Earning inequalities in the parishes of Lisbon
By: Margarida Carvalho and Renato Miguel do Carmo
Lisbon municipality distinguishes itself from the remaining Portuguese territory by the higher earnings the workers receive there. However, the municipality is crossed by higher inequality levels than those recorded in national terms. And these inequalities aren’t homogeneously distributed on the municipality’s parishes.
“Quadros de Pessoal” database is collected annually by the Strategy and Planning Office at the Ministry of Labour and Social Solidarity (GEP/MTSS). It results from a survey applied to all Portuguese companies and it collects information about these companies’ establishments and workers. Since 2003 the parish of the establishment is one of the collected information. The possibility to do an analysis at the parish level allows a more comprehensive view of what happens inside the municipalities.
There are already some works about the socio-spatial differentiation of the residents of Lisbon municipality, but considering the importance of this as hub employer, it is also important to know the differentiations among the population working there, whether they live there or not. Actually, the labour market in the municipality is crossed by distinct economic patterns.
In 2009 Lisbon municipality had 408 837 workers, who were employed in 35 376 establishments. The average earning in the municipality was 1 508 Euros, more 500 Euros than the national average that year (Table 1).
A look to the average monthly earnings according to workers’ sex reveal that men that work in Lisbon municipality earn, averagely, more 33.7% than the national average; for women this percentage is 30.0%.
If one considers the workers school attainment, we see that workers with ISCED 3/4 are the ones that are more rewarded for working in Lisbon municipality: they earn, averagely, more 20.7% than Portugal workers with the same school attainment.
However, this earning benefit from the Lisbon municipality regarding the remaining country coexists with high inequality levels. In Table 2 it is possible to see, for Lisbon municipality and for Portugal, the value of the S80/S20 ratio, an indicator calculated as the ratio of total income received by the 20% of the workers with the highest income (the top quintile) to that received by the 20% of the workers with the lowest income (the bottom quintile). In the same table is presented the share of the total income received by each quintile.
In Lisbon the ratio S80/S20 is 6.7. This means that the earnings of the 20% wealthiest 20% are almost seven times higher than the earnings that the bottom 20% get. In Portugal this indicator is 4.8. And in Lisbon the 20% with the highest earnings get 47.2% of the total earning income. This percentage is also high when we consider Portugal (44.7%).
Considering, on the one hand, the earning benefit Lisbon takes over the country and, on the other hand, the higher level of inequalities that this municipality shows, we tried to understand these apparent contradictions using a cluster analysis, where the parish emerges as unit of analysis. The variables “average monthly earning”, the “establishment’s economic activity classification” and the “size of the establishment” were used to this cluster analysis and allowed us to define four types of configuration of economic establishments in the parishes of Lisbon municipality. In Map 1 we can see the distribution of the four profiles identified.
The first identified profile, called “Larger size; predominance of administrative and financial activities; high earnings” includes thirteen parishes: Campolide, Coração de Jesus, Mártires, Santa Engrácia, Santa Isabel, Santa Maria dos Olivais, São Domingos de Benfica, São João de Deus, São José, São Mamede, São Nicolau, São Paulo and São Sebastião da Pedreira. These are the parishes where the establishments are larger: averagely they have 13.3 workers (a number higher than the average in the municipality – 11.5 workers). In this cluster 19.1% of the economic establishments are dedicated to administrative and support service activities and 13.6% to financial and insurance activities. Information and communication activities also present an important percentage in this cluster: 8.4% (a percentage higher than the one registered in the municipality – 6.8%).
The following eleven parishes are in the second profile, “Average size; predominance of administrative and financial activities; average earnings”: Alcântara, Alvalade, Campo Grande, Encarnação, Lapa, Lumiar, Nossa Senhora de Fátima, Prazeres, Santa Catarina, São Cristóvão e São Lourenço and São Jorge de Arroios. Here the establishments have an average of 9.5 workers. Administrative and support service activities correspond to 24.2% of the establishments.
The profile “Average size; predominance of trade and administrative activities; average earnings” refers to fourteen parishes: Ajuda, Alto do Pina, Ameixoeira, Benfica, Carnide, madalena, Marvila, Mercês, Pena, Sacramento, Santa Maria de Belém, Santo Estêvão, Santos-o-Velho and São Francisco Xavier. In average, in this cluster the establishments have 9.1 workers. The activity “wholesale and retail trade, repair of motor vehicles and motorcycles” includes 18.8% of the establishments (in the municipality the percentage of this activity is 13.2%) and administrative and support service activities correspond to 25.0% of the establishments of this cluster.
