Portugal sees wage compression as minimum wage approaches median pay

An analysis released by the Banco de Portugal shows that the Kaitz index – the ratio of the minimum wage to the median wage – rose to 91% in 2025, up from 87% in 2019. The rise reflects a tightening gap between Portugal’s statutory minimum wage and the average wage, creating a pronounced compression of the wage distribution.

Economists interviewed by Lusa argue that the compression could be eased by stronger productivity growth. As Pedro Braz Teixeira put it, “it is necessary that minimum‑wage increases be more aligned with productivity gains.” Oxford Economics’ Ricardo Amaro added that “the solution will have to involve raising the rest of the salaries in line with this upward trend.”

The report notes that the lowest decile saw base‑salary growth of just over 8% in 2025, while the top decile grew by about 5%, highlighting the limited spread of pay gains. Experts call for policies that promote productivity, attract high‑quality foreign investment, and reward education and experience to counteract the narrowing wage gap.