The average salary premium of a person with a degree (in real terms, already excluding inflation) has fallen sharply between 2006 and 2020, more than 16%, according to calculations by Dinheiro Vivo (DV) based on a study by the Bank of Portugal (BdP), released yesterday (Monday, 20).
The same is to say that having a degree was much less compensating in terms of income from work than having only the 12th year, compared to the 14 year period in question.
In fact, since 2006, with the exception of 2008 and 2009, when there were marginal gains in this measure, the trend has always been one of sharp devaluation of graduate wage premiums, the difference between the average salary of those with a degree and the pay of those who have completed high school.
The good news is that a reversal in this trend may have begun in 2019 and 2020, with increases in this differential (premium) of 3.2% and 1.2% respectively, the same work released yesterday shows, in pre- publication, which will appear in the BdP’s new economic bulletin, which will be published this Friday.
The other, more “positive” news is that wage inequality has narrowed over the 14 years covered by the study, but mainly because the minimum wage has increased significantly in primary education (where the concentration of minimum wage cases is greater) and the wages of the most qualified much less.
what could happen
There are explanations and there are many. The increase in the minimum wage may have pushed up the average salary of those with a secondary education, although it is not the group with a greater concentration of workers earning the statutory minimum.
Another explanation is that since 2006 there has been a significant influx of people with diplomas (and other higher education qualifications), which has led to a greater supply of these types of qualifications, giving employers in this wave more power to propose proposals. doing. from abundance, higher salaries, lower to the most qualified at the time of hiring.
In any case, the situation is somewhat problematic for the individuals involved, as obtaining a degree involves a greater investment and tends towards more years or time in inactivity (studying).
How is the wage premium calculated?
DV’s accounts show that the premium for the average graduate in 2006 was EUR 652 per month in real terms compared to an employee with a secondary education. The first earned 1744 euros at the time, the second 1092.
Over time, that difference narrowed and by 2020, the premium for obtaining a diploma had fallen to 546 euros. While the type graduate earned 1592 euros in 2020, the secondary earned 1047 euros.
The average salaries of both groups are decreasing compared to 2006: for bachelor’s degrees the decrease is almost 9%, for those with a secondary education the decrease is more than 4%. Those with a master’s degree also saw their average salary fall (minus 5%).
The only exception is even in the basic training group where, due to the minimum wage updates, the valuation increased from an average of 801 euros in 2006 to 910 euros in 2020, according to the Bank of Portugal. It’s an increase of nearly 14% that has not only reduced inequality, but may have lifted many workers out of the poverty line.
The authors of the central bank study explain that “between 2006 and 2020, the wage distribution in Portugal reflects important developments, namely the remarkable increase in education, the continuation of the trend towards an increase in the participation rate of women and the aging of the the labor force, as well as the increase in the minimum guaranteed monthly salary”.
Pay brakes
But there were brakes. “The wage distribution also reflects the recessions that have occurred during this period, particularly those between 2011 and 2013, which implied significant reductions in employment and an increase in the unemployment rate to historically high levels”. It was notorious among graduates and there were even important phenomena such as emigration.
The BdP study confirms that “the sharp increase in the guaranteed minimum monthly remuneration from the end of 2014 has contributed to the densification of the salary structure in the period analysed”.
“Wage growth was stronger in socio-demographic groups where the prevalence of this pay is higher,” such as the lower educated.
“As a result of these developments, wage inequality, as measured by conventional indicators, decreased between 2006 and 2020.”
The bank headed by Mário Centeno also notes that “the increased supply of people with higher education has been accompanied by a positive wage gap for workers with this level of education, which, although lower than at the beginning of the reporting period, remains high”.
But of course, as mentioned, the premium went down. “In 2020, the real average wage of an employee with a diploma was 52% higher than that of an employee with a secondary education”, a ratio that was much higher in 2006, around 60%.
In addition, the “evidence presented” in this new study “suggests that the lifetime wage profile of workers depends on the timing (and conditions) of entry into the labor market”.
This “indicates a reduction in the average entry-level wage of workers with higher education between 2010 and 2014. In the most recent period, the real average entry-level wage of these workers is still lower than that observed between 2006 and 2010, although an upward profile may be observed,” says the BdP.
That is, recent graduates enter the labor market and accept wages that are significantly lower than in 2006.
In other words, they have been slowly recovering in recent years, but are still well below the level offered by employers (private sector and public companies) in 2006: 3.5% lower.
All other groups (divided by qualifications: basic or lower, secondary, masters) report improvements in their salary proposals when entering the labor market.
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
