in the years that followed and reached 17.1% in 2019, it still remained above the OECD average (11.8% for the same year). In more recent years, the impact of the COVID‑19 pandemic was felt heavily by young people. Job losses were mostly experienced by young and temporary workers (OECD, 2021[2]), driving the youth unemployment rate upwards again reaching 23.5% in 2021. While the labour market in Portugal overall bounced back quickly from the pandemic crisis, the recovery for young people was much slower, with the youth unemployment rate still exceeding the pre‑COVID level in 2023 at 20.3%, compared to an OECD average of 10.5% (Figure 2.4). Furthermore, this rate of youth unemployment in Portugal is almost four times the rate for those outside the youth age bracket (5.64% for those aged 25‑64 years). The youth employment rate in Portugal was also impacted by the COVID‑19 crisis and as of 2023 is now exceeding the pre‑pandemic level at 28.2% (Figure 2.5); significantly below both the OECD and EU27 (43.7% and 35.8% respectively). Aiming to improve the labour market opportunities of young people and combat precariousness, the Portuguese Government in 2023 introduced a Decent Work Agenda which contained a number of measures targeted at this group (Box 2.1).
Youth unemployment rates, 2010‑23
Note: OECD and EU27 are weighted averages. Persons aged 15‑24.
Source: OECD Data Explorer • Employment and unemployment by five-year age group and sex - indicators and Eurostat dataset: Unemployment by sex and age – annual data for Portugal.
Youth employment rates, 2010‑23
Note: OECD and EU27 are weighted averages. Persons aged 15‑24.
Source: OECD Data Explorer • Employment and unemployment by five-year age group and sex - indicators and Eurostat dataset: Employment and activity by sex and age - annual data for Portugal.
Examining the gender dimension in the Portuguese labour market highlights progress, but disparities still remain. The employment rate of women in Portugal was 7 percentage points above the OECD average in 2023; 2 percentage points below the equivalent rate for men. A similar trend and gender gap is seen for the labour force participation rate. However, these rates are largely in line with international comparisons, as was the gender-pay gap in Portugal in 2022: 6.1% compared to 11.4% on average across OECD countries. The work towards gender-based pay equity has been further prioritised in Portugal through transparency legislation introduced in 2019, which was further strengthened in 2021 now requiring compliance from firms with 50 employees or more; previously the threshold was 250 workers (OECD, 2023[4]; Diário da República, 2018[5]).
Despite recent improvements, educational attainment of adults in Portugal still lags behind international comparisons, particularly for some age cohorts. Tertiary level attainment (post-secondary, ISCED Levels 5‑8) is highest among 25‑34 year‑olds at 40.9% in 2023, as is common internationally with an average of 43.1% across EU countries (Eurostat, 2024[6]; OECD, 2023[7]). In addition, while the qualification levels of young adults have seen dramatic improvements in recent years, entering the labour market and securing a good-quality job still remains a challenge for many young people, illustrated by a lower employment rate among graduates than on average across Europe (OECD, 2023[4]; OECD, 2022[8]). However, examining the working age population as a whole (25‑64 year‑olds), rates of non-tertiary and tertiary educational attainment in Portugal are below the EU average.1 This highlights the importance of further incentivising the take‑up of adult and other alternative education routes in Portugal, including in the workplace, through traineeships or internships for example, particularly to assist those with lower levels of educational attainment to boost their skills profile and improve their labour market prospects. In this domain, Portugal’s adult learning participation (specifically formal and non-formal education and training undertaken in the last 12 months; for ages 25‑64) stood at 44.2% in 2022. This rate was not far behind the EU average of 46.6%, although seeing a small reduction from the last available rate in 2016 where participation in Portugal stood above the EU average at 46.1% (Eurostat, n.d.[9]).
Population ageing also poses a significant challenge for Portugal. At present, working-age people as a share of the population in Portugal is on par with the OECD average at around 64% (OECD, 2021[2]). However, projections indicate that Portugal’s working age population will shrink at a much faster rate than many of its OECD counterparts; falling to 54.2% of the population by 2060 as compared to 58.7% across the OECD region (OECD, n.d.[10]). In order to mitigate the impacts of this demographic trend, including on productivity and economic growth, Portugal will need to take steps to enhance labour market participation, including through enhanced provision of employment services and ALMPs (including measures specifically targeted at activating the inactive population). In recent years, immigration has exceeded emigration in Portugal and reforms have been implemented to ease recruitment processes for foreign workers. Prevailing labour shortages and a projected shrinking labour force will mean Portugal will likely see demand for foreign workers remaining high. Imbalances on the labour market in Portugal are also seen between those with permanent and temporary contracts. While the share of employment covered by temporary contracts has reduced in recent years, the incidence still remains comparatively high in the OECD region: 17.3% in Portugal compared to 11% across the OECD in 2023 (OECD, 2024[11]). However, the incidence of temporary contracts is more pronounced among younger workers, seeing 56% of employees aged between 15‑24 years on such contracts in Portugal relative to 25% on average across the OECD. Measures put forward in the Portuguese Government’s Decent Work Agenda aim to increase the cost and restrict employers’ ability to use temporary contracts (OECD, 2023[4]). The measures include limiting the successive use of temporary contracts, which is often commonplace, and enhanced compensation in the event of termination (Box 2.1).
