Salaries in Portugal: have workers lost their purchasing power?
Premise: A worker, who has earned minimum wage for the past 15 years, argued on TV he lost purchasing power during the past government. Was the interviewee correct or not? This is a common complaint among Portuguese and one that anyone will easily hear in a political debate (or at a café, for that matter). Thus, it seemed just right to be the topic of the first post in this blog. First, we need to have a definition of purchasing power. For now, and to keep it simple, I'll use CPI as the deflator to construct the purchasing power. Plotting the minimum salary and the average base salary (before food and transportation subsidies, and bonuses) since 2000, we get a chart similar to this: where the dashed lines are the nominal values and the thick lines are in purchasing power parity (i.e., deflated by inflation). Values are calculated as monthly wage times 14 months, divided by 12, thus accounting for Christmas and summer bonuses. Two striking conclusions from this ch...