The past in the present Portuguese social security reform - SFI

The past in the present Portuguese social security reform - SFI

Paper for the inaugural ESPAnet conference

"Changing European Societies - The Role for Social Policy"

Organised by the Danish National Institute of Social Research

Copenhagen, 13-15 November 2003

The past in the present Portuguese social security reform

Silvia Ferreira

Sociology Department

Faculty of Economics

University of Coimbra




Since 1996 the Portuguese social security system was subject to a political will for reform

intending to overcome some problems that are typical of its specificities, and also the new

challenges generally posed upon these systems and to incorporate the demands and interests

of social groups that reached the political agenda. In social welfare as well as in the pensions

sectors some reform proposals called for a deep change suggesting a path shift. However, the

possibilities for policy reform were deeply conditioned by the system features and the social

actors involved in its reform.

In 2000 a group of experts produced a report on the future of social Europe considering that

Portugal along with Ireland, Denmark and Holland was taking the right steps to escape the

path dependency of the typical problems of its type of regime, through the combination of

measures typical of other models (Ferrera, et al., 2000: 53). To these authors Portugal was

also experimenting a path shift through policy measures such as social pacts connecting

income policies, labour market reform, social security and the fiscal system in order to

achieve salaries restrain and flexibility; growing use of activation measures and an integrated

action involving different policy areas and social actors in the fight against poverty and social

exclusion (Ferrera, et al., 2000: 61-71). The question on the capacity to make these changes

effective and thus to solve some of the most serious problems of the social security system

and social policies outcomes is yet to be answered. In this article we analyze the evolution of

the social security system in order to understand the present moment of reform demonstrating

the path shifting drift goes further than the measures indicated by Ferrera et al. (2000) and

that are explained by very particular characteristics that resulted from a tension existing in the

system trough the incorporation of different and diverging welfare models through its history.

Explanations based on the resources mobilization theories are important to understand the

features of the Portuguese welfare state. It has been characterized as underdeveloped, in

comparison with the welfare states in the core European countries. This resulted in a

combination of circumstances such as a long period of an authoritarian regime leading to its

late development marked by the democratic revolution of 1974, the social and economic

crises originated with the oil shocks, the resonance of the debates on welfare state


etrenchment of the eighties, the example of social protection models of the European

developed welfare states and the effects of the adhesion of Portugal to EEC, in 1986.

Santos identifies the causes of this quasi-welfare state in the lack of four initial conditions

crucial for the expansion of the welfare states: the difficulties of a social pact between labour

and capital given the lack of autonomous organizational and negotiation capacity and

segmentation of the social actors, capital and labour; the imbalance between economic

accumulation and social legitimating tasks of the state that lead to massive disrespect of social

and labour rights by enterprises and a big discrepancy between law in books and law in

action; the low level of expenses in welfare policies; and a state bureaucracy that did not

internalized the idea that social expenses and services are a right-based claim and not the

result of state benevolence (Santos, 1999: 7-14). As Andreotti et al. (2001: 49) mentions,

“many of the welfare structures existing in southern Europe preceded democratization, and

thus were constructed without the political participation of civil society”.

Like the Portuguese welfare state also the Portuguese civil society was characterized as being

weak, with lack of organization and institutionalization and high level of dependence upon the

state. This weakness is the cause and consequence of the non-existence of autonomous social

actors able to integrate the social pacts that sustain the welfare state. This deficit of

corporation has allowed a greater autonomy and centrality of the state and state regulation

even creating a civil society. Santos mentions the existence of a secondary civil society in

Portugal, created by the state through selective policies that allowed the corporatization and

organization of some interests and by the same process the blockage of the organization of

other interests. Thus, an intimate civil society emerged constituted by the organizations closer

to the state as well as a distant civil society with lack of access to the state and the political

process (Santos, 1990: 222-223). This creation of a civil society was visible in social partners

area as well as in the field of nonprofit organizations.

Andreotti et al. (2001: 45-46) express these complex features of state and society referring

that ‘weakness’ and ‘centrality’ are characteristics of the state in South European countries

and ‘strength’ and ‘marginality’ characterize most social forces. While the state weakness

arises from the low levels of social expenses and the dominance of the subsidiarity principle

(rooted in the Catholic tradition), its ‘centrality’ arises from the dominant role the state plays

in the regulation of social life given the high heterogeneity and fragmentation of social

interests in society. The intermingling of state and society and the integration of different and

contradictory forces in the state creates a state paralysis that have characteristics such as: “the

failure to reform decisive sectors of administration or to take decisions or to follow strategic

orientations; the over-production of legislation dissociated from effective implementation;

interventionism without effectiveness in terms of public regulation; the investment in the

rhetorical dimensions of politics as well as in the media; the fragmentation of the

administrative structures; the persistence of a clientelist bureaucracy with a low sense of

personal responsibility” (Andreotti et al., 2001: 47).

According to Rhodes the Southern European welfare states faces the same challenges as other

countries in trying to keep the balance between insurance against risk, the welfare safety net

and income redistribution but the challenge is different since this balance never existed in the

past (Rhodes, 1997: 14).

To understand the present moment of reform we add other important influences over policies,

mainly because a path shift would not seams possible under the basic characteristics of the

Portuguese welfare state. According to Pierson (1994) the same theories that explain the

development of the welfare state are not sufficient to explain retrenchment measures.

According to the author, to explain the way the welfare state resists change we must consider


such institutional factors as: the role played by interest groups developed with the social

programs and developed in the political structure, the lock-in effects resulting from the

existence of social and economic networks that raises the cost for the adoption of alternative

policies and the effect of information asymmetry allowing the strategic manipulation of policy

design (Pierson, 1994: 39-46). The features that constrain southern welfare states, such as “the

strenght of vested interests, clientelist collusion, an absence of political consensus and the

weakness and fragmentation of administrative structures, amplify these factors” (Rhodes,

1997: 15). Other influence that came to be increasingly relevant in the last decades is the role

played by international political organizations in the imposition of social policy models

(Deacon et al., 1997; Gough, 2000a: 11). According to Deacon et al. (1997) and Gough (2000)

the influence of these different agencies also varies between countries. In the case of European

Union member states and despite the subsidarity principle the influence of EU institutions is

strong and at many levels: legislation, information exchange instruments, structural funds, and

European programs. For Ferrera et al. (2000: 76-84) the member states are now under a net of

regulations that help shape the reforms on their welfare states.

A characterization of the Portuguese welfare state

Following Esping Andersen's typology of the three worlds of welfare capitalism (1990)

several authors (Ferrera, 1996; Rhodes, 1997) place the Portuguese welfare state within a

forth welfare regime, along with Spain, Greece and Italy with whom Portugal shares

important features and similar moments in history. The characteristics of this Southern

European welfare states are: an highly fragmented and corporatist income maintenance

system with an marked internal polarization marked by peaks of generosity side by side with

gaps of protection; the establishment of national health services based on universalistic

principles; a low degree of state penetration in the welfare sphere; and a highly collusive mix

between public and non-public actors and institutions (Ferrera, 1996).

Although Portugal shares many characteristics of the southern European welfare states the are

also important nuances that are tributary of its past and of the presence of diverging welfare

state models. In order to characterize the social security system and the Portuguese welfare

state we will now discuss the similarities and differences of the Portuguese social security

system with the southern European model starting with a description of its design.

The Portuguese social security system shares with the conservative/corporatist and southern

European models a strong emphasis in income maintenance instruments due to its basis in

mandatory social insurance. However as Ferrera (1996) recognizes the Portuguese social

security system is the less fragmented among other southern European countries.

The central component of the system is the General Regime, this regime covers all workers in

the private formal sector (salaried and self-employed workers), cash benefits are related to

salaries and working careers, it is financed by employees and employers contributions and

managed as pay-as-you-go. There are only two exceptions to the coverage of the private

sector employees: the advocates fund and social protection of the bank workers not totally

covered by social security since their pensions are in private pension funds.