The Portuguese Government in 2023 launched a Decent Work Agenda (Agenda do Trabalho Digno), containing around 70 measures to improve working conditions and promote a better balance between personal, family and professional life. This includes a dedicated set of actions to assist young workers and address precariousness in the Portuguese labour market. Some of the key measures for young people include:
Reduced trial periods for young people who have already had a fixed-term contract in the same activity (even with another employer),
Remuneration for professional internships must now be at least 80% of the national minimum wage and must now guarantee social protection and work accident coverage,
Internship grants for graduates provided by the PES were increased to EUR 960,
Enhanced social protection for young workers, including the ability to accumulate family allowances and study grants,
Reduced income tax for young workers (seeing a 100% exemption in the first year of work, with tax payable increasing gradually until year five where the exemption is 25%),
A sustainable employment hiring incentive (financial support to employers who recruit jobseekers registered with the PES on permanent contracts),
An upskilling programme to retrain people (particularly unemployed or underemployed people) in areas related to information and communication technology (ICT) through a combined programme of training in HEIs and on-the‑job training with an employer,
A green skills and jobs programme to support the vocational training and re‑qualification of workers in firms impacted by rising energy costs and jobseekers. The aim is to prevent the risk of unemployment of participants and stimulate the creation of new jobs, while promoting the green transition and energy efficiency.
Source: Government of Portugal (2023[12]), Agenda do Trabalho Digno – saiba tudo o que vai mudar, www.portugal.gov.pt/pt/gc23/comunicacao/noticia?i=agenda-do-trabalho-digno-saiba-tudo-o-que-vai-mudar#1; Government of Portugal (2023[13]), Agenda do Trabalho Digno – Valorização dos jovens, www.portugal.gov.pt/pt/gc23/comunicacao/documento?i=agenda-do-trabalho-digno-valorizacao-dos-jovens; IEFP (2024[14]), Compromisso Emprego Sustentável, https://iefponline.iefp.pt/IEFP/medCompromissoEmpregoSustentavel.do; IEFP (n.d.[15]), Programa “Trabalhos e Competências Verdes / Green Skills & Jobs”, www.iefp.pt/programa-trabalhos-competencias-verdes-green-skills-jobs.
This section provides an overview of ALMP provision in Portugal. This includes a description of the institutional set-up of the Portuguese ALMP system, including the role of social partners. In addition, this section presents an examination of trends in public expenditure on ALMPs, the composition of the ALMP basket and how evidence is generated on the effectiveness of these programmes.
2.3.1. The Portuguese PES has joint responsibility for employment services and vocational training, with formal co‑operation with social partners
The PES in mainland Portugal, IEFP (the Institute for Employment and Vocational Training), is a national level body under the supervision, but with administrative and financial autonomy, of the Ministry of Labour, Solidarity and Social Security (Lauringson and Lüske, 2021[16]; IEFP, n.d.[17]). The provision of ALMPs is regulated by a government decree which establishes the objectives, principles and design of programmes and measures (Diário da República, 2015[18]). Social partners have links with the IEFP, both through formal involvement in the provision of some services (specifically vocational training, see below) and participation in advisory bodies.
The PES has a decentralised structure, with five sub-national directorates operating across the country’s mainland regions (North; Centre; Lisbon & Tagus Valley; Alentejo; and Algarve). In addition to the provision of employment services, IEFP is also responsible for the provision of vocational training in Portugal. Therefore, across the five regions, IEFP operates a network of both employment centres and vocational training centres. Two types of vocational training centres exist across the country: those directly managed by IEFP and those operating on the basis of “participatory management”, resulting from a protocol signed jointly between IEFP and the social partners.
