Portuguese Salaries Fall as Cheaper Workers Sought, Mercer Says

Portuguese salaries are falling for the first time since at least 1998 as companies replace more expensive workers with cheaper ones, according to consulting firm Mercer.

Total compensation fell as much as 1.8 percent this year for so-called less qualified positions, while managers and board members lost 0.37 percent, Mercer said in a statement today, based on a survey carried out by its unit in Portugal.

“The substitution of workers for those with lower salary levels for the same functions has led to a reduction of wages in practically all job groups,” it said. It was the first drop since the survey began 14 years ago.

Portugal’s government is cutting spending and raising taxes to meet the terms of the 78 billion-euro ($101 billion) aid plan from the euro area and the International Monetary Fund. A surge in borrowing costs led Portugal last year to follow Greece and Ireland in needing a bailout.

The government forecasts the unemployment rate will rise to about 16 percent in 2013 from 15.5 percent this year. Economic growth has averaged less than 1 percent a year for the past decade, making Portugal among Europe’s weakest performers.

Twenty-six percent of companies that took part in the survey did not increase wages this year. The study analyzed 108,837 job positions in 296 companies in Portugal, Mercer said.

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