Belonging to the contributory sub-system is also a number of special regimes that resulted

from the integration of some enterprise funds in social security as well as small funded regime

(Voluntary Social Insurance) that covers certain categories such as volunteers of nonprofit

and humanitarian organizations and students with scholarships.


For people without contributions or that do not fulfill the eligibility conditions of the general

regime there is a solidarity subsystem, means tested, covering all citizens (and legal residents

under specific circumstances) living below a certain level of income with benefits in cash and

financed through general taxation. This subsystem includes mainly social pensions and

insertion social income (created in 1996 as guaranteed minimum income). Included here are

two closed regimes of rural workers protection derived from the integration of these

beneficiaries without (transitory regime of rurals - RTR) or with few contributions (special

regime for the social security of agricultural activities - RESSAA). A recently created family

protection subsystem includes family allowances as well as handicap and dependency

allowances differentiated according to the income and composition of households and

financed through general taxation.

Besides these contributory and solidarity systems there is a social action system consisting

mainly of family and social services with casual benefits in kind or in cash, directed to

population in risk or situation of poverty and social exclusion and to groups such as children,

young people, people with disabilities and old aged. Benefits are personalized and its

attribution depends on the discretionary decision of welfare workers (public and private).

Contrary to the former regimes rights are not judicially demandable. The direct provision of

social and family services is mainly by nonprofit organizations, the Private Institutions of

Social Solidarity (IPSS).

Integration of social action in the administration of social security national and local

institutions is a particular feature of Portuguese social security as normally these benefits tend

to be organized at the local level, mainly in the responsibility of local government. At the

local level the same regional and sub-regional social security bodies that administer

contributory and noncontributory regimes administer these services. Thus institutional design

is also a particular characteristic of this southern European social security system given the

high level of institutional integration and state centralization. Besides social security

institutions are under the direct authority of the Minister for Social Security and social

partners participation in the system is limited to a consultive role.

Outside the social security system is the social protection of civil servants that used to be

more generous than the general regime but it has been slowly approximating eligibility

conditions and benefits. Health services are not included in the social security system but

instead on a national health system. The health system is composed by a national health

system universalistic and financed through general taxation and several sub-systems,

encompassing 25% of the population, for particular professional groups such as civil servants

and the military, and also banks and insurance companies workers, financed by contributions

of workers and employers and by the state (OCDE, 1998).

Besides the universality of the health system the system shares with the liberal Anglo-Saxon

model, in the non-contributory area, an emphasis on labour market integration through

residualization of policies not to discourage participation in the labour market, thus resulting

in the combination of high levels of employment with high levels of poverty. The inefficacy

of the system in terms of redistribution have been portrayed in the Household Panel of the

European Union where Portugal scores the highest level of poverty and income inequality

after social transfers, thus showing one of the higher levels of inefficiency in reducing poverty

and inequality (Marlier e Cohen-Solal, 2000).

The system gaps of protection are not only occurring in the areas that are left outside the

income replacement mechanisms. In 1996, 54% of the old age pensions of the general regime

were minimum pensions. Considering minimum and social pensions 93% of the old age

pensioners were receiving pensions below the minimum salary (Santos et al., 1998b: 158).


This tendency was not the result of an immature contributory system but of low salaries and

short contributive periods that stabilized since the eighties.

Another feature of the Portuguese welfare state that is shared with other southern European

countries is the presence of a strong informal sector (welfare society) compensating for some

of the insufficiencies of the public social protection (Santos, 1999; Hespanha et al., 2000).

This welfare society is defined as “networks of relationships of inter-knowledge, mutual

recognition, and mutual help based on kinship and community ties, through which small

social groups exchange goods and services on a non-market basis and with a logic of

reciprocity that approximates that of the gift relationship” (Santos, 1991: 17). It attenua tes the

pressure for public provision and generates specific articulations between the social protection

provided by the state and that provided by the community. However it is not a substitute for

the welfare state since it tends to be hostile to citizenship because it is based on reciprocity,

and concrete benevolent actions (Santos, 1999: 20). Besides, as it was demonstrated informal

networks of support tend to reinforce social inequalities as it is woman of an higher level of

education that tend to receive more support from their families, mainly women of women

families. Thus it is not the welfare society that fills the gaps of the welfare state but the

welfare state that fails to fill the gaps of the welfare society (Wall et al., 2001). Furthermore

this welfare society may function as an obstacle to redistributive measures limiting demands

to the state. In analyzing the possibilities for the implementation of a minimum income in

Portugal Ian Gough (2000) declared that this welfare society would contribute to the

difficulties of the existence of a mass mobilization to press the state towards this policy.

The role of the family and the community in Portuguese (and southern European) welfare

state is framed by a principle of subsidiarity that is different from the one prevailing in the

conservative/corporatist model, since the state weakly supports the privileged role of the

family and provides low social transfers and services that support this role (Hespanha et al.,


Despite that and differently from other southern European countries there is a coexistence of

lack of family services and a very high level of participation of women in the labour force at

levels that are closer to women labour market participation in the social democratic model.

The very low level of salaries insuficient to support a single breadwinner howsehold explains


One of the areas where the private public mix is most visible is in the provision of social and

family services. These services, although considered a responsibility of the welfare state are

mainly provided by private non-profit and commercial organizations. Nonprofits manage/own

81% of social equipments and services while the central and local government only manages

4%. The for-profit sector is achieving an important weight in the provision of family services

(13%). In the social security budget for this sub-sector the amount of transfers to nonprofits

through cooperation agreements is greater that the amount the state spends providing its own

services. Only 19% concerns public provision, while 67% of spending are transfers to

nonprofits mostly through contractualization and 10,1% are used in programs, most of them

implemented through partnerships between state and nonprofits (as the programs to fight

against poverty and social exclusion).

Despite the importance of state funding on these organizations user payments also have a

considerable importance. The public share in the income source of nonprofits is 38% and the

users are left with an important part of the services cost (35% concerns users payments). This

feature brings us close to countries such as Spain and Italy characterized by a low public

sector financial participation compensated by a high importance of fees for services, in the


context of a European tendency for a high level of public subsidiarization on the area of social

services (from 40% to 66%) (Salamon et al., 1999).

When it regards to this area the main difference between Portugal and other southern

European welfare states is the high degree of organization of the nonprofit sector through

strong and powerful peak organizations that participates in policy making in this area.

Despite the importance of private provision the state capacity to regulate this provision is

weak and creates an area of social entitlements where particularism prevails over universalism

and issues of fairness and equity are raised. In the contractual arrangements with private

nonprofits the state have no capacity to determine or even to know, due to the refusal of the

organizations to provide information on the people they attend) who are the beneficiaries of

the services. Moreover it is not possible to guarantee that the beneficiaries are the people who

are most in need, due to the creaming tendencies of organizations for reasons like financial

health; the organizations are discouraged to attend the most disadvantaged population and the

most disadvantaged areas, due to the logic of financing at fixed rates regardless of their actual

cost for each organization or even beneficiary; innovative services are discouraged, due to the

difficulties raised by special regulations in the case of services that fall outside the framework

for typical cooperation agreements nationally framed with the peak associations through the

Co-operation protocol.

This low financial investment is parallel to a deficit of recognition of this area as belonging to

citizenship rights, being it simply defined as the ability of citizens to claim for the right to

have access to these services. As it as been pointed out, this is not even a public policy area

(Rodrigues, 1999) So, currently, the discussion in Portugal is not about the private provision

of public goods and services but the opposite.

The past of social security

We now turn to the evolution of social security policies in the areas of income replacement

benefits and social assistance.