As they are both arms of the PES, employment centres and vocational training centres are operationally linked and at times located at the same premises. The first point of contact for a jobseeker is the employment centre where their needs are assessed by a counsellor and a personal progression plan (or individual action plan) is developed. Jobseekers with training needs are then referred to vocational training centres. Those vocational training centres run jointly with social partners provide specialised training in a dedicated sector or field, including centres focusing on digital skills and the energy transition, for example. Vocational training centres typically rely on local level networks, in order to establish arrangements with employers to provide on-the‑job training through the hosting of apprentices or other vocational training participants.2 In addition, vocational training centres often rely on close engagement with employers in the region to tailor courses to their needs. However, the extent and quality of these local links varies across centres and regions, with anecdotal evidence suggesting that vocational training centres with social partner involvement potentially seeing stronger relationships with employers than those operated solely by IEFP.
Social partners are also involved in several supervisory and advisory bodies of the PES. First, IEFP’s tripartite Board of Directors brings together representatives from public administration, trade unions and employer organisations. Second, Regional Advisory Councils, also tripartite in nature, operate within the sub-national territories of the PES and act as consultative fora to discuss IEFP’s services and operations on a regional basis. Despite these various fora for consultation, social partners report room for improvement, including to improve trust and the quality of social dialogue. Furthermore, when being consulted on new measures or proposals, social partners report insufficient provision of supporting data, limiting their ability to provide informed advice to the PES and Ministry.
2.3.2. Despite reductions from previous highs, Portuguese ALMP expenditure is now just above the OECD average
Spending on ALMPs in Portugal represents 0.43% of GDP and is now above the OECD average of 0.40% (Figure 2.6). This has been driven by year-on-year increases in total ALMP expenditure in the last few years, particularly since the COVID‑19 pandemic period. However, examining this trend over a longer time horizon, total ALMP expenditure in Portugal has fluctuated considerably over the last two decades (Figure 2.7). In fact, despite recent increases, recent ALMP expenditure in Portugal is substantially lower than in previous years – where Portuguese ALMP spending outpaced the OECD average to larger degrees.
Within the ALMP basket, as a percentage of GDP, training (0.19%), employment incentives (0.11%) and PES and administration (0.09%) represent the three largest areas for spending in Portugal in 2022 (Figure 2.7).3 Portuguese investment in training measures was almost double the OECD average (0.10% of GDP) and was only exceeded by five OECD countries (Austria, France, Finland, Denmark and Luxembourg). However, expenditure on training has fluctuated considerably. Since 2017 expenditure on training has been at some of its lowest rates, lagging behind previous levels: 0.18% of GDP on average between 2017‑22 compared to 0.29% over the period 2004‑16. The Estágios ATIVAR.PT internship programme evaluated in this report falls within this AMLP category, specifically under workplace training (European Commission, 2018[19]).
Active labour market policy (ALMP) spending as a percentage of GDP, 2022
Note: OECD is an unweighted average of the 34 countries shown. Category 4.2 relates to temporary employment maintenance incentives which were dramatically affected by exception measures to address the challenges of COVID‑19 and is excluded from this comparison. Data refer to 2020 (Italy) and 2021 (Greece, Ireland, Israel).
Spending on PES and administration, often considered to be the most cost-effective form of intervention, is 2 percentage points below the OECD average of 0.11% of GDP (Card, Kluve and Weber, 2018[20]; Brown and Koettl, 2015[21]; Dar and Tzannatos, 1999[22]; Kluve, 2010[23]). Direct job creation represents the fourth largest area for ALMP expenditure at 0.03% of GDP, just below the OECD average of 0.04%. Sheltered and supported employment programmes represent the main area where Portuguese expenditure is significantly outpaced by the OECD average (0.09% of GDP), seeing a spending allocation of only 0.02% of GDP. Nevertheless, some measures under other categories of ALMPs are targeted at people with disabilities or reduced work capacity (among many other groups), including the Estágios ATIVAR.PT internship evaluated in this report. Start-up incentives which provide a route to self-employment for jobseekers largely do not feature within the ALMP mix of Portugal, a trend shared with several other OECD countries contributing to an OECD average of 0.01% of GDP.
Active labour market policy (ALMP) expenditure by category in Portugal and the OECD as a share of GDP, 2004‑22
Note PES: public employment service. GDP: gross domestic product.
OECD is an unweighted of 33 member countries for which data are available over the time period shown. Employment incentives excludes employment maintenance incentives (category 4.2), to remove as much as possible measures that are specific to COVID‑19.