Finally, “Small size; predominance of trade activities and food services; low earnings” is the profile of fifteen parishes: Anjos, Beato, castelo, Charneca, Graça, Penha de França, Santa Justa, Santiago, Santo Condestável, São João, São João de Brito, são Miguel, São Vicente de Fora, Sé and Socorro. As the name of the cluster indicates, here the establishments have a lower number of workers: in average 6.2. The wholesale and retail trade, repair of motor vehicles and motorcycles establishments rise to 18.9% and the accommodation and food service activities establishments to 25.3% (in the municipality the percentage is 10.5%).
In Figure 1 we can see the average earnings in the four identified clusters and in the totality of Lisbon municipality. The cluster “Larger size; predominance of administrative and financial activities; high earnings” is the only with an earning superior to the municipality average. In the cluster “Small size; predominance of trade activities and food services; low earnings” the monthly earning is 875 Euros less than the average of the first cluster.
Figure 2 presents the share of the total earnings received by each quintile of workers and S80/S20 ratio, in Lisbon municipality and in each cluster. As it is possible to see, the cluster “Larger size; predominance of administrative and financial activities; high earnings” have the highest S80/S20 ratio: 7.3. This means that the share received by the 20% of the workers with the highest income is seven times higher than the share received by the 20% of the workers with the lowest income. In this cluster, the group of the 20% of the workers with the highest income gathers 46.8% of the total income.
The cluster where the S80/S20 ratio is lower is the “Small size; predominance of trade activities and food services; low earnings” cluster: 4.0. In this cluster the 20% poorest have 10.4% of the total income, the highest percentage of the four clusters. That is, although this is the cluster with the lower average monthly earning, it is also the cluster where there is a lower earning inequality among workers.
A look to the school attainment of the workers in each cluster reveals clear differentiations (Figure 3). In the cluster “Small size; predominance of trade activities and food services; low earnings” workers with ISCED 2 are the majority (62.2%), while those with ISCED 5/6 represents only 13.7%.
With about five percentage points above the average recorded in the municipality, the cluster “Larger size; predominance of administrative and financial activities; high earnings” arises with a percentage of 32.5% of workers with ISCED 5/6. In this cluster workers with ISCED 2 don’t reach 35%, which represents the lower percentage of this typology.
The cluster “Average size; predominance of administrative and financial activities; average earnings” has a school attainment profile similar to the one from the cluster “Larger size; predominance of administrative and financial activities; high earnings”.
Regarding the workers’ earnings, Lisbon municipality is in advantage in comparison to the rest of the country. In 2009 the average monthly earning in the municipality was 458 Euros superior to the average national earning. The sex differentiation shows that the gap is higher among men then among women: those won more 579 Euros (33.7%) in Lisbon than nationally, these more 385 Euros (30.0%). Nevertheless, women that work in Lisbon present an average monthly earning superior to the men’s in national terms.
An analysis to workers’ average earnings according to their school attainment shows, also here, Lisbon municipality standing out from the rest of the country: regardless the workers’ school attainment, in average the earning in Lisbon is superior to the national earning (although the difference is not very significant among workers with ISCED 0).
Moreover, the discrepancies among Lisbon and Portugal related to the workers’ school attainment reveal themselves not only in the wage levels, but also in the schooling profile of its workers. In Lisbon municipality the percentages of workers with ISCED 5/6 and ISCED 3/4 are substantially higher, while the importance of those with ISCED 2 or ISCED 0 is smaller.
But the apparently privileged position of Lisbon regarding the rest of the country conceals situations of great inequality and wage disparity. The S80/S20 ratio in Lisbon municipality is 6.7, while when one considers the all country the value of this indicator is 4.8. That means that although the average monthly earning in Lisbon municipality is higher than the national one, there is a greater earning disparity.
The cluster analysis conducted here, where the parishes were the unit of analysis, allowed us to know the spatial distribution of inequalities in Lisbon municipality. We identified four groups of parishes, where the one with the higher average earnings is also the one crossed by a higher inequality level. On the contrary, the group of parishes where, in average, the monthly earning is lower is also the group where the inequalities among workers’ earning are less pronounced.
On the other hand, the cluster with the highest average monthly earning and with the most accentuated inequality levels is the same where school attainment of workers is higher. In the cluster less unequal and with the lowest average earning, the workers’ school attainment is the lowest of the municipality.
Methodological notes: This study was based on the project “Wage gap in the “freguesias” of Lisbon (2003-2009)”, that results from a partnership between the Observatory of Inequalities and the Observatório Luta Contra Pobreza na Cidade de Lisboa (Obsevatory Fight Against Poverty in the City of Lisbon). Portugal: by Portugal we are referring to the totality of workers/municipalities of Portugal, including Lisbon. Average monthly earning: the monthly earning comprehends the workers’ basic pay, the regular benefits and the extraordinary benefits.
Originally published in Observatory of Inequalities, 2012