It has been noted that the Portuguese social security system was designed with inspiration of

several models over time, the German and English model in the beginning of the XX th century,

the Italian model in 1930s, the French model in the 1960s, and the European model in the

1980s (Guibentif, 1997). This means that the system developed in the confluence of some

times opposite models, institutional constellations and social actors. Thus, its institutional

design and social actors and the contradiction it have incorporated shape the possibilities for

change and its content.

In fact, it is possible to make a periodization based on these influences. In 1913 and 1919 it

was made the first attempt to create the mandatory social insurance against disease, work

injuries, invalidity, old age and survival. This insurance was still largely inspired on mutual

schemes (since mutual associations were then the only existing organisms for social

insurance) but also had some innovative instruments of redistribution. By that time mutuals

were flourishing as the pioneers of social insurance and perhaps if the system had evolved

from here mutual associations would now have a more important position in the system

similar to what happens in Belgium or France. One of the inspirations was England, as it is

evidenced by the fact that one of the laws clearly refers the English experience as



In England, in 1912, 30.000 Friendly societies existed with a population of five million

members; Trade Unions with enormous costs with invalidity and old age, costing to the

British treasury more than fifteen million pounds per year, Work-house with the large

donations of munificence and generosity of the British soul, all that was not enough to the

needs of the disabled of the coal mines, the big factories and the working rural population.

It was then that the valorous statesman Lloyd George, honor of England and glory of

mankind fought with faith, tenacity and action against the conservative adverse streams,

taking the British Parliament to enact in 1912 the bill of compulsory social insurance

against disease, invalidity and old age. Besides Great Britain mandatory social insurance

are enacted in Europe, in Austria, Germany, Denmark, Switzerland, Sweden and Norway 1

(Ministério do Trabalho, 1920: 40).

However, this law was never implemented. The failure of this first attempt is attributed to

several factors: the highly volatile political context, the extremely difficult economic situation

and least but not last the lack of political support by the working class organizations (Leal,

1998: 105). By then there was also an attempt by the government to control the assistance to

the poor and health services in the hands of Catholic Church organizations and other

philanthropic associations. This was done in the context of the centralization of the state

powers and the growing defense of the separation between the Catholic Church and the state.

During the First Republic, which started in 1910, this separation was made official and a

number of policy measures took a great amount of power from the Church over areas such as

education, health and social services. In the context of an open conflict the state determined

expulsions and expropriations of religious orders, and that generated a clear antagonism of the

Church that together with the political instability contributed to the fall of the First Republic.

There was resistance to the intromission of the state in charity matters. For instance, in the

first congress of charity promoted by a major charity organization (Misericórdia do Porto), in

1905, it was claimed that the public organization of social provision is “cold and rigid, for it

individuals are the subjects of a public function, a salary; while in voluntary aid there is

individual charity, passion and love”. In this congress opinions diverged regarding the role of

the state: should charities be totally free and the state abstain from any organization of the

welfare provided by those organizations or should there be a general state regulation and

coordination of the welfare provided by organizations. Later, with the creation of state

regulation over social aid, public authority to coordinate social aid of private organizations at

the local level was given to misericórdias. We will find strikingly similarities with this

discourse and options later.

A second period begins with the dictatorial regime of Salazar in the context of the corporatist

project expressed in the Nation Statute of Labour (Estatuto Nacional do Trabalho) of 1933

which was inspired in the Italian fascist model. In the mid 30’s, Salazar’s dictatorship created

a limited and exclusionary corporatist regime based on mandatory social insurance for

workers employed in the formal economy and state employees. Following the corporatist

philosophy the initiative for the creation of professional or entreprise welfare funds must arise

from the intermediary bodies. The state should only have coordinating and inspecting roles.

The government also enacted people’s houses (casas do povo) and fishermen’s houses (casas

dos pescadores) for the education and social protection of rural workers and fishermen to be

created in all parishes. These “houses” were composed by rural landowners and workers and

were controlled by the former. The design of the corporate mandatory social insurance

included union funds, people and fisherman’s houses, mutual associations and social

1 Our translation of the preface of the bill that creates mandatory social insurance.


insurance funds of civil servants. The social assistance and health services were left to the

initiative of the charities respecting the subsidiarity principle expressed in the Pio XI’s

encyclical Quadragesimo Anno. There was a division of the political and social work between

the state and the Church that was left with the social welfare while the state assumed here a

supplementary role. However, the authoritarian nature of the regime didn’t left much freedom

to organizations having considerable powers in the creation and extinction and in the control

over organizations boards. Mutual associations were even more severely restrained for several

reasons such as the limitation to the freedom of association, state interference in their

management with cases of dissolution or integration into welfare bodies and so on (Rosendo,


Also, as Schmitter notes, the highly authoritarian and centralized character of Salazar

government made difficult the emergence of corporatist bodies (1999: 131-132) and thus the

development of funds without government interference. In 1940 there existed only 9 labour

union funds and 126 ‘people’s houses’ and the government had to intervene directly in the

creation of these institutions.

A third period for social protection in Portugal started in the beginning of the 1960s, and

although Portugal was still under the dictatorship the social protection schemes went under a

radical and discrete reform towards an universal social security system similar to that

developed in Europe. By then ruling elites were replaced by technocrats with high influence

in public policies through planning commissions and working teams (Schmitter, 1999: 133).

The transformation was discrete since it was only at the level of the technical details and not

in principles and philosophy (Maia, 1985; Guibentif, 1997). They were made by some social

actors familiarized with the 1943 Beveridge plan and the recommendations of the

International Labour Organization. This familiarity is visible in the First National Colloquium

of Labour and the Corporatist Organization of Social Welfare 2 , in 1961, where the term social

security was widely discussed among the state bureaucrats. It was assumed that the social

security model is broader than the social insurance model as it encompasses more instruments

and beneficiaries, it universalizes risks and costs, it unifies or coordinates benefits under a

guaranteed rights framework, as it unifies and coordinates sectors and it is partly financed

through taxes (Ribeiro, 1961: 13-14). In the framework law of 1962 social insurance funds

were supposed to be organized by territory covering all workers and all professions to develop

a general and uniform system administered largely by the state. Although the Convention n.

102 of the International Labour Office, of 1952, that became the minimum framework for

organizing social security 3 was only adopted by Portugal in 1981 it was influencing this law

(Leal, 1998: 146).

A balance made in 1971 showed that 69% of the active population was covered by social

protection schemes. Salaried employees from industry and services as well as professionals

(lawyers, doctors, engineers) were fully covered by social insurance. But the economic

structure in Portugal was marked by the strong importance of the agriculture and in this sector

the social protection coverage was only 48% for salaried workers and only 6% for small

peasants. Concerning social assistance, in 1969 it was calculated that it only covered 10% of

the population out of the capital Lisbon (Rodrigues, 1999: 169). Furthermore, the protection

for domestic workers and self-employed was inexistent.

2 National Conference of Work, Corporatist Organization and Social Insurance.

3 Defining the social protection in disease, maternity, familly charges, unemployment, health, invalidity, death,

work injuries and professional disease, the rules for financing, administration, the people covered and the

minimum amounts of benefits.


Policy initiatives were taken in order to include more beneficiaries in the system, manly the

rural workers and the self-employed. In the case of rural workers the option was to integrate

everybody in the social insurance schemes even if they had not contributed previously. Those

over 70 years old that have not contributed were exempt from contributions and had access to

pensions (creating a special regime integrated in the contributory social protection because a

non-contributory component in the system was still excluded); the qualifying period to

pensions was reduced to 3 years inscription and 24 months contributions thus giving almost

direct access to pensions; reduction of the women retirement age from 65 to 62 years old; a

scheme for domestic workers was created with a very generous definition of domestic worker

that turned out to include a great number of housewives. The result was a growth in the

number of pensioners between 1970 and 1975 of 533% for men and 1741% for women that

were previously almost excluded from social protection.

