Portuguese unemployment benefits fell from 70% to 64% of wages over a decade, central bank finds

Drop in wage replacement rates

Unemployment benefits in Portugal covered a smaller share of workers' previous earnings in 2025 than they did a decade earlier, according to a report from Banco de Portugal. The study on Portuguese unemployment support between 2015 and 2025, conducted by a team under Álvaro Santos Pereira, found that the replacement rate fell from approximately 70% of the last monthly wage in 2015 to 64% in 2025. This six percentage point decrease occurred because benefit adjustments are determined by the Social Support Index (IAS) rather than the national minimum wage. Because statutory benefit ceilings and floors are tied to the IAS, benefit updates failed to keep pace with broader national salary increases. When statutory supplements and increases are included, the average replacement rate in 2025 reached approximately 66%. The central bank described the structural mechanism behind the coverage gap.

This mechanism is particularly relevant at the bottom of the wage distribution, where the minimum benefit limits are most frequently applicable.

Impact across wage brackets and monthly averages

The decline in benefit value was not distributed evenly across different income brackets. In 2025, unemployment benefits replaced an average of 69% of prior earnings for low-wage employees, 66% for middle-wage earners, and 49% for high-wage workers. Despite the drop relative to wages, the nominal value of the benefit expanded over the ten-year period, registering an average annual growth rate of 3.4% in nominal terms and 1.3% in real terms. By 2025, the average monthly unemployment benefit reached 700 euros. Low-wage earners formed an increasingly large share of total entries into the system over the decade, while the proportion of high-wage claimants remained relatively stable. In 2025, approximately 40% of all new entries into the unemployment support system were workers who had earned monthly wages up to 880 euros, in a period when the national minimum wage stood at 870 euros.

Sectoral distribution of new claimants

The study evaluated where claimants originated across the Portuguese economy using administrative Social Security microdata. Manufacturing industries and administrative and support service activities represented the two largest shares of new unemployment entries in 2025, with each sector accounting for close to 17% of total claimants. The commercial trade sector formed the third largest category, accounting for 14.2% of all new entries. Compared to baseline figures from 2015, the relative share of unemployment claims grew within manufacturing and expanded considerably within the accommodation and food services sector. Conversely, the weight of entries originating from the construction sector, as well as public administration, education, and health services, declined distinctly over the same ten-year period.

Demographic shifts among beneficiaries

Demographic characteristics of workers entering the Portuguese unemployment benefit system underwent notable changes between 2015 and 2025. Foreign national workers experienced the most pronounced increase, growing from 2.2% of total new benefit entrants in 2015 to 26.6% in 2025. The proportion of older workers entering the welfare system also climbed, as employees aged 50 and older moved from 21% of new recipients in 2015 to 26% in 2025. Female claimants continued to make up the majority of new entries, rising from 51.6% in 2015 to 53.4% by 2025. The central bank stated that these demographic patterns correspond with structural transformations in Portugal's salaried workforce over the decade. The complete analysis is scheduled to appear in the central bank's upcoming Economic Bulletin.