Income and wage inequality in democratic Portugal, 1974-2020

Abstract

This paper investigates the evolution of income and wage inequality in Portugal from the 1974 democratic revolution up to 2020, drawing on a series of administrative records, survey data and aggregate statistics. Over this period, Portugal consistently ranked among the most unequal nations in the developed world. The transition from a deeply unequal dictatorial regime, in the wake of the 1974 revolution, brought about substantial redistribution. However, since the 1980s, income and wage inequality followed an arc-shaped trajectory. There was a sharp rise in inequality from the early 1980s to the mid-1990s, which, in just eight years, outpaced the infamous US growth in wage inequality of the last five decades. Then, there was stability at high levels until the mid-2000s. Finally, there was a sharp decline in inequality until 2020, which halved both the gender wage gap and the college wage premium. Changes related to the supply and demand for education/skills emerged as key drivers of inequality dynamics. Institutional and political forces were especially relevant in reducing inequality during the transition to democracy and, more recently, with the rising importance of the minimum wage and collective bargaining.