The changes in social assistance were important in 1971 where the residual role of the state

was being abandoned, new perspectives on social assistance were being introduced and the

idea of an integrated social security was also emerging; however the implementation of these

changes were most ineffective (Maia, 1985).

The generosity of all these changes was not accompanied by generosity in terms of the level

of benefices since the method for calculation of subsidies rewarded mainly long contributive

careers and the minimum pension was very low. This turns out to be a persistent characteristic

of most of the inclusive measures until now: although the system is inclusionary and updated

in terms of coverage the levels of benefits are considerably low. Besides, protection on

unemployment and work injuries was still inexistent. These attempts to improve the social

protection were severely restrained by the difficult budgetary situation provoked by the

Colonial War. Between 1960 and 1971 military expenses went from 4% to 7% of GDP while

public expenses in social areas were lagging far behind those in the European developed

countries: education expenses grew from 1,5% to 1,8% of GDP between 1960 and 1971 when

it was 5% to 7% in other countries in this year; from 0,5% in 1960 to 2,1% of the GDP in

1971 in health compared to 4% to 5% of GDP in European countries in 1971; 4% to 5,6% of

GDP of public social security expenses when in other countries the percentage ranked from

10% to 15% in 1971 (Lopes, 1996). Social security funded system resources were even used

to finance economic development and war expenses (Rodrigues, 1999).

A fourth moment begins with the Portuguese democratic revolution. In April 1974 a military

revolt quickly became a revolution with the massive participation of the population and the

emergence of social movements in all sectors: land reform, cooperatives, workers councils,

squatters, social and family services created and managed by neighborhood associations,

popular management of schools and health clinics, fight against nuclear plants, cultural

dinamization and so on. These movements were present in almost all the production and

social reproduction areas and in this first moment they were the propeller of policy change.

The creation of a national health system and a social security system was contemplated in the

program of the military movement that led the revolt and in the First Provisional Government


In May 1974 it was adopted the creation of a minimum salary, raising the family allowances

amount, the statutory minimum pension duplicated and determined that it couldn’t be less

than 50% of the minimum salary, old age and invalidity social pensions were created and with

them the non-contributory regime (although it was only 25% of the minimum salary for

people living in urban areas and 12,5% for people in rural areas). It was determined a

maximum limit to all the old age and invalidity pensions equivalent to the salary of a minister.

In March 1975 the first still rudimentary and residualist protection on unemployment was


created (contradictorily not yet integrated in the social security system); various groups were

integrated in the system, the protection of the rural workers was improved, mainly in

maternity leave and survival pensions. The charities workers were recognized equal pay and

benefits to the civil servants, the hospitals managed by misericórdias were nationalized in

order to integrate the National Health System (institutionalized in 1979) and social partners

began to be created replacing the corporatist bodies. In July 1975 the creation of charities

ceases to be dependent of the authorization of local governors. In 1976 the Service for

Repression of Vagrancy was extinct and the poorhouses are transferred from the police

authorities to the social security institutions; state committees replaced the ‘people’s houses’

boards and rural workers were integrated into the general scheme of social insurance. In

August 1975 it is determined that some costs with benefits without contributory character

(such as the rural workers and social assistance) should be financed through general taxes and

not by contributions (but this was not implemented).

Although the reality came to be lagging behind expectations this was the moment where the

basis of the Portuguese welfare state, as appears in the 1976 Constitution, was designed and

still influences all the subsequent policy measures and laws. The conflict between those in

favor of a social democratic Western Europe-type project and those in favor of a socialist

project (Santos, 1999) was incorporated into the 1976 Constitution and the former starts to be


A tension between a labourist and a universalistic design for the system was created with

influence until nowadays. The former inherited from the past and defended by technocrats of

the system, and the last inspired in the social democratic welfare states schemes and

philosophy. The resulting laws were a mix of both in an innovative philosophy that left much

to be made real. According to a privileged witness of this period Social Security meant: “a

safety net tight enough so to protect individuals and families against all the social needs from

the nest to the tomb, from the first age to the last” (Leal, 1998: 61-62).

One example is the 1977 law concerning the institutional design of social security with direct

influence in the 1984 framework law. This law determined: the integration of the social

insurance and the social assistance components creating an integrated system; the

deconcentration through the creation of social security local agencies with an high degree of

autonomy responsible for the management of the integrated system at the local level; and the

centralization through putting of all welfare institutions under direct administration of the

central government (as it was proposed in the 1976 Constitution). The idea behind the

integration of social insurance and social assistance was that it would be the regional (district

and sub-district) agencies to design and attribute social benefits according to the concrete

situation and needs of the beneficiaries. As Leal says, this philosophy was closer to the

perspectives and aspirations of social workers (1998: 230). In this law the system also

included consultative bodies at the central and local level that were composed by more than

the traditional social actors of the income replacement schemes: labour unions, local

government representatives, charities, local communities and other possible stakeholders

(only later employers representatives came to be integrated).

Also in 1979 the first statute of social welfare nonprofits, the statute of the Private Institutions

of Social Solidarity, was designed under a universalistic spirit. Organizations were considered

as being integrated in the social security system although their private character was respected

through mainly the absence of state control over their boards. But there was the necessity for

their administrative structure and organization to be authorized by public bodies and the

changes on their main objectives and activities. However there was a wide range of regulatory

and inspection powers of the state over the organizations functioning and their activities. At

first sight this was not radically different from the situation under the authoritarian regime


where one cannot really say that they were private organizations since state interference was

considerable. However the philosophy was different since this integration was justified in the

fact that organizations were providing social goods and services with a public character,

considered in the Constitution as integrating the social security rights. The statute of IPSS

clearly mentions as their activities the same included in the Constitution 4 .

It was then that confusion was started between the regulations over organizations themselves,

which was seen as an authoritarian residue, and regulations over the provision of the social

services contracted to them. Besides this statute, designed in consultation with the peak

organization of misericórdias and the Catholic Church did not fit the characteristics of the

new organizations that emerged with the revolution (Hespanha et al., 2000).

Another innovative and path breaking initiative was the enactment in 1979 of a minimum

scheme that included universal benefits and means tested benefits to all citizens and the

responsibility to pay the difference between benefits of other schemes and the minimum

scheme benefits.

These measures had an impact on the growth of expenses specially when combined with the

coverage increase of the early seventies. The policy measures of social protection

improvement impacted on the newly created non-contributory regime as it had few


During the First Constitutional Government the rising inflation and the budgetary deficit

imposed the need to an agreement with the International Monetary Fund. This agreement lead

to the abandonment of the political project of socialism and to the implementation of

adjustment measures such as the decrease of public expenses in state administration and in

investment and a decrease in expenses with social security (Reis, 1998: 41,50).

In 1976 started a period of permanent austerity that had impact on the design of the

Portuguese welfare state. Given the fact that social actors were too fragmented to organize the

negotiation between labour and capital the state itself created this social partners in promoting

the creation of a trade union confederation (UGT) that would accept to negotiate the social

pacts since the existing confederation (CGTP-IN) highly influenced by the communist party

was making radical demands. From then on CGTP was absent from almost all the social pacts


A fifth moment began in the early eighties and the context is internationally of welfare state

‘crisis’ and nationally of the rise of the right wing political forces into power through a center

right/left coalition. The first years of the decade were marked by political stability in the

social security orientations in the context of a broad political instability with change of

government and several ministers of social affairs, since the secretary of state for social

security persists surviving from the IV to the VIII Constitutional Governments. The centerright

governments adopted a rhetoric of the return of civil society cutting with the previous

prevailing socialist and social-democratic discourse but the preparation and the adhesion of

Portugal to the EEC (1986) had attenuating effects as it presses for an approximation of

European social protection legal structures.