2.3.3. A systematic approach to evaluating ALMPs is not yet present in Portugal
Many PES across OECD and EU countries monitor the services and measures delivered to jobseekers and other clients to assess performance against desired indicators and to examine implementation of measures over time. However, measuring the true impact of ALMP measures implemented by PES requires the conducting of counterfactual impact evaluations (CIEs). CIEs measure the impact of participating in a programme compared to the counterfactual of not participating, often through the lens of key outcomes such as employment and wages. CIEs go beyond traditional monitoring activities conducted by PES, which cannot directly attribute outcomes to programme participation (i.e. whether a jobseeker would have indeed found a job anyway, even without participating in a given programme). Therefore, CIEs provide an avenue for PES to rigorously assess the effectiveness of their services and measures and to move to more evidence‑informed policy making (OECD, 2020[24]).
A number of factors contribute to the capacity of a PES to conduct systematic and high-quality CIEs. These include high-quality and linkable administrative data sources that can be used for research, sufficient resources (either to hire experts with the necessary skills internally and/or to contract these activities out), quality assurance mechanisms, an evaluation plan or strategy (to set the annual research agenda) and appropriate avenues to disseminate findings, including to the relevant policy makers. In the case of the Portuguese PES, IEFP does not routinely produce CIEs of ALMPs, despite the availability of rich administrative data and the possibility to use these data for research purposes. In Portugal, the majority of evaluations of ALMPs that have been undertaken have been of programmes financed through the European Social Fund Plus (ESF+), which is the European Union’s primary instrument for investing in people and aids the implementation of the European Pillar of Social Rights (European Commission, n.d.[25]). Interventions funded through ESF+ are required to be subject to monitoring and evaluation, undertaken at the Member State or regional level. However, such evaluations are relatively broad and, depending on the individual study, can examine programme efficiency, effectiveness, value‑added, sustainability, intended impact objectives etc. and, do not necessarily always feature a CIE component.
Of those evaluations conducted in Portugal under ESF+ that do utilise counterfactual methods, only a few have focused on employment support measures (PO ISE, n.d.[26]). First, the Youth Employment Initiative (YEI) was established to further accelerate the implementation of Portugal’s Youth Guarantee. The YEI encompassed 12 measures across 4 categories of support: i) employment supports (including employment incentives), ii) internships, iii) education, and iv) entrepreneurship support (IESE and PPLL Consult, 2021[27]; Duarte et al., 2020[28]). The CIE found that YEI internships and employment incentives improved the probability of obtaining a job: by 16.6 percentage points for participants who completed a 12‑month internship and by 32.8 percentage points for those who completed a 12‑month employment incentive programme. Both measures also saw participants receiving comparatively higher salaries after completing the programme (an additional EUR 179 for internship and EUR 225 for employment incentive participants respectively). Second, a CIE of internships and vocational training programmes found that, despite an initial lock-in effect during the first nine to 12 months from entering the programme, internships enhance participants’ employment probability by 10‑20 percentage points (Paes Mamede, Fernandes and Cruz, 2015[29]). The study also found that participants of vocational training who graduated from high school but did not pursue higher education faced a 25-percentage point higher probability of finding employment in the first 12 months following completion.
With no track-record in conducting regular and systematic CIEs of ALMPs, relevant administrative data are not routinely linked for this purpose nor does an analytical database exist. Therefore, the conducting of CIEs of ALMPs in the Portuguese context, including in the case of the evaluation outlined in the following chapters, requires manual production and preparation of the relevant data required to conduct the analysis (OECD, 2024[30]). While possible, this process can be tedious and time‑consuming and is largely only conducted on an ad hoc basis. The previously highlighted studies and the OECD analysis presented in the following chapters indicate the potential for Portugal to further leverage available rich administrative data to establish a more systematic and routine approach to CIEs of ALMPs. Such efforts would also be greatly aided by the development and implementation of a monitoring and evaluation framework to guide and inform evidence‑generation surrounding ALMPs and the allocation of the necessary funds for research. This would allow IEFP to build an evidence base and enhance their understanding on the effectiveness of ALMP measures, including what measures work best for whom – enabling better targeting of supports to different client groups and ensuring the right support is in place for people with different needs.
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← 1. Here non-tertiary educational attainment refers to upper secondary and post-secondary non-tertiary education (ISCED Levels 3 and 4).
← 2. In Portugal, apprenticeships are long-term vocational education and training courses targeted towards young people.
← 3. The ALMP classifications are defined by the methodology of the OECD Employment and Labour Market Statistics database (https://doi.org/10.1787/data-00312-en) and the European Commission Labour Market Policy database (https://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=8126&furtherPubs=yes).