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2008 OECD Economic Surveys: Portugal 2008

image of OECD Economic Surveys: Portugal 2008

OECD's periodic review of the Portuguese economy. This 2008 edition focuses on several key challenges including securing fiscal consolidation, maximising the gains from integration into the world economy, and improving the functioning of the labour market.

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Improving the functioning of the labour market

While participation rates are above average in Portugal, employment has been broadly stagnant since 2000, the unemployment rate has doubled and long-term unemployment is close to 50%. The labour market has become increasingly segmented, with a large proportion of workers on short-term contracts or in selfemployment. Building on measures already taken, reforms are needed to develop human capital and facilitate labour market adjustment in the changing environment. This chapter argues that what is required to promote the creation of more – especially less precarious – jobs, is a broad strategy, including labour market reforms and human capital formation. In particular, there is a need to enhance the adaptability of the labour force, addressing rigidities in the formal labour market and improving the balance between flexibility and workers’ protection. Effective training is also required to improve the skill match for new entrants and to help displaced workers in sectors affected by structural adjustments. Some measures have already been taken. The government has launched an initiative to upgrade competences of young people and adults at risk. It is also reviewing labour market settings and legislation with a view to reducing the segmentation of the labour market and increasing its adaptability. The measures taken and proposed go in the right direction. Continuity in the reform process and implementation remain a challenging task.

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