Right from the beginning of the new cabinet attempts were made by the government to erase

the most socializing components of the social protection designed in the previous moment.

For example, in 1982 an attempt is made to revoke the law that created the National Health

4 According to this statute IPSS are created to give organized expression to the moral duty of solidarity and

justice among individuals and pursuing a given set of goals: supporting children, youth and families, of social

and communitarian integration, of old-age and disability protection, compensating for reduction in income and in

ability to work, promoting and protecting health, education and training and solving housing problems.


System. But the Constitutional Court considered that revocation contrary to the Constitution.

However, even if not revoked it began an erosion of the NHS, inertia and restrictive measures

of public investment and policies promoting the expansion of the private sector (Santos,


Another was the revocation, in 1980, of the law on the universal minimum scheme and its

replacement by other that clearly established the separation between contributory and noncontributory

regimes and determined that non-contributory benefits should be always means

tested. With this the idea of building a social assistance system was abandoned and the

contributory features of the system were strengthened. In consonance with international

discourses of devolution and state retrenchment it was defended that the state should not

intervene directly in social services provision and the idea that the access to these services can

become citizenship rights was refused.

This decade was fundamental in structuring the relationship between the state and the private

sector and in some areas such as social services this was done in a liberal framework that

assumed the separation and even the opposition between state and civil society. Cooperatives

and mutuals statutes were enacted, the IPSS statute was revised, and the rules for the

cooperation between IPSS and the state were enacted and revised in the space of three years.

The supplementary role of the state was again defended and the government start withdrawing

previous regulations over the private nonprofit organizations and their services. In 1983 IPSS

statute was revised and the state regulation over organizations was lessened and transferred to

regulation over their activities, that is, over cooperation agreements. However the regulations

existing in cooperation agreements were also revised in 1983. The regulations concerning the

number and qualifications of its workers, the criteria to the admission of clients and the

technical aspects of services and equipments provision were revoked. The nature of this

contractual relationship with the state was never clear. In the ambit of the cooperation

agreements the state was supposed to participate in 70% to 80% of the costs of users and the

social security institutions in consultation with the peak bodies calculated this cost. The

remaining amount was supposed to be the IPSS contribution to solidarity. Thus IPSS were

more than mere contracted service providers and this justified their resistance to state


But there were also budgetary reasons for designing this relationship. Leaving the main

responsibility of services provision to IPSS exempted the state from assuming them directly

as a matter of rights. Also lessening the regulations over service provision was another

mechanism for the state to reduce its financial responsibilities towards these organizations in

the ambit of the contractual relationship implied by these agreements. In the 1983 revision of

the cooperation agreements regulations technical support that was contemplated as one of the

responsibilities of public agencies and that included close cooperation between social security

and organization officers in the ambit of cooperation agreements almost disappeared.

It was also in these settings that the first framework law of the democratic period was passed

in the Parliament, in 1984. Only two bills were under discussion, one produced by the

coalition PS/PSD (center left and center right) and other by a political right party CDS 5 . No

alternatives for the system arising from more left wing parties were proposed in the

Parliament and that seamed quite paradoxical. During the parliamentary discussion there was

only one reference made by a left wing party to the need to change social security instruments

towards a local development perspective. Even the permanence of the protection on work

5 The initiative for a bill on a framework law of social security came from the right wing party in 1983. During

this discussion in the Parliament the government proposed to present a bill in two months. The new discussion of

the two bills took place in January 20 and 21, 1984.


injuries outside the public system on the hands of insurance companies was not contested by

left wing parties as it was recognized that taking these insurance from private enterprises

would lead many to bankruptcy and thus unemployment. Besides, insurance companies as

well as many other economic sectors were nationalized since 1974.

During the discussion in the Parliament it was possible to see important different perspectives

in the two political forces proposing the bills. While the government considered that social

action goods and services should become entitlements as a “more perfect stage in social

protection” the party CDS through the Secretary of State of Social Security of the former

governments refused it vehemently:

Because of the tendency to monetarize excessively the assistance systems thus leading to

the atrophy of benefits in kind or in services; because of the tendency to annul the

differences between public social action and private social action introducing bureaucracy,

functionalism and regulation where there is the right to exist spontaneity, service and

creativity; finally because of the tendency to standardize social protection, diluting, after

all, the essence of social action as personalized and a sort of “exclusive suit” against the

“prêt-à-porter” of patterned systems. 6

The approved law opted for a clear dualization of the system giving social assistance a

secondary and residual role.

Another important debate was also on the relationship between public and private regarding

complementary pensions. While the government limit these funds to socio-professional funds

and want to introduce a state regulation on the beneficiaries’ guarantees through an

approximation to the rules, eligibility conditions and quotizations linked to the general

system; CDS refused these limitations and regulations. This last perspective came to be

expressed in the final text of the framework law as well as another demand of this political

party: the introduction of a ceiling to contributions to create incentives to complementarity


Despite the great number of regulations on social security that came out in the years that

followed the publication of this framework law its implementation was never complete. For

instance, the state never published a law concerning the financing of non-contributory regimes

and instruments by the general state budget as it was contemplated in the framework law,

leaving it to the decisions of the annual state budget thus these transfers occurred only

sporadically; the National Council of Social Security, an advisory board composed by social

partners representatives, local government national associations and IPSS was never created

and thus the Social and Economic Council dedicated to more encompassing social and

economic policies was for a long time the fora for the participation of the social partners in

social security policies. This meant that the social protection policies negotiated at the Social

and Economic Council was frequently integrated in broader negotiations on economic

policies; the ceiling to contributions considered in the framework law never got to be

implemented also. All these issues remained latent in the agenda of future social security

reform, as we will see.

Table 1 reflect the effects of policy measures in social security through showing the annual

growth of social security expenses since 1971, in its main regimes. In it is possible to see part

of the story of the system narrated above: the rise in expenses in the General Regime in 1972

and 1973 meaning the important investment made and another rise in the two years that

6 Our translation of an excert of the Parliamentary debate (DAR, 21/1/1984: 2857).


followed the Revolution. The increasing investment in the social protection of rural workers

(through the RESSAA and the RTR) until 1981; the beginning of the non-contributory regime

in 1976 and the effects of some improvements during the eighties such as, for instance, the

creation of the 13 th month, the survival pension in 1981 and a better, although limited,

articulation with the pensions of the contributory regimes below the social pension level, and

an increase of the rural (RTR) pensions to the social pension limit. However the level of this

pension remained low (about 25%) even with means-tested income limits higher (30%). We

can also see a disinvestment in social action expenses since 1978, interrupted only when this

sector incorporated some health services after the creation of the National Health System.

Table 1 - Annual growth of social security expenses (1971-85)

1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

General Regime 4% 30% 20% 1% 28% 14% -3% 4% -10% 17% 10% 2% -2% -3% 2%

RESSAA 114% 67% 42% 96% 46% 15% 1% 10% 12% 44% 4% -33% -2% -10% 0%

Non-Contributory - - - -65% -66% 782% 11% 32% 40% 59% -5% 328% -12% -12% -7%

Regime (with RTR)

Social Action - - - 3% 43% 62% 20% -1% 89% 655% 4% -2% -1% -5% 10%

Administration 18% 10% 24% 9% -1% 23% -17% 6% -7% 23% -4% -4 -15% -7% -0%

Health services and 16% 30% 20% 2% 11% 13% -6% -70% -100% - - - - - -


Total 11% 29% 23% 7% 23% 16% -4% -11% -12% 29% 7% 1% -4% -5% 1%

Source: Institute for the Finantial Management of Social Security (IGFSS).

It is also clear in this table the effect of 1976 crisis and the IMF agreement through a

reduction of the annual growth of social security expenses. The rise of expenses in 1980 is a

consequence of a clear electoralist strategy with measures of rising social insurance benefits,

salaries and public investment (Lopes, 1996: 361). The consequence was a budgetary deficit

that implied a second agreement with the IMF, in 1983, this time with adjustment measures

even more restrictive and higher social costs: decrease of salaries and purchase power,

unemployment, indebtedness of entreprises, debts to the social security and the Ministry of

Finance and salaries in delay (Lopes, 1996).

After the second half of the eighties Portugal lived a very favorable economic climate,

influenced by the international economic growth and the adhesion to EEC with the impact of

the regulatory framework and the structural funds. In political terms this was also the

beginning of a 8 years period of stability given the absolute majority, since 1987, of the center

right government elected in 1985. In social policies although there was an increase in social

spending the system maintained its basic structure (Guillén et al., 2001). This is

understandable in light of the political objectives of the government. In its action program for

1987-1989 it is said that the social security system should not introduce distorting elements

that are negative to the economy, it should help the flexibility of the labour market through

protection in unemployment and that the social security system should support the shock of

economic transition. Meanwhile the institutionalization of the social dialogue through the

creation of the Permanent Council for Social Concertation, in 1984, helped to set the

negotiations table for these policies. But the absence of the major union confederation

(CGTP-IN) from the social pacts then signed showed the weakness of labour in these


In the context of economic restructuring and policies promoting the flexibility of the labour

force income replacement mechanisms had showed to be of great utility for negotiations with

the labour unions. Unemployment protection that only covered 25% of the unemployed in

1984 was improved first through the creation of a non means-tested benefit and then through

the integration of this protection in the general protection scheme. Improvements in the


eligibility conditions allowed the access to the subsidy by a rising number of unemployed.

The results of the negotiations between social partners and the government also showed to

have inequalitarian outcomes deepening the divide between insiders and outsiders of the core

labour market (Mozzicafredo, 1997). For instance in 1993 the unemployment benefits covered

over 50% of the population but not on an equal way. The coverage was 100% for the

population over 54 years old that were loosing their jobs, 58% coverage for men and 49% for

women and only 21% young workers (less that 25 years old).

Improving the access to early retirement was also another policy measure carried out to help

economic restructuring and one of the new justifications for early retirement was

technological obsolescence by workers. Other measures meant incentives for the employment

of young people, unemployed and disabled through the exemptions of contributions and the

reduction of employers contributions as well as some training programs.

The adhesion of Portugal to the EEC brought new ideas and funds on policies to fight poverty

and exclusion and the development of partnership with the third sector. The European

programs to fight poverty were highly influent in introducing new philosophies and new

approaches in this area, such as the local partnerships between public agencies and nonprofit

organizations and new understandings about problems of poverty and social exclusion.

However these policies were set outside the social security system in a National Program to

Fight Poverty under the direct responsibility of the Minister of Social Security thus assuming

its provisional character (Rodrigues, 1999).

In the following decade the discourse of the center right government was one of reducing the

role of the state and privatization of pensions especially since a report on the financial system

in 1993 by the Bank of Portugal claimed that social security should be reduced in order to

allow the necessary growth of the sector (Ministério das Finanças, 1993). This report added to

a number of reports on the pensions crisis by neoliberal scholars and the Portuguese

Association of Insurance Companies. The 1994 report of the World Bank on ageing came to

be influent in the rhetoric and proposals for reforming public pensions as it was then visible in

the media. In a national newspaper the minister of social security defended the introduction of

a ceiling to contributions in order to reduce the expenses of the public system and allow the

investment in private pension funds (Jornal Expresso, 5/3/1994). However no policy measures

were taken towards the privatization of pensions besides the legislation promoting the

creation and growth of private pension funds. But this issue remained in the political agenda.

The reform of the social security system

We place our analysis of the social security reform beginning in 1996 after the election of a

center left government that selected social policies to be its distinctive mark. Issues

concerning social protection and the high levels of poverty and social exclusion were already

in the political agenda during the electoral campaign. The socialist party included in its

electoral program the introduction of the Guaranteed Minimum Income based on the

diagnosis of the gaps of the system given the insufficiency of the income replacement

mechanisms. Convergence with the social protection of European countries and the European

Council Recommendation of 1992 were also strong arguments to justify the introduction of

this policy that would mean a path shift in the system.

The diagnosis of the social security system made in the Governmental Program is of a system

in crisis, unable to solve new problems, underdeveloped in the context of the European Union


and iniquitous in its structure. A reference was made to the post-revolutionary path breaking

attempts making an explicit link to this period:

Despite the introduction of elements tending to universalism and to a distributive

orientation right after April 1974, the system continues to be based mainly in conventional

principles of social insurance, oriented largely to the employed (Programa do XIII

Governo Constitucional, 1995: 196-197).

The system reform started in 1996 with the pilot project of a Guaranteed Minimum Income

(GMI) and the creation of a White Book Commission for the social security reform and

culminated with a new framework law on social security in 2000 and a great number of policy

measures measures towards further redistribution that seamed to imply a path shift. The GMI

is a good expression of government orientations in this area being considered in its legal

design more typical of social democratic models (Guibentif and Bouget, 1997). It included a

cash benefit corresponding to the difference between a minimum income and the earning of

the family dependent on the applicant, accessible to all legal residents as a social right and

dependent on the acceptance of a social integration programe through a contract negotiated

between the State and the recipient. The conditionality of this benefit do not eliminates its

rights character as the counterpart of the recipient acceptance of the insertion program was the

responsibility of the state to guarantee the conditions for this insertion. This instrument was

also innovative in terms of its implementation instruments mainly regarding the involvement

of all services of social security (regimes and social action) in its operationalization and the

local commissions created to implement the measure and responsible for the negotiation and

design of the contract. These commissions are composed by a wide range of local social

actors such as local departments of several ministries, local government authorities, labour

unions and nonprofit organizations. Public-private nonprofit partnerships for the participation

of social actors in the implementation of policies were another innovative feature (Guillén et

al., 2001). However, path shifting potential of the benefit was attenuated by the fact that the

amount of the cash benefit was indexed to the social pension and thus of a low level (about

36,6% of the minimum salary). When presenting its bill on the Parliament the Minister for

Solidarit and Social Security reasoned against critics that it would create a disincentive to

work saying that the monetary benefit was to low do that 7 . Another bill on the minimum

income by the Communist Party was more generous since it it made the amount of the benefit

equivalent to the minimum salary. However in a conservative drift ths bill considered that this

new right should be created outside the social security system in order to prevent increasing

costs over the social security budget due the chronically disrespect of the orientations

concerning transfers from the general state budget. The government proposal passed in the

Parliament with votes of the Communist Party and the opposition the center right and right

political parties.

The redistributive character of the GMI was reinforced by other policies that introduced the

principle of positive discrimination in the contributory sub-system such as universal family

allowances dependent on the income of families and higher annual rises for lowest pensions.

The emphasis on local partnerships to implement policies was expanded to other areas besides

the GMI local commissions such as the Social Market for Employment, the local

commissions for the protection of underage children and the Social Network and involved

new actors such as the local government and other nonprofit organizations besides IPSS. The

Social Network is a very curious policy instrument that reveals the importance given to the

7 Assembleia da República, Plenary Meeting N.º 68, May 9, 1996.


esponsabilization of social actors at the local level to help solve problems of social exclusion.

Without creating any other kind of instrument this law simply designed the organization of

civil society in commissions at several regional levels (parish, district and national), attributed

functions of diagnosis of social problems and identification of solutions, and determined that

local government bodies should be the coordinators of Social Networks. Despite this the

Social Network is really being lauched by some municipalities.

The emphasis on partnerships developed on the programs to fight poverty and social

exclusion was strengthened by the fact that in some areas the presence of the private nonprofit

sector is very important. The policy measures seamed to go back to a certain philosophy that

were present when the first IPSS statute was designed, that is the idea of networks of public

and private providers under the regulatory framework of the state and in the context of social

and family services turned into social rights. A ‘cooperation pact for social solidarity’,

between the government and the associations of municipalities and parishes, charities and

mutualities peak associations as a framework for the relationship between these social actors

was signed. This pact was initially a proposal by the IPSS peak organization to solve finantial

problems of the contractual arrangements that the government accepted, but included local

government in its ambit. This was the first step to make this pact ineffective since IPSS peak

association feared competition of the local government in service provision and lost of

organizations authonomy. This pact contemplated among other issues on policies proposals

that never came to reality such as the need to revise the IPSS statute, the legislation on the

contractualization with the state and the inspection powers of the state. The will to improve

the regulatory and inspection capacity of the state over contracted services provided by IPSS

had considerable resistance mainly from the major peak association that usually assumes in

discourse a confrontational strategy with the state.

Despite the fact that the levels of unemployment were relatively low when compared with

other European countries, mainly the continental countries there was also an emphasis on

active measures to promote employment with a clear influence of European Union social

policy orientations. The development of the Social Market for Employment, under which a

new set of employment policies was developed (e.g. insertion enterprises and local initiatives

for employment), the introduction of flexibility the retirement pensions rewarding workers

that opted to remain in the labour market after the retirement age, a partial unemployment

subsidy for unemployed in part-time work as well as the insertion programs of the GMI are

some of these measures.

In social security organic there were also important changes concerning the district and subdistrict

agencies. They have lost autonomy and became dependent on a national institute

(ISSS - Institute for Solidarity and Social Security) created to administer the social security

regional institutions that looses autonomy and encompassing social insurance and social

assistance agencies. A national institute for the coordination of the social security statistics

were also created trying to correct the existing situation of local databases unable to

communicate and thus to produce data on beneficiaries and enterprises to help decision

making. There was also organic separation of the finantial, inspecting and benefits attribution

functions. Also one department was created to take care of the issues related to poverty and

social exclusion policy measures. Since this is one of the areas where resistance to change is

major this was done through maintaining the power structure of civil servants. Of course this

oppened up the possibility to make changes ineffective.

The White Book Commission on Social Security created in 1996 was composed by experts

indicated by the government including academics, tecnocrats of the social security system and

from the private pension funds sector. It was supposed to study the system and make

proposals for its reform but some diagnosis and proposals for reform were already being


discussed. Given the diagnosis since the early ninetees of a finantial crisis in the system and

the unsustainability of the pensions of the contributory system the solution to partially

privatize it through the introduction of a ceiling to contributions was again on the table. This

proposal was object of an intense debate not only in the Commission but also in the media

that amplifyed this debate. Thus, contrary to what happened in the eighties the discussion on

the reform was very participated by the political parties, the labour unions and employees

associations and other relevant actors. In the beginning it seamed that the Commision

mandate was to study the best way to implement this ceiling or in another words to legitimise

it with techincal expertise. A pact signed between social partners and government had been

paralelly signed concerning several measures to promote competitivity and economic growth

encompassed a wide range of reforms in social security included this ceiling (CES, 1997).

However there was a clear division inside the Commission almost from the beginning

concerning not only the reform proposals but also the diagnosis. For a small group of the

Commission the financial problems of the social security were due to the fact that the state

didn’t made the financial transfers to cover non-contributory systems expenses as it was stated

in the framework law of 1984. Furthermore, introducing a ceiling would have the effect of

antecipating the finantial problems since contributions would be reduced. The majority

perspective in the Commission came out to be quite radical, a system of three pillars: a

mandatory public pay-as-you-go pension up to a certain limit of contributions; mandatory

complementary funded pension schemes, public or private; and voluntary private funded

schemes (CLBSS, 1998; Santos et al., 1998).

During the debate that took two years the position of social partners evolved to an opposition

to the proposals of the majoritary group of the Commission, the two labour union

confederations (unusually in harmony) and the industry employees associations confederation

considered that the proposal for the introduction of the three pillars was to radical and didn’t

help the finanantial health of the system. The final report end up being not a consensual and

unitary document but included two repports from the diverging perspectives, one proposing

the three pillars system and other insisting that it was possible to make adjustments on the

system without structurally changing it, and a great number of personal statements from the

members of the Comission. A number of other measures regarding other components of the

system were included in the two documents being some introduced in policy agenda.

Once concluded the work of the White Book Comission the discussion was initiated at the

parliamentary level as a new framework law was being discussed. Differently from the

eighties the new framework law had bills from all the political parties in Parliament. Three

major perspectives on the reform were identifyable: the political parties from the left, the

Communist Party and Bloco de Esquerda, intended to maintain the basic structure of the

system. The political parties form the right and center right (PSD and CDS-PP) proposed a

new system with a share of participation of the public and the private sector.

The socialist government bill proposed a change in the social security system so that the

social insurance lose weight in benefit of the social assistance area. This last bill that came to

be approved designed important changes in a new System of Solidarity and Social Security.

The distinction between contributory, non-contributory regimes and social action formally

disappears so that protection of workers and non-workers should be encompassed by the same

instruments depending only on the eligibility conditions; the contributory subsystem loses

symbolic importance being mentioned in the last place and links between contributions and

benefits are reinforced mainly in order to aleviate the finantial burden of the social security

budget transferring some responsabilities to the general state budget to be financed through



Other inovations were the creation of an universal sub-system for familly protection and the

integration of social action into a solidarity regime that encompasses social pensions, the GMI

and the expenses of the contributory subsystem related to benefits not linked to previous

contributions (such as minimum pensions costs). This integration ecoed in the philosophie of

the mid seventies implyed that social action was finally a matter of rights. This meant that all

the cooperation instruments and regulatory framework of the relationship with providers

needed to be changed. The regulatory and inspecting role of the state would have to be

enhanced and more finantial resources would be needed so that the equal access to these

services would be guaranteed. The possibility to introduce vouchers contemplated in the

framework law came as one possibility to overcome some of the existing obstacles to make

acess to social and familly services a social right.

The polemic introduction of a ceiling to contributions was contemplated in the framework law

but limited. In adiction to the conditions that the introduction of the ceiling would have to

serve the finantial sustainability of the system and the deepening of solidarity another

condition were added by pressure of the Comunist Party and the Bloco de Esquerda: that the

introduction of the ceiling would be dependent on a report from the government

demonstrating the accomplishment of those conditions and the decision would depend of a

favourable opinion of the National Council for Solidarity and Social Security. This came to be

reinforced later by a social pact signed by the social partners. In the same day a social pact on

pensions reform was signed by social partners extending the reference period for pensionable

earnings from 10 to 40 years, and introducing higher substitution rates for lower incomes.

With this reform the Minister for Solidarity and Social Security could say that the system

were finantially sustainable for a long period. The question on weather this reform deepened

the divide between insiders and outsiders was heatedly discussed but not conclusive since

lack of data did not allowed to have a portrait of the real working carreers of social security


However the new framework law and specially some of their innovations had a short period

of life. As a result of a bad score in the local elections the prime minister resigned and the

anticipated elections brought another political force into power. The center right party who

won the elections made an alliance to a small political right party in order to have the majority

in the Parliament. This small party placed three ministers in the government in crucial areas

such as defense, justice and labour and social security.

Now we can find ecoes of this period in the early eighties and not just (but also) because the

Minister of Labour and Social Security was then the Secretary of State of Social Security. In

July 2002 a new framework law for social security is proposed by the government, discussed

in the Parliament and approved by the majority. The rapidity of these changes didn’t left

much space for resistance to organize besides that of labour unions confederations if there

was any other resistance to be to organizable. Besides the heated debate on the labour code

proposed by the same Ministry outshined the changes taking place in Social Security.

Although much of the previous framework law was kept the introduced changes signifyed a

quite radical philosophical drift. First the social action subsystem regains its residual place

and loses its rights nature as it is excluded from the social solidarity subsystem.

Second the ceiling is introduced designing a three pillars ‘system’ for pensions: a first pillar

public, mandatory pay-as-you-go until a certain limit of income, a second pillar mandatory,

private or public, funded and with the possibility open for opt out above another ceiling and a

third pillar composed of voluntary pension funds. As was mentioned to the media by the

Minister the first ceiling will be 6 times the minimum salary and the second 10 times the

minimum salary. Although much of the conditionalities on the introduction of the ceiling are


kept from the previous law the condition of a favourable opinion of the National Council for

Solidarity and Social Security disapeared ths mamking its implementation easier.

Thus a new welfare mix that is already contained in the three pillars model emerges in this

new framework law that also includes now a complementary system composed of mandatory

funded regimes and voluntary pension funds private or public. After all the system long walk

to privatization is not interrupted here although difficulties are enviseable due to budgetary

severe constrains of the present moment leaving few space to finance the costs of the partial

transition of a pay-as-you-go system to funded schemes.

The following scheme that shows the three framework laws design for the social security

system is after all more revealing than the more fixed reality of its institutions, actors and

instruments. But the real issue will be the implementation of this new framwork law that is

still to come.

Table 2 - The framework laws for Social Security of the Second Republic

1984 – Social Security


Contributory subsystem

(pensions, unemployment subsidy,

payed sick leave, maternity leave,

work injuries and professional

diseases, familly allowances)



(social pensions, social

unemployment subsidy, familly


Social Action

(social and familly services, casual

benefits in cash and in kind)

2000 – Solidariy and Social

Security System

Citizenship social

protection subsystem

Solidarity regime

(social pensions, minimum

pensions, guaranteed minimum


Social Action

(social and familly services

public and private, casual

benefits in cash and in kind)

Universal familly

protection subsystem

(familly allowances)

Contributory subsystem

(pensions, unemployment subsidy,

payed sick leave, maternity leave,

work injuries and professional


2002 – Social Security


Public social security


Contributory subsystem

(pensions, unemployment

subsidy, payed sick leave,

maternity leave, work injuries

and professional diseases)

Solidarity subsystem

(social pensions, minimum

pensions, insertion social

income , vouchers)

Familly protection subsystem

(familly allowances)

Social action system

(social and familly services public

and private, casual benefits in cash

and in kind)

Complementary system

(mandatory pension regimes and

voluntary pension funds)


Looking at the past of the Portuguese social security system we find continuities and

discontinuities with different times. Discontinuities are shorter termed and are much tributary

to the political forces at the policy making arena, mainly the government. Given government’s

capacity to administer social security due to the centralization of the system and the lack of

effective social partners participation in its management policy change through law enactment

is rather easy.

The identifiable discontinuities are originated in the two competing models since 1974 that

are present in the system structure and underlying the policy agenda. The first model tends to


privilege and reinforces income replacement mechanisms as they are at the core of the system.

This model finds great sympathy on the part of system technocrats (until recently the main

producers of knowledge about the system), as technical coherence is a high valued principle.

This model is reinforced by the fact that the system lies its basis in the social insurance

mechanisms created since the 1930s and specially in the 1960s. This model prevailed during

the eighties policies to improve the system and their mechanisms were important to be

negotiated with the social partners during the economic restructuring.

For refusing to create particular instruments to integrate those that are not well covered or that

are left outside its mechanisms this system incorporated what may be called irrationalities in a

model perspective: important spending on minimum pensions given the difficulty to

accomplish the eligibility conditions of the pensions regime by a large number of the

population; special regimes integrated by pensioners without contributory past, mainly rural

in a society where the primary sector importance was (and is) very high; the weak role of

social partners in the administration of the system and its dependence upon governmental

decisions .

The other competing model is theintegrated” system as it was proposed in the 1974 First

Provisional Government Program. The two moments of this model are 1974-1979 (with

interruptions) and 1996-2002. In both periods a great deal of institutional experimentation

occurred trying to design a system with no parallel in the world, as it was said by a state

bureaucrat during the first moment experimentations. The most marked feature of this model

is the combination of income replacement, universal (means-tested or/and income related)

benefits and social and family services. The policies between 1996-2001 introduced this

complexity in the system combining the existing income replacement mechanisms with some

positive differentiation in few areas, means-tested universal benefits (such as the GMI) and

income related universal benefits (such the new framework for family allowances. Of course,

in this model the pressure for the participation of the state general budget is great as it

expresses the idea of a national social solidarity (and not just workers solidarity) contained in

most of its policies.

Another discontinuity is related to the relationship between social security institutions and

private providers of social welfare. Of course this is connected with the existing two models.

For instance opposite perspectives have been alternating regarding the role of IPSS and the

commercial sector in the system. In the social insurance model the tendency is for the state to

reduce its regulation over nonprofit organizations taking advantage of the fact that they can

function as an isolating mechanism from social demands concerning access and quality. The

subsidiarity principle that leaves to the family and charities the first responsibility with social

care is coincident with the male dominated welfare of this income replacement model. Once

more this subsidiarity principle dates from the division of work between the Catholic Church

and the state in 1930s and was revitalized in the 1980s under the rhetoric of opposition

between state and civil society and the return of solidarity to society. This logic is now

extended with the inclusion of the commercial sector in this division of work (whether in

pensions or in social services) and in the idea that all three sectors should be in competition

for service provision leaving to the citizen-consumer to choose among providers.

The other competing model does not assumes a separation between state and nonprofit

organizations and designs instruments where public-private partnerships are created to

implement policies and to share responsibilities as a broader social responsibility for welfare

is envisaged. This conception pressed for the idea of social services as a rights matter in 1975-

79 and in 1996-2001 and thus tends to integrate services provision in a more tighter

regulatory framework. The amount of state intervention in direct provision is a nuance in this

model. Of course a conflict emerges concerning this framework since one needs to deal with


the tensions that might be created between the private (particularistic) nature of organizations

and the public (universalistic) character of their services. Thus first, this regulatory framework

needs to be constantly negotiated with institutions to prevent the danger of state

authoritarianism and, second not all organizations are able to incorporate a citizenship

framework and thus particularistic drifts in social services are a real danger.

Despite these discontinuities that left important marks in the design of the Portuguese social

security system there are also striking continuities that have to do with the specific

characteristics of Portuguese state and society and have important effects at the

implementation level with capacity to turn ineffective much of the policies that were

designed. One continuity is the unequal access of social groups to the policy arena producing

a imbalance in terms of the outcomes of policies: the fact that labour were almost always

weaker at the negotiations table and the tendency to include only the interests of the core

workers generated policies that enhanced the insider/outsider divide of a segmented labour

market; the drift to pensions privatization as a result of the well succeeded pressure of the

private sector; the fact that peak associations of nonprofit organizations inherited from the old

regime got a central role in designing the relationship between state and nonprofits excluding

demands and logics of organizations that emerged after the democratic period; The resistance

of the system bureaucrats crucial in some moments to determine how policies were

implemented and the prevailing idea in some sectors that social benefits are still a matter of

state benevolence and not of social rights introduces distortions in the implementation of

policies, mainly when they have a strong redistributive character. Another continuity is the

marginality of social security issues and policies that left the Ministries of Social Security

without capacity to press the Ministries of Finances concerning the transfers from the general

state budget creating permanent finantial constrains to social policies.

Thus the question on if the Portuguese welfare state initiated a path shift is still to be

answered. Despite the fact that much of the reforms initiated by the socialist government are

still under way and with an high degree of institutional experimentation, they are now

happening in a context where another model shift under the new government seams to be

under